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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER , 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
KINETIC CONCEPTS, INC.
KCI PROPERTIES LIMITED
KCI REAL PROPERTY LIMITED
KCI HOLDING COMPANY, INC.
KCI-RIK ACQUISITION CORP.
KCI INTERNATIONAL, INC.
KCI AIR, INC.
PLEXUS ENTERPRISES, INC.
MEDICAL RETRO DESIGN, INC.
KCI THERAPEUTIC SERVICES, INC.
KCI NEW TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
TEXAS 7352 74-1891727
TEXAS 7352 74-2621178
TEXAS 7352 74-2644430
DELAWARE 7352 74-2804102
DELAWARE 7352 74-2853532
DELAWARE 7352 51-0307888
DELAWARE 7352 74-2765302
DELAWARE 7352 74-2814710
DELAWARE 7352 74-2652711
DELAWARE 7352 74-2152396
DELAWARE 7352 74-2615226
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
DENNIS E. NOLL
8023 VANTAGE DRIVE 8023 VANTAGE DRIVE
SAN ANTONIO, TEXAS 78230 SAN ANTONIO, TEXAS 78230
(210)524-9000 (210)524-9000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER,
INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL NUMBER, INCLUDING AREA CODE, OF AGENT FOR
EXECUTIVE OFFICES) SERVICE)
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COPIES TO:
COX & SMITH INCORPORATED
112 E. PECAN STREET, SUITE 1800
SAN ANTONIO, TEXAS 78205
(210) 554-5500
ATTENTION: STEPHEN D. SEIDEL
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED UNIT PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
9 5/8% Senior Subordinated Notes
Due 2007, Series B.............. $200,000,000 100% $200,000,000 $59,000.00
Guarantees........................ -- -- -- --
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM S-4
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REGISTRATION STATEMENT ITEM OF FORM S-4 CAPTION OR LOCATION
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<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Outside Front Cover
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front; Outside Back Cover Page;
Available Information
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Summary; Risk Factors; Selected Historical
Consolidated Financial Data; Unaudited
Pro Forma Condensed Consolidated
Financial Statements; The Exchange Offer
4. Terms of the Transaction................... Outside Front Cover Page; Summary; The
Exchange Offer; Description of Notes;
Description of Capital Stock; Certain Tax
Considerations
5. Pro Forma Financial Information............ Unaudited Pro Forma Condensed Consolidated
Financial Statements
6. Material Contacts with the Company Being
Acquired................................... Inapplicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
Be Underwriters............................ Inapplicable
8. Interests of Named Experts and Counsel..... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Inapplicable
10. Information with Respect to S-3
Registrants................................ Inapplicable
11. Incorporation of Certain Information by
Reference.................................. Inapplicable
12. Information with Respect to S-2 or S-3
Registrants................................ Inapplicable
13. Incorporation of Certain Information by
Reference.................................. Inapplicable
14. Information with Respect to Registrants
Other than S-3 or S-2 Registrants.......... Business; Consolidated Financial
Statements; Selected Historical
Consolidated Financial Data; Unaudited
Pro Forma Condensed Consolidated
Financial Statements; Management's
Discussion and Analysis of Financial
Condition and Results of Operation
15. Information with Respect to S-3
Companies.................................. Inapplicable
16. Information with Respect to S-2 or S-3
Companies.................................. Inapplicable
17. Information with Respect to Companies Other
than S-2 or S-3 Companies.................. Inapplicable
18. Information if Proxies, Consents or
Authorizations are to be Solicited......... Inapplicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or
in an Exchange Offer....................... Management; Principal Shareholders, Certain
Relationships and Related Transactions
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1998
PROSPECTUS
KINETIC CONCEPTS, INC.
OFFER TO EXCHANGE 9 5/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
FOR ANY AND ALL OUTSTANDING 9 5/8% SENIOR SUBORDINATED
NOTES DUE 2007, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED.
Kinetic Concepts, Inc., a Texas corporation ("KCI" or the "Company"),
hereby offers (the "Exchange Offer"), upon the terms and conditions set forth in
this Prospectus ("Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 9 5/8%
Senior Subordinated Notes due 2007, Series B (the "Exchange Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement of which this Prospectus is a part,
for each $1,000 principal amount of its outstanding 9 5/8% Senior Subordinated
Notes due 2007, Series A (the "Series A Notes"), of which $200,000,000 principal
amount is outstanding. The form and terms of the Exchange Notes will be the same
as the form and terms of the Series A Notes (which they replace) except that (i)
the Exchange Notes will bear a Series B designation, (ii) the Exchange Notes
will have been registered under the Securities Act and, therefore, will not bear
legends restricting their transfer and will not be subject to certain provisions
relating to an increase in the interest rate which were applicable to the Series
A Notes in certain circumstances relating to the timing of the Exchange Offer,
(iii) holders of the Exchange Notes will not be entitled to certain rights of
holders of the Series A Notes under the Registration Rights Agreement (as
defined), which rights will terminate upon consummation of the Exchange Offer
and (iv) the Tender Offer (as defined) having been timely consummated, the
Exchange Notes will not be subject to certain provisions relating to a special
redemption that would have been applicable if the Tender Offer had not been
consummated on or prior to November 6, 1997. The Exchange Notes will evidence
the same debt as the Series A Notes (which they replace) and will be issued
under and be entitled to the benefits of the Indenture dated as of November 5,
1997 (the "Indenture") among the Company, the Guarantors (as defined) and Marine
Midland Bank, as Trustee, governing the Series A Notes and the Exchange Notes.
As used herein, the term "Notes" refers to both the Series A Notes and the
Exchange Notes. See "The Exchange Offer" and "Description of Notes."
Interest on the Exchange Notes will accrue from the date of original
issuance of the Series A Notes for which they were exchanged (November 5, 1997)
and will be payable semi-annually on May 1 and November 1 of each year,
commencing on May 1, 1998, at the rate of 9 5/8% per annum. The Exchange Notes
will be redeemable, in whole or in part, at the option of the Company on or
after November 1, 2002, at the redemption prices set forth herein plus accrued
interest to the date of redemption. In addition, prior to November 1, 2000, the
Company, at its option, may redeem up to 35% of the aggregate principal amount
of the Notes originally issued under the Indenture with the net cash proceeds of
one or more Equity Offerings (as defined) at a redemption price equal to
109.625% of the aggregate principal amount to be redeemed, together with accrued
and unpaid interest, if any, to the date of redemption, provided that at least
65% of the aggregate principal amount of the Notes originally issued remain
outstanding immediately after such redemption. See "Description of
Notes -- Redemption."
(continued on next page)
SEE "RISK FACTORS" ON P. 18 FOR A DESCRIPTION OF CERTAIN RISKS TO BE
CONSIDERED BY HOLDERS WHO TENDER THEIR SERIES A NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE COMPANY WILL ACCEPT FOR EXCHANGE ANY AND ALL VALIDLY TENDERED SERIES A
NOTES NOT WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS THE EXCHANGE OFFER IS EXTENDED BY THE COMPANY IN ITS SOLE
DISCRETION (THE "EXPIRATION DATE"). TENDERS OF SERIES A NOTES MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. THE
EXCHANGE OFFER IS NOT CONDITIONED UPON ANY MINIMUM PRINCIPAL AMOUNT OF SERIES A
NOTES BEING TENDERED FOR EXCHANGE. SERIES A NOTES MAY BE TENDERED ONLY IN
INTEGRAL MULTIPLES OF $1,000. IN THE EVENT THE COMPANY TERMINATES THE EXCHANGE
OFFER AND DOES NOT ACCEPT FOR EXCHANGE ANY SERIES A NOTES, THE COMPANY WILL
PROMPTLY RETURN ALL PREVIOUSLY TENDERED SERIES A NOTES TO THE HOLDERS THEREOF.
The date of this Prospectus is , 1998.
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(continued from previous page)
The Exchange Notes will be unsecured senior subordinated obligations of the
Company and will be subordinated in right of payment to all existing and future
Senior Debt (as defined) of the Company, including indebtedness under the New
Credit Facilities (as defined). The Exchange Notes will also be effectively
subordinated to all secured indebtedness of either the Company or any of its
subsidiaries to the extent of the assets secured by such indebtedness. The
Exchange Notes will rank pari passu with any future senior subordinated
indebtedness of the Company and will rank senior in right of payment to all
other subordinated obligations of the Company. The Exchange Notes will be
unconditionally guaranteed by each of the domestic subsidiaries of the Company
(the "Guarantors") on an unsecured senior subordinated basis. As of September
30, 1997, on a pro forma basis after giving effect to the Transactions (as
defined) and the Acquisitions (as defined), the Company and the Guarantors would
have had approximately $342.7 million of Senior Debt outstanding and
approximately $57.3 million of availability under the New Credit Facilities. In
addition, on September 30, 1997, the Company's subsidiaries that are not
Guarantors would have had, on the same pro forma basis, approximately $5.7
million of indebtedness and liabilities, including trade payables, which would
be structurally senior to the Exchange Notes. See "Description of Notes."
Upon the occurrence of a Change of Control (as defined), each holder of
Notes will have the right to require the Company to repurchase such holder's
Notes at a price equal to 101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of repurchase. In addition, the
Company is obligated to offer to repurchase the Notes at 100% of the principal
amount thereof plus accrued interest to the date of repurchase in the event of
certain asset sales. An event constituting a Change of Control will also result
in a default under the New Credit Facilities and may also result in a default
under other Senior Debt, if any. See "Description of Notes -- Change of
Control."
The Company will accept for exchange any and all Series A Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on
, 1998, unless extended by the Company in its sole discretion
(the "Expiration Date"). Tenders of the Series A Notes may be withdrawn at any
time prior to 5:00 p.m. on the Expiration Date. The Exchange Offer is subject to
certain customary conditions. The Series A Notes were sold by the Company on
November 5, 1997 to the Initial Purchasers (as defined) and were thereupon sold
by the Initial Purchasers in reliance upon Rule 144A under the Securities Act,
to a limited number of qualified institutional buyers that agreed to comply with
certain transfer restrictions and other conditions. Accordingly, the Series A
Notes may not be offered, resold or otherwise transferred in the United States
unless registered under the Securities Act or unless an applicable exemption
from the registration requirements of the Securities Act is available. The
Exchange Notes are being offered hereunder in order to satisfy the obligations
of the Company and the Guarantors under the Registration Rights Agreement
entered into by the Company, the Guarantors and the Initial Purchasers in
connection with the offering of the Series A Notes. See "The Exchange Offer."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer may be offered for resale, resold and otherwise transferred by
any holder thereof (other than any such holder that is an "affiliate" of the
Company or any of the Guarantors within the meaning of Rule 405 under the
Securities Act or a broker-dealer who purchased the Series A Notes directly from
the Company for resale pursuant to Rule 144A or another exemption from the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business and such holder is not engaged
in, and does not intend to engage in, a distribution of the Exchange Notes and
has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. See "Purpose of the Exchange Offer" and
"Resale of the Exchange Notes." By tendering the Series A Notes in exchange for
Exchange Notes, each holder, other than a broker-dealer, will represent to the
Company that: (i) it is not an affiliate of the Company or any of the Guarantors
(as defined in Rule 405 under the Securities Act) or a broker-dealer tendering
Series A Notes acquired directly from the Company for its own account; (ii) any
Exchange Notes to be received by it will be acquired in the ordinary course of
its business; and (iii) it is not
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(continued from previous page)
engaged in, and does not intend to engage in, a distribution of the Exchange
Notes and has no arrangement or understanding to participate in a distribution
of the Exchange Notes. If a Holder of Series A Notes is engaged in or intends to
engage in a distribution of the Exchange Notes or has any arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, such holder may not rely on the
applicable interpretations of the staff of the Commission and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Each broker-dealer that
receives the Exchange Notes for its own account pursuant to the Exchange Offer
(a "Participating Broker-Dealer") must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of the Exchange Notes received in
exchange for the Series A Notes where such Series A Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. Pursuant to the Registration Rights Agreement, the Company
agreed that it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale during the period
required by the Securities Act. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses of the Exchange Offer. No underwriter is
being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF SERIES A NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES AND BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS OFFERING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS IN
CONNECTION THEREWITH. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
The Series A Notes have been designated as eligible for trading in the
Private Offerings, Resale and Trading through Automated Linkages market. Prior
to this Exchange Offer, there has been no public market for the Exchange Notes.
If such a market were to develop, the Exchange Notes could trade at prices that
may be higher or lower than their principal amount. The Company does not intend
to apply for listing of the Exchange Notes on any securities exchange or for
quotation of the Exchange Notes through the Nasdaq Stock Market's National
Market or otherwise. The Initial Purchasers have previously made a market in the
Series A Notes and the Company has been advised that the Initial Purchasers
currently intend to make a market in the Exchange Notes, as permitted by
applicable laws and regulations, after consummation of the Exchange Offer. The
Initial Purchasers are not obligated, however, to make a market in the Series A
Notes or the Exchange
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Notes and any such market making activity may be discontinued at any time
without notice at the sole discretion of the Initial Purchasers. There can be no
assurance as to the liquidity of the public market for the Exchange Notes or
that any active public market for the Exchange Notes will develop or continue.
If an active public market does not develop or continue, the market price and
liquidity of the Exchange Notes may be adversely affected. See "Risk
Factors -- Lack of Public Market." Moreover, to the extent that the Series A
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Series A Notes could be adversely
affected.
The Exchange Notes will be available initially only in book-entry form. The
Company expects that the Exchange Notes issued pursuant to the Exchange Offer
will be issued in the form of a Global Certificate (as defined herein), which
will be deposited with, or on behalf of, The Depository Trust Company (the
"Depositary" or "DTC") and registered in its name or in the name of Cede & Co.,
its nominee. Beneficial interests in the Global Certificate representing the
Exchange Notes will be shown on, and transfers thereof will be affected through,
records maintained by the Depositary and its participants. After the initial
issuance of the Global Certificate, the Exchange Notes in certified form will be
issued in exchange for the Global Certificate only on the terms set forth in the
Indenture. See "Book-Entry; Delivery and Form."
Holders of the Series A Notes not tendered and accepted in the Exchange
Offer will continue to hold such Series A Notes and will be entitled to all of
the rights and benefits and will be subject to the limitations applicable
thereto under the Indenture and with respect to transfer under the Securities
Act. The Company will not receive any proceeds from the Exchange Offer. Pursuant
to the Registration Rights Agreement, the Company and the Guarantors will pay
all the expenses incurred by them incident to the Exchange Offer. See "The
Exchange Offer."
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NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER THIS CHAPTER WITH THE STATE OF NEW HAMPSHIRE NOR
THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN
THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT
ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO,
ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE
MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The factors discussed under
"Risk Factors," among others, could cause actual results to differ materially
from those contained in forward-looking statements made in this Prospectus,
including, without limitation, the statements in "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," in
the Company's press releases and in oral statements made by authorized officers
of the Company. When used in this Prospectus, the words "estimate," "project,"
"anticipate," "expect," "intend," "believe" and similar expressions are intended
to identify forward-looking statements. All of these forward-looking statements
are based on estimates and assumptions made by management of the Company, which,
although believed to be reasonable, are inherently uncertain. Therefore, undue
reliance should not be placed upon such estimates and statements. No assurance
can be given that any of such statements or estimates will be realized and
actual results will differ from those contemplated by such forward-looking
statements.
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SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
including the notes thereto appearing elsewhere in this Prospectus. Prospective
purchasers should carefully consider the information set forth or referred to
under the heading "Risk Factors." As used in this Prospectus, unless the context
indicates otherwise, (i) the "Company" and "KCI" mean Kinetic Concepts, Inc. and
its consolidated subsidiaries, (ii) all dollar amounts are expressed in United
States dollars, (iii) all references to financial statement balances are
determined in accordance with United States generally accepted accounting
principles ("GAAP") and (iv) "pro forma" means as adjusted on a pro forma basis
for the Transactions (as defined) and the Acquisitions (as defined).
OVERVIEW
Kinetic Concepts, Inc. is a worldwide leader in innovative therapeutic
systems which prevent and treat the complications of immobility that can result
from disease, trauma, surgery or obesity. The Company's clinically effective
therapeutic systems include specialty hospital beds, specialty mattress overlays
and non-invasive medical devices combined with on-site patient care consultation
by the Company's clinically-trained staff. The complications of immobility
include pressure sores, pneumonia and circulatory problems which can increase
patient treatment costs by as much as $75,000 and, if left untreated, can result
in death. The Company's therapeutic systems can significantly improve clinical
outcomes while reducing the cost of patient care by preventing these
complications or accelerating the healing process, as well as by providing labor
savings. The Company has also been successful in applying its therapeutic
expertise to bring to market innovative medical devices that treat chronic
wounds and help prevent blood clots. For the latest twelve-month period ended
September 30, 1997, the Company generated unaudited pro forma revenue and EBITDA
(as defined) of $308.1 million and $95.2 million, respectively. From 1994 to
1996, KCI increased revenue and EBITDA (excluding divested businesses and other
non-recurring gains) at compound annual growth rates of 10.2% and 10.1%,
respectively.
The Company designs, manufactures, markets and services its products, many
of which are proprietary. KCI's therapeutic systems are used to treat patients
across all health care settings including acute care hospitals, extended care
facilities and patients' homes. Health care providers generally prefer to rent
rather than purchase the Company's products in order to avoid the ongoing
service, storage and maintenance requirements and the high initial capital
outlay associated with purchasing such products, as well as to receive the
Company's high-quality clinical support. KCI's therapeutic systems typically
rent for $20 to $175 per day. The Company can deliver its therapeutic systems to
any major domestic trauma center within two hours of notice through its network
of service centers.
Management believes that approximately two-thirds of the patients who use
the Company's therapeutic systems are over the age of 65. Management believes
that the market for its therapeutic systems will continue to grow due to the
aging of the population and further market penetration of the Company's
therapeutic systems as a result of increased pressure on health care providers
to control costs and improve patient outcomes.
The Company's principal executive offices are located at 8023 Vantage
Drive, San Antonio, Texas 78230 and its telephone number is (210) 524-9000.
THERAPIES
The Company's therapeutic systems deliver one or a combination of the
following therapies:
Pressure Relief/Pressure Reduction. The Company's pressure relief and
pressure reduction surfaces provide effective skin care therapy in the treatment
of pressure sores, burns, skin grafts and other skin conditions and help prevent
the formation of pressure sores which develop in certain immobile individuals.
The Company's beds and mattress overlays reduce the amount of pressure at any
point on a patient's skin by using surfaces supported by air, silicon beads, or
a viscous fluid. Some of the products further promote healing through pulsation.
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Pulmonary Care. The Company's pulmonary care systems provide Kinetic
Therapy to help prevent and treat acute respiratory problems, such as pneumonia,
by reducing the build-up of fluid in the lungs. The United States Centers for
Disease Control (the "CDC") defines Kinetic Therapy as the lateral rotation of a
patient by at least 40 degrees to each side (a continuous 80 degree arc). KCI is
the only manufacturer of beds which deliver Kinetic Therapy, which the Company
believes is essential to the prevention or effective treatment of pneumonia in
immobile patients. Some of the Company's products combine Kinetic Therapy with
additional therapies such as percussion and pulsation which help loosen mucous
buildup and promote circulation.
Bariatric Care. The Company offers a line of bariatric care products which
are designed to accommodate obese individuals. These products are used generally
for patients weighing from 250 to 500 pounds, but can accommodate patients
weighing up to 1,000 pounds. These individuals are often unable to fit into
standard-sized beds and wheelchairs. The Company's most advanced bariatric care
product serves as a bed, chair, scale and x-ray table, helps patients enter and
exit the bed, and contains other features which permit patients to be treated
safely and with dignity. Moreover, treating obese patients is a significant
staffing issue for many health care facilities because moving and handling these
patients increases the risk of injury to hospital personnel. Management believes
that its bariatric care products enable health care personnel to treat obese
patients in a manner which is safer to such personnel than traditional methods,
which can help reduce worker's compensation claims. Some of the bariatric
products also address complications of immobility and obesity such as pressure
sores.
Closure of Chronic Wounds. The Company is the sole provider of a patented,
non-invasive device which uses negative pressure to promote the healing of
chronic wounds. The negative pressure is applied through a proprietary foam
dressing which draws the tissue together, stimulates blood flow, reduces
swelling and decreases bacterial growth. The device heals wounds more quickly
than traditional methods and has been effective at closing chronic wounds which
have, in some cases, been open for years.
Circulatory Improvement. The Company offers a non-invasive device which
improves blood circulation, decreases swelling in the lower extremities and
reduces the incidence of blood clots. The therapy is accomplished by wrapping
inflatable cuffs around a foot or leg and then automatically inflating and
deflating them at prescribed intervals. The products are often used by
individuals who have had hip or knee surgeries, diabetes or other conditions
which reduce circulation.
COMPETITIVE STRENGTHS
Management believes the following competitive strengths contribute to the
Company's leading market position and its growth in revenue and EBITDA.
Effective therapeutic systems. The Company has focused on therapeutic
systems that are designed to improve patient outcomes and reduce the cost of
patient care. For example, the Company believes that its Kinetic Therapy systems
can reduce the probability of an immobile patient contracting pneumonia in the
acute care setting by as much as 50%, and that its pressure relief systems can
heal pressure sores up to three times faster than traditional methods.
Proprietary products. The Company is the only manufacturer of Kinetic
Therapy systems and has the exclusive license to market its vacuum wound closure
technology. The Company has several other therapeutic products under development
which management believes are unique and further believes that the use of such
products will reduce the cost of patient care and yield superior outcomes when
compared to traditional methods.
Established service distribution network and broad product line. With 143
domestic service centers, a fleet of approximately 26,500 surfaces, a clinically
trained sales force that conducts more than 200,000 patient visits annually and
the ability to deliver therapies to every major domestic trauma center within
two hours, the Company has a national presence that management believes is a
significant competitive advantage. The Company believes its network addresses
the needs of customers by providing nationwide coverage, consistent availability
of a broad range of products and high-quality service.
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<PAGE> 10
Industry leadership in clinical research. KCI's therapeutic systems are
supported by the most extensive collection of published clinical studies in the
industry. These studies demonstrate the clinical efficacy demanded by health
care providers and the cost effectiveness of the Company's products.
Strong management team. The Company installed a new, experienced
professional management team beginning in 1994. This team, led by Raymond R.
Hannigan, President and Chief Executive Officer, has refocused the Company's
strategy toward providing cost-effective, clinically-proven outcomes.
Management's initiatives have resulted in increased revenue, improved
profitability, improved efficiencies and enhanced distribution and information
systems. As a result, from 1994 to 1996, KCI increased revenue and EBITDA
(excluding divested businesses and other non-recurring gains) at compound annual
growth rates of 10.2% and 10.1%, respectively.
BUSINESS STRATEGY
The Company intends to continue to grow operating earnings and improve its
market position by pursuing the following strategies:
Increase presence in extended care and home care markets. Because of the
cost pressures within the health care industry, acute care hospitals are
discharging patients earlier, thereby increasing the demand for the Company's
products in the extended and home care settings. KCI provides therapies to
patients across multiple care settings through its national distribution network
and broad product line which are designed to provide a continuum of care. The
Company's new marketing programs specifically target national and regional
extended care providers.
Further penetrate the acute care market. KCI serves over 1,300 medium to
large hospitals and is presently focusing its marketing efforts on an additional
1,900 similarly-sized hospitals in which the Company has had a relatively small
presence. The Company believes its strong position as the sole manufacturer of
Kinetic Therapy beds and exclusive provider of its wound closure device will
help KCI penetrate these new accounts.
Increase usage of recently introduced products. The Company intends to
increase revenues by improving market awareness for its most recently introduced
products. The Company's newest products include medical devices for treatment of
chronic wounds, specialty surfaces for obese patients and sophisticated Kinetic
Therapy beds. The Company believes these unique products have excellent growth
potential and provide the Company with an opportunity to penetrate competitive
accounts.
Introduce new products. Approximately 30% of the Company's 1996 domestic
revenues were generated by products which have been introduced since 1994. One
of KCI's objectives is to continue to expand revenues by acquiring or developing
new products which improve patient outcomes and reduce the cost of patient care.
In addition, existing products are continuously improved in consultation with
health care professionals to enhance their features and improve their clinical
effectiveness.
Expand internationally. The Company has direct operations in 13 foreign
countries and has 75 independent dealers in other foreign markets. The Company
intends to continue to expand in growing international markets by establishing
additional direct operations and expanding its dealership network.
Pursue strategic acquisitions. The Company intends to pursue strategic
fold-in acquisitions, both domestically and internationally, to enhance its
geographic coverage and broaden its product line. Between January and October
1997, the Company completed five such acquisitions. For example, the Company's
acquisition of substantially all of the assets of RIK Medical L.L.C. in October
1997 broadened its product line to include a new non-powered proprietary support
surface.
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<PAGE> 11
RECENT ACQUISITIONS
On October 1, 1997, the Company consummated the acquisition of
substantially all of the assets of RIK Medical, L.L.C. ("RIK"), a Delaware
limited liability company. The Company paid approximately $23.3 million for the
acquisition plus an earn-out of up to $2.0 million. RIK is a manufacturer of
non-powered therapeutic support surfaces based in Boulder, Colorado. The RIK
products incorporate several unique and patented components and features. Other
recent acquisitions include Ethos Medical, Ltd., and substantially all the
assets of H.F. Systems, Inc. ("H.F. Systems"), Trac Medical, Inc. and Equi-Tron
Mfg., Inc. The acquisitions of RIK and H.F. Systems are collectively referred to
as the "Acquisitions."
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<PAGE> 12
SUMMARY OF THE TRANSACTIONS
THE INVESTORS
Fremont Purchaser II, Inc. (the "Fremont Investor"), is a subsidiary of
Fremont Acquisition Company II, L.L.C. and Fremont Acquisition Company IIA,
L.L.C., which were both formed by Fremont Partners L.P.
Fremont Partners L.P., and certain affiliated parties (collectively,
"Fremont"), is a private equity fund headquartered in San Francisco with
committed capital of $605 million. Fremont is part of The Fremont Group, a
private investment company with more than $7.4 billion in assets under
management. Fremont's strategy is to make substantial privately negotiated
equity investments in sizable businesses and apply a hands-on operating approach
to enhance and create value in partnership with management. Among the companies
where Fremont and its affiliates have had significant roles are Crown Pacific
Partners, L.P. (timber and forest products; NYSE: CRO), Coldwell Banker
Corporation (residential real estate), and, most recently, Kerr Group, Inc.
(specialty plastic closures; NYSE: KGM). The principal offices of Fremont are
located at 50 Fremont Street, Suite 3700, San Francisco, CA 94105.
RCBA Purchaser I, L.P. (the "RCBA Investor" and, together with Fremont
Investor, the "Investors"), was formed by Richard C. Blum & Associates, L.P.
Richard C. Blum & Associates, L.P. and its predecessors and certain
affiliated parties (collectively, "RCBA") is a San Francisco based private
investment concern specializing in strategic block, relationship-oriented
investing. RCBA and its affiliates have approximately $1.2 billion in assets
under management and a 20-year investment performance record. RCBA's investment
strategy is to source negotiated private equity transactions through minority
strategic block investments in the public market. RCBA sources its investments
by identifying companies (or industries) undergoing change, which represent good
businesses and where the opportunity exists to build relationships with
management and subsequently implement strategies to provide a superior return on
investments. Among the investments in which RCBA has played a significant role
are Northwest Airlines Corporation (airline; NASDAQ: NWAC); National Education
Corporation (educational training and publishing; previously NYSE: NEC); and URS
Corporation (infrastructure engineering; NYSE: URS). The offices of RCBA are
located at 909 Montgomery Street, Suite 400, San Francisco, CA 94133.
THE TRANSACTIONS
The Company and the Investors entered into a Transaction Agreement dated as
of October 2, 1997, as amended by a letter agreement dated November 5, 1997 (as
so amended, the "Transaction Agreement"), pursuant to which the Investors are
participating in the recapitalization (the "Recapitalization") of the Company.
Pursuant to the Transaction Agreement, the Investors purchased in the aggregate
7,802,180 newly-issued shares of the Company's common stock, $.001 par value per
share ("Shares"), at a per Share price equal to $19.25 (the "Stock Purchase").
The proceeds of the Stock Purchase, together with approximately $343.0 million
of aggregate proceeds from certain financings described below, and the proceeds
from the offering of the Series A Notes (the "Offering"), have been and will be
used by the Company to (i) purchase 31,006,942 Shares tendered to the Company
pursuant to the terms of that certain Offer to Purchase dated October 8, 1997
(the "Tender Offer") at a price of $19.25 per Share, net to each seller in cash
(the "Per Share Amount"), (ii) pay all related fees and expenses, (iii) pay the
Merger Consideration (as defined) for Shares in connection with the Merger (as
defined) and (iv) for general corporate purposes.
The Transaction Agreement provides that, among other things, as soon as
practicable after the consummation of the Stock Purchase, the purchase of Shares
pursuant to the Tender Offer, the satisfaction of the other conditions set forth
in the Transaction Agreement, and in accordance with the requirements of the
Delaware General Corporation Law and the Revised Uniform Limited Partnership Act
of the State of Delaware (together, "Delaware Law") and the Texas Business
Corporation Act ("Texas Law"), the Investors will be merged with and into the
Company (the "Merger" and, together with the Recapitalization, the Tender Offer
and the Stock Purchase, the "Transactions") with the Company as the surviving
corporation of the Merger (the "Surviving Corporation"). The consummation of the
Merger is subject to the satisfaction or
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<PAGE> 13
waiver of certain conditions including the approval of the Transaction Agreement
by the requisite vote of the shareholders of the Company. Under the Company's
articles of incorporation and Texas Law, the affirmative vote of the holders of
two-thirds of the outstanding Shares is required to approve the Transaction
Agreement. Fremont, RCBA and Dr. James Leininger owned approximately 90.2% of
the issued and outstanding Shares as of the record date (the "Record Date") for
the special meeting of shareholders to be held to approve the Transaction
Agreement, and all of such Shares owned by them will be voted in favor of the
approval of the Transaction Agreement. As such, Fremont, RCBA and Dr. James
Leininger can effect the Merger without the affirmative vote of any other
shareholder.
Following the consummation of the Merger, Fremont, RCBA, Dr. James
Leininger and Dr. Peter Leininger would own 7,029,922, 4,644,010, 5,939,220 and
100,000 Shares, respectively, representing 39.7%, 26.2%, 33.5% and 0.6% of the
Shares outstanding following such consummation. There would be no other
shareholders at such time, but certain members of management would retain, and
be granted, additional options to purchase Shares.
Funding for the Recapitalization consisted of: (i) gross proceeds from the
Offering of $200.0 million; (ii) borrowings under the New Credit Facilities of
approximately $343.0 million; and (iii) an investment of approximately $348.8
million in equity in the Company (the "Equity Financing"), comprised of the
contribution of approximately $198.6 million of the Continuing Shares (as
defined) at a price of $19.25 per Share by the Continuing Shareholders (as
defined) and the purchase by the Investors of approximately $150.2 million of
Shares from the Company. The New Credit Facilities provide for up to $400.0
million in the form of (i) three tranches of term loans (the "Term Loan
Facility"), (ii) a six-year revolving credit facility (the "Revolving Credit
Facility") and (iii) a six-year acquisition facility (the "Acquisition
Facility", and together with the Term Loan Facility and the Revolving Credit
Facility, the "New Credit Facilities"). See "The Transactions", "Use of
Proceeds", and "Description of New Credit Facilities".
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer provides holders of the Series A Notes with the Exchange
Notes which will generally be freely transferable by the holders thereof without
registration or any prospectus delivery requirement under the Securities Act.
The Company's purpose in engaging in the Exchange Offer is to provide holders of
the Series A Notes with freely transferable securities and to comply with the
provisions of the Registration Rights Agreement which require, subject to
certain conditions, that the Exchange Offer be made. See "Purpose of the
Exchange Offer".
THE EXCHANGE OFFER
Exchange Ratio............. Each Series A Note is exchangeable for a like
principal amount of Exchange Notes.
Expiration Date............ 5:00 p.m., New York City time, on ,
1998 unless extended, in which case the term
"Expiration Date" means the latest date and time to
which the Exchange Offer shall have been extended.
Principal Amount of
Notes...................... Subject to the terms and conditions of the Exchange
Offer, any and all Series A Notes will be accepted
if duly tendered and not withdrawn prior to
acceptance thereof. The Exchange Offer is not
conditioned upon any minimum principal amount of
the Series A Notes being tendered. The Indenture
limits the aggregate principal amount which may be
outstanding thereunder, including the Series A
Notes and the Exchange Notes, to $300.0 million
principal amount, of which $200.0 million is
currently outstanding in the form of the Series A
Notes.
Trading and Market Price... The Series A Notes are currently eligible for
quotation through the National Association of
Securities Dealers, Inc.'s PORTAL system.
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<PAGE> 14
Prior to the date hereof, there has been only a
private institutional trading market for the Series
A Notes. It is anticipated that a similar trading
market will exist for the Exchange Notes following
the Exchange Offer. BT Alex. Brown Incorporated and
BancAmerica Robertson Stephens (the "Initial
Purchasers") have advised the Company that they
intend to act as market makers for the Exchange
Notes; however, they are not obligated to do so and
may discontinue market making activities with
respect to the Exchange Notes at any time. See
"Risk Factors -- Lack of Public Market."
Resale of Exchange Notes... Based on interpretations by the staff of the
Commission, as set forth in no-action letters
issued to third parties, the Company believes that
the Exchange Notes issued pursuant to the Exchange
Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other
than broker-dealers who acquire such Exchange Notes
directly from the Company for resale pursuant to
Rule 144A under the Securities Act or any other
available exemption under the Securities Act or any
holder that is an "affiliate" of the Company or any
of the Guarantors as defined in Rule 405 under the
Securities Act), without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such
holders' business and such holders are not engaged
in, and do not intend to engage in, a distribution
of such Exchange Notes and have no arrangement or
understanding with any person to participate in a
distribution of such Exchange Notes. By tendering
Series A Notes in exchange for Exchange Notes, each
holder, other than a broker-dealer, will represent
to the Company that: (i) it is not an affiliate of
the Company or any of the Guarantors (as defined
under Rule 405 of the Securities Act) or a
broker-dealer tendering Series A Notes acquired
directly from the Company for its own account; (ii)
any Exchange Notes to be received by it will be
acquired in the ordinary course of its business;
and (iii) it is not engaged in, and does not intend
to engage in, a distribution of such Exchange Notes
and has no arrangement or understanding to
participate in a distribution of the Exchange
Notes. If a holder of Series A Notes is engaged in
or intends to engage in a distribution of the
Exchange Notes or has any arrangement or
understanding with respect to the distribution of
the Exchange Notes to be acquired pursuant to the
Exchange Offer, such holder may not rely on the
applicable interpretations of the staff of the
Commission and must comply with the registration
and prospectus delivery requirements of the
Securities Act in connection with any secondary
resale transaction. Each Participating
Broker-Dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer
in connection with resales of Exchange Notes
received in exchange for Series A Notes where such
Series A Notes were acquired by such Participating
Broker-Dealer as a result of market-making
activities or other trading activities. The Company
has agreed that it will make this
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<PAGE> 15
Prospectus available to any Participating
Broker-Dealer for use in connection with any such
resale. See "Plan of Distribution." To comply with
the securities laws of certain jurisdictions, it
may be necessary to qualify for sale or register
the Exchange Notes prior to offering or selling
such Exchange Notes. The Company has agreed,
pursuant to the Registration Rights Agreement and
subject to certain specified limitations therein,
to register or qualify the Exchange Notes for offer
or sale under the securities or "blue sky" laws of
such jurisdictions as may be necessary to permit
the holders of Exchange Notes to trade the Exchange
Notes without any restrictions or limitations under
the securities laws of the several states of the
United States.
Consequences of Failure to
Exchange Series A
Notes.................... Upon consummation of the Exchange Offer, subject to
certain exceptions, holders of Series A Notes who
do not exchange their Series A Notes for Exchange
Notes in the Exchange Offer will no longer be
entitled to registration rights and will not be
able to offer or sell their Series A Notes, unless
such Series A Notes are subsequently registered
under the Securities Act (which, subject to certain
limited exceptions, the Company will have no
obligation to do), except pursuant to an exemption
from or in a transaction not subject to, the
Securities Act and applicable state securities
laws. See "Risk Factors -- Consequences of Failure
to Exchange" and "The Exchange Offer -- Terms of
the Exchange Offer."
Conditions of the Exchange
Offer.................... The Company's obligation to consummate the Exchange
Offer is subject to certain conditions. See "The
Exchange Offer -- Conditions." Tenders of the
Series A Notes may be withdrawn at any time prior
to the Expiration Date. See "The Exchange
Offer -- Withdrawal Rights."
How to Tender.............. Tendering holders of the Series A Notes must either
(i) complete and sign a Letter of Transmittal, have
their signatures guaranteed if required, forward
the Letter of Transmittal and any other required
documents to the Exchange Agent at the address set
forth under the caption "Exchange Agent," and
either deliver the Series A Notes to the Exchange
Agent or tender such Series A Notes pursuant to the
procedures for book-entry transfer or (ii) request
a broker, dealer, bank, trust company or other
nominee to effect the transaction for them.
Beneficial owners of the Series A Notes registered
in the name of a broker, dealer, bank, trust
company or other nominee must contact such
institution to tender their Series A Notes. The
Series A Notes may be physically delivered, but
physical delivery is not required if a confirmation
of a book-entry transfer of such Series A Notes to
the Exchange Agent's account at DTC is delivered in
a timely fashion. Certain provisions have also been
made for holders whose Series A Notes are not
readily available or who cannot comply with the
procedure for book-entry transfer on a timely
basis. Questions regarding how to tender and
requests for information should be directed to the
Exchange Agent. See "The Exchange Offer -- How to
Tender."
Guaranteed Delivery
Procedures............... Holders of Series A Notes who wish to tender their
Series A Notes and whose Series A Notes are not
immediately available or who cannot deliver their
Series A Notes and a properly completed Letter of
Trans-
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<PAGE> 16
mittal or any other documents required by the
Letter of Transmittal to the Exchange Agent prior
to the Expiration Date may tender their Series A
Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer -- How
to Tender."
Withdrawal Rights.......... Tenders of Series A Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the
Expiration Date. To withdraw a tender of Series A
Notes, a written or facsimile transmission notice
of withdrawal must be received by the Exchange
Agent at its address set forth herein under "The
Exchange Offer -- Exchange Agent" prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Tenders...... Subject to the terms and conditions of the Exchange
Offer, including the reservation of certain rights
by the Company, the Series A Notes validly tendered
prior to the Expiration Date will be accepted for
exchange. Subject to such terms and conditions, the
Exchange Notes to be issued in exchange for validly
tendered Series A Notes will be mailed by the
Exchange Agent promptly after acceptance of the
tendered Series A Notes or credited to the holder's
account in accordance with appropriate book-entry
procedures. Although the Company does not currently
intend to do so, if it modifies the terms of the
Exchange Offer prior to the Expiration Date, such
modified terms will be available to all holders of
the Series A Notes, whether or not their Series A
Notes have been tendered prior to such
modification. Any material modification will be
disclosed in accordance with the applicable rules
of the Commission and, if required, the Exchange
Offer will be extended to permit holders of the
Series A Notes adequate time to consider such
modification. See "The Exchange Offer -- Acceptance
of Tenders."
Exchange Agent............. Marine Midland Bank
Fees and Expenses.......... All expenses incident to the Company's consummation
of the Exchange Offer and compliance with the
Registration Rights Agreement will be borne by the
Company. See "The Exchange Offer -- Fees and
Expenses."
Use of Proceeds............ There will be no cash proceeds payable to the
Company from the issuance of the Exchange Notes
pursuant to the Exchange Offer. The proceeds from
the sale of the Series A Notes were used and are
being used in connection with the Recapitalization
and for general corporate purposes.
Issuer..................... Kinetic Concepts, Inc., a Texas corporation.
Notes Offered.............. $200,000,000 aggregate principal amount of 9 5/8%
Senior Subordinated Notes due 2007.
Maturity Date.............. November 1, 2007
Interest Payment Dates..... Interest on the Exchange Notes will accrue from the
date of original issuance of the Series A Notes
(November 5, 1997) and be payable semi-annually on
each May 1 and November 1, commencing May 1, 1998.
Optional Redemption........ The Series A Notes are, and the Exchange Notes will
be, redeemable at the option of the Company, in
whole or in part, at any time or from time to time,
on or after November 1, 2002, at the redemption
prices set forth herein, plus accrued interest, if
any, to the date of redemption. In
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<PAGE> 17
addition, prior to November 1, 2000, the Company,
at its option, may redeem up to 35% of the
aggregate principal amount of the Notes originally
issued with the net proceeds of one or more Equity
Offerings (as defined) at a price equal to 109.625%
of the aggregate principal amount to be redeemed,
together with accrued and unpaid interest, if any,
to the date of redemption, provided that at least
65% of the aggregate principal amount of the Notes
originally issued remain outstanding immediately
after such redemption. See "Description of
Notes -- Redemption."
Change of Control.......... Upon the occurrence of a Change of Control, each
holder of Exchange Notes and each holder of Series
A Notes will have the right to require the Company
to repurchase such holder's Notes at a purchase
price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any,
to the date of repurchase. See "Description of
Notes -- Change of Control."
Offers to Purchase......... In the event of certain asset sales, the Company
will be required to offer to repurchase the
Exchange Notes and the Series A Notes to the extent
of the net cash proceeds from such asset sales at a
price equal to 100% of their principal amount, plus
accrued and unpaid interest, if any, to the date of
repurchase. See "Description of Notes -- Certain
Covenants -- Limitation on Asset Sales."
Guarantees................. The Series A Notes are, and the Exchange Notes will
be, unconditionally guaranteed (the "Guarantees")
by each of the domestic subsidiaries of the
Company. The Guarantees are unsecured senior
subordinated obligations of the Guarantors, and
rank pari passu in right of payment to all existing
and future unsecured senior subordinated
indebtedness of the Guarantors. See "Description of
Notes -- Guarantees."
Ranking.................... The Series A Notes are, and the Exchange Notes will
be, unsecured senior subordinated obligations of
the Company and are and will be subordinated in
right of payment to all existing and future Senior
Debt of the Company, including indebtedness under
the New Credit Facilities. The Notes also are and
will be effectively subordinated to all secured
indebtedness of either the Company or any of its
subsidiaries to the extent of the assets secured by
such indebtedness. The Notes will rank pari passu
with any future senior subordinated indebtedness of
the Company and will rank senior in right of
payment to all other subordinated obligations of
the Company. As of September 30, 1997, on a pro
forma basis after giving effect to the Transactions
and the Acquisitions, the Company and the
Guarantors would have had approximately $342.7
million of Senior Debt outstanding and
approximately $57.3 million of availability under
the New Credit Facilities. In addition, on
September 30, 1997, the Company's subsidiaries that
are not Guarantors would have had, on the same pro
forma basis, approximately $5.7 million of
indebtedness and liabilities, including trade
payables, which would be structurally senior to the
Notes. See "Description of Notes."
Certain Covenants.......... The Indenture governing the Notes (the "Indenture")
imposes certain limitations on the ability of the
Company and its subsidiaries to, among other
things, incur additional indebtedness, pay
dividends or make certain other restricted
payments, consummate certain asset sales, enter
into certain transactions with affiliates, incur
liens, create restrictions on
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<PAGE> 18
the ability of a subsidiary to pay dividends or
make certain payments, sell or issue preferred
stock of subsidiaries to third parties, merge or
consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all
or substantially all of the assets of the Company.
See "Description of Notes -- Certain Covenants."
Federal Income Tax
Considerations........... For federal income tax purposes, holders of Series
A Notes will not recognize any gain or loss upon
the receipt of Exchange Notes pursuant to the
Exchange Offer. See "Certain Tax Considerations."
For additional information regarding the Notes, see "Description of Notes."
EXCHANGE OFFER; REGISTRATION RIGHTS; ADDITIONAL INTEREST
In the Registration Rights Agreement, the Company and the Guarantors agreed
(i) to file a registration statement with respect to the Exchange Offer within
45 days after the date of issuance of the Series A Notes (the "Issue Date"),
(ii) to use their best efforts to cause such registration statement to be
declared effective under the Securities Act within 150 days after the Issue Date
and (iii) to use their best efforts to consummate the Exchange Offer within 180
days of the Issue Date. If the Company and the Guarantors do not comply with
their registration obligations in a timely manner, they will be required to pay
additional interest (in addition to the scheduled payment of interest) during
the first 90 day period of such default in an amount equal to 0.50% per annum at
the end of such 90 day period. The amount of the additional interest will
increase by an additional 0.50% per annum for each subsequent 90 day period
until such obligations are complied with, up to a maximum amount of additional
interest of 1.50% per annum. In the event that applicable interpretations of the
staff of the Commission do not permit the Company to effect the Exchange Offer,
or if for any other reason the Exchange Offer is not consummated within 180 days
of the Issue Date, or if certain holders of the Series A Notes are not permitted
to receive the benefit of the Exchange Offer, the Company and the Guarantors
will use their best efforts to cause to become effective a shelf registration
statement with respect to the resale of the Series A Notes and to keep such
shelf registration statement effective until the earlier of two years after its
effective date and such time as all of the Series A Notes have been sold
thereunder.
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
The following table presents summary historical consolidated financial data
of the Company for the three years ended December 31, 1996, for the nine months
ended September 30, 1996 and 1997, and for the latest twelve-month period
("LTM") ended September 30, 1997, which have been derived from the Company's
consolidated financial statements and unaudited historical and pro forma
financial data. The pro forma data give effect to the consummation of the
Transactions and the Acquisitions. The unaudited Pro Forma Condensed
Consolidated Balance Sheet data reflects such adjustments as if the Transactions
and the Acquisitions had occurred at September 30, 1997, and the unaudited Pro
Forma Statements of Earnings data for the nine month period ended September 30,
1997, and for the LTM ended September 30, 1997, reflect such adjustments as if
the Transactions and the Acquisitions had occurred at the beginning of the
respective periods. The historical consolidated financial data of the Company
for the nine months ended September 30, 1996 and 1997, and for the LTM ended
September 30, 1997 have been derived from the Company's interim consolidated
financial statements which, in the opinion of management of the Company, have
been prepared on the same basis as the audited consolidated financial statements
and include all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation of the financial data for such periods. The
information in this table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Selected Historical Consolidated Financial Data," the Consolidated Financial
Statements and the notes thereto and the unaudited Pro Forma Condensed
Consolidated Financial Statements and the notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------ ----------------------------------
PRO FORMA PRO FORMA
1994 1994(1) 1995 1996 1996 1997 1997(2)
-------- --------- -------- -------- -------- ----------- ---------
(DOLLARS IN (UNAUDITED)
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenue............... $269,646 $ 222,084 $243,443 $269,881 $199,829 $ 224,511 $ 233,839
Gross profit.......... 91,023 74,289 92,294 107,361 78,881 92,801 96,333
Operating
earnings(3)........ 124,078 113,383 43,792 55,354 40,090 48,605 51,701
Interest income....... 1,318 1,318 5,063 9,332 3,055 1,421 548
Interest expense...... 5,846 109 509 245 118 126 37,139
Net earnings(4)....... 64,383 70,783 28,441 38,987 25,859 29,903 8,420
Other Data:
EBITDA(5)(6).......... 80,105 67,091 71,615 81,300 59,632 67,133 71,274
EBITDA margin......... 30% 30% 29% 30% 30% 30% 30%
Depreciation and
amortization....... 38,795 26,355 22,760 21,794 16,487 17,144 19,060
Capital
expenditures....... 9,564 5,425 37,104 27,083 19,137 24,004 25,654
Ratio of EBITDA to
cash interest
expense............ 2.03x
Therapy days.......... 4,166 4,166 4,761 5,240 3,897 4,655 4,655
</TABLE>
<TABLE>
<CAPTION>
LTM ENDED
SEPTEMBER 30,
1997
-------------
<S> <C>
Pro Forma Data:
Revenue....................................................................... $ 308,094
EBITDA(6)..................................................................... 95,187
EBITDA margin................................................................. 31%
Cash interest expense......................................................... 46,941
Ratio of EBITDA to cash interest expense...................................... 2.03x
</TABLE>
16
<PAGE> 20
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------------------ SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1997 1997(2)
-------- -------- -------- ------------- -------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (end of period):
Cash.................................... $ 43,241 $ 52,399 $ 59,045 $ 45,535 $ 22,276
Working capital......................... 90,731 109,413 107,334 111,164 99,508
Total assets............................ 232,731 243,726 253,393 286,023 319,452
Total debt.............................. 7,924 -- 514 477 543,127
Stockholders' equity (deficit).......... 185,423 210,324 211,078 230,826 (278,460)
</TABLE>
- ---------------
(1) The 1994 unaudited pro forma selected consolidated financial data is based
on the historical financial statements of the Company, giving effect to the
sale of certain assets of the Company's Medical Services Division ("Medical
Services") and all of the capital stock of KCI Financial Services, Inc.
("KCIFS") as if such sales had been consummated as of January 1, 1994 and
giving effect to such other assumptions and adjustments as set forth in the
notes accompanying the 1994 unaudited pro forma condensed consolidated
statement of earnings. See 1994 Unaudited Pro Forma Condensed Consolidated
Statements of Earnings and the notes thereto included in this Prospectus.
(2) The unaudited pro forma selected consolidated financial data is based on the
historical financial statements of the Company giving effect to the
Acquisitions and the Transactions and giving effect to such other
assumptions as set forth in the notes accompanying the unaudited pro forma
consolidated condensed financial statements. The unaudited pro forma
selected consolidated balance sheet data give effect to the Transactions and
Acquisitions as if they had occurred on September 30, 1997. The unaudited
pro forma selected consolidated operating and other data give effect to the
Transactions and Acquisitions as if they had occurred at the beginning of
the nine month period ended September 30, 1997. See Unaudited Pro Forma
Condensed Consolidated Financial Statements and the notes thereto included
elsewhere in this Prospectus.
(3) Excluding the effect of the proceeds of $84.8 million from the patent
litigation settlement and other unusual items, operating earnings and pro
forma operating earnings for the year ended December 31, 1994 would have
been $39.2 million and $38.6 million, respectively.
(4) Excluding the effect of the proceeds of $84.8 million from the patent
litigation settlement and other unusual items, net earnings and pro forma
net earnings for the year ended December 31, 1994 would have been $22.0
million and $25.1 million respectively.
(5) EBITDA is defined as earnings before interest expense, income taxes,
depreciation, and amortization. EBITDA and pro forma EBITDA for the year
ended December 31, 1994 exclude the proceeds of $84.8 million from the
patent litigation settlement and other unusual items. Had these amounts been
included, EBITDA and pro forma EBITDA for the year ended December 31, 1994
would have been $165.0 million and $141.8 million, respectively. While
EBITDA should not be construed as a substitute for operating earnings, net
earnings, or cash flows from operating activities in analyzing the Company's
operating performances, financial position or cash flows, the Company has
included EBITDA because it is commonly used by certain investors and
analysts to analyze and compare companies on the basis of operating
performance, leverage and liquidity and to determine a company's ability to
service debt.
(6) EBITDA for the year ended December 31, 1996 and pro forma EBITDA for the LTM
ended September 30, 1997 exclude a one-time gain of $5.2 million related to
the early repayment of notes receivable from MEDIQ/PRN that had previously
been discounted.
17
<PAGE> 21
RISK FACTORS
Prospective investors should carefully consider the following risk factors
in addition to the other information contained herein before making an
investment in the Exchange Notes offered hereby.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
As a result of the Transactions, the Company has significant indebtedness.
At September 30, 1997, the Company's total liabilities would have been $597.9
million and its stockholders' deficiency would have been $278.5 million, in each
case on a pro forma basis after giving effect to the Transactions and the
Acquisitions. The pro forma stockholders' deficiency is a result of the
Recapitalization. In addition, subject to the restrictions in the New Credit
Facilities and the Indenture, the Company may incur additional indebtedness from
time to time to finance acquisitions or capital expenditures or for other
purposes. After giving effect to the Transactions and the Acquisitions as if
they had occurred at the beginning of the nine month period ended September 30,
1997 and the twelve month period ended December 31, 1996, the Company's pro
forma ratio of earnings to fixed charges would have been 1.39x and 1.35x
respectively.
The degree to which the Company is leveraged could have important
consequences to holders of the Notes including, but not limited to, the
following: (i) a substantial portion of the Company's cash flow from operations
must be dedicated to debt service and will not be available for other purposes;
(ii) the Company's future ability to obtain additional debt financing for
working capital, capital expenditures or acquisitions may be limited; and (iii)
the Company's level of indebtedness could limit its flexibility in reacting to
changes in the industry and general economic conditions. Certain of the
Company's competitors currently operate on a less leveraged basis and have
significantly greater operating and financing flexibility than the Company.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations (including those incurred in connection with the
Recapitalization) will depend upon its future operating performance including
its ability to implement its business strategy, which will be affected by the
factors described herein and by prevailing economic conditions and financial,
business, regulatory and other factors, many of which are beyond its control.
The Company currently anticipates that its operating cash flow, together with
borrowings under the New Credit Facilities, will be sufficient to meet its
operating expenses and to service its debt requirements as they become due.
However, if the Company is unable to service its indebtedness, it will be forced
to adopt an alternative strategy that may include actions such as reducing or
delaying capital expenditures, selling assets, restructuring or refinancing its
indebtedness, or seeking additional equity capital. There can be no assurance
that any of these strategies could be effected on satisfactory terms, if at all.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture and the Bank Credit Agreement (as defined) entered into
pursuant to the New Credit Facilities restrict, among other things, the
Company's ability to: incur additional indebtedness; incur liens; pay dividends
or make certain other restricted payments; consummate certain asset sales; enter
into certain transactions with affiliates; incur indebtedness that is
subordinate in right of payment to any Senior Debt and senior in right of
payment to the Notes; impose restrictions on the ability of a subsidiary to pay
dividends or make certain payments to the Company; merge or consolidate with any
other person; or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the assets of the Company. See "Description of
Notes -- Certain Covenants" and "Description of New Credit Facilities." In
addition, the Bank Credit Agreement contains other and more restrictive
covenants and prohibits the Company from prepaying certain of its indebtedness
(including the Notes). The Bank Credit Agreement also requires the Company to
maintain specified financial ratios and satisfy certain financial condition
tests. The Company's ability to meet those financial ratios and tests can be
affected by events beyond its control, and there can be no assurance that the
Company will meet those tests. A breach of any of these covenants could result
in a default under the Bank Credit Agreement and/or the Indenture. Upon the
occurrence of an event of default under the Bank Credit Agreement, the lenders
could elect to declare all amounts outstanding under the Bank Credit Agreement,
18
<PAGE> 22
together with accrued interest, to be immediately due and payable. If the
Company were unable to repay those amounts, the lenders could proceed against
the collateral granted to them to secure that indebtedness. If the indebtedness
under the New Credit Facilities were to be accelerated, there can be no
assurance that the assets of the Company would be sufficient to repay in full
the indebtedness thereunder and the other indebtedness of the Company, including
the Notes. Substantially all of the assets of the Company and each of its
domestic subsidiaries are pledged as security under the Bank Credit Agreement.
See "Description of New Credit Facilities."
SUBORDINATION
The Notes and the Guarantees are and will be unsecured senior subordinated
obligations of the Company and the Guarantors, respectively, and, as such, are
subordinated to all existing and future Senior Debt of the Company and the
Guarantors, including borrowings under the New Credit Facilities. The Notes are
also effectively subordinated to all secured indebtedness of either the Company
or any of its subsidiaries to the extent of the assets secured by such
indebtedness. As of September 30, 1997, on a pro forma basis, the Company and
the Guarantors would have had approximately $342.7 million of Senior Debt. In
addition, on a pro forma basis, the Company would have had approximately $57.3
million available under the New Credit Facilities. Subsidiaries of the Company
that are not Guarantors would have had, on a pro forma basis, approximately $5.7
million of indebtedness and liabilities, including trade payables, which would
be structurally senior to the Notes.
The Company may not pay principal of, premium, if any, or interest on or
other amounts owing in respect of the Notes, make any deposit pursuant to any
defeasance provisions or repurchase, redeem or otherwise retire the Notes if
certain Senior Debt is not paid when due or any other default on such
Indebtedness (as defined) occurs and the maturity of such Indebtedness is
accelerated in accordance with its terms unless, in either case, the default has
been cured or waived, any such acceleration has been rescinded or such
Indebtedness has been paid in full. Moreover, under certain circumstances, if
any non-payment default exists with respect to such Indebtedness, the Company
may not make any payments on the Notes for a specified time, unless such default
is cured or waived, any acceleration of such indebtedness has been rescinded or
such indebtedness has been paid in full. See "Description of
Notes -- Subordination."
HOLDING COMPANY STRUCTURE; EFFECTS OF ASSET ENCUMBRANCES
The Company is a holding company, the principal assets of which consist of
equity interests in its subsidiaries. The Company's cash flow and, consequently,
its ability to service debt, including the Notes, is dependent upon the earnings
of its subsidiaries and the payment of funds by those subsidiaries to the
Company in the form of loans, dividends or otherwise. The Notes are and will be
guaranteed on an unsecured senior subordinated basis by the Guarantors, and as a
result, should the Company fail to satisfy any payment obligation under the
Notes, the holders would have a direct claim therefor against the Guarantors.
However, the Guarantors are obligors with respect to substantial indebtedness,
including in their capacity as guarantors under the New Credit Facilities on a
senior basis, and the capital stock of the Guarantors is pledged to secure
amounts borrowed thereunder. Accordingly, there may be insufficient assets
remaining after payment of senior and/or secured claims to pay amounts due on
the Notes. The Company's non-Guarantor subsidiaries are separate and distinct
legal entities and have no obligation, contingent or otherwise, to pay any
amounts due pursuant to the Notes or to make funds available therefor, whether
in the form of loans, dividends or otherwise. The Indenture permits the Company
and its subsidiaries (including non-Guarantor subsidiaries) to incur additional
indebtedness, subject to certain limited exceptions. See "Description of
Notes -- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness." Any right of the Company to participate in any distribution of
the assets of any of the non-Guarantor subsidiaries upon the liquidation,
reorganization or insolvency of such subsidiary (and the consequent right of the
holders of the Notes to participate in the distribution of those assets) will be
subject to the claims of creditors (including trade creditors) and preferred
stockholders, if any, of such non-Guarantor subsidiary, except to the extent
that the Company has a claim against such non-Guarantor subsidiary as a creditor
of such non-Guarantor subsidiary. Moreover, the payment of dividends and the
making of loan advances to the Company by its subsidiaries will be subject to
restrictive
19
<PAGE> 23
covenants in agreements entered into by certain of such subsidiaries and may be
restricted upon an event of default thereunder.
LIMITATIONS ON REPURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon a Change of Control, each holder of Notes will have certain rights to
require the Company to repurchase all or a portion of such holder's Notes. See
"Description of Notes." If a Change of Control were to occur, there can be no
assurance that the Company would have sufficient funds to pay the repurchase
price for all Notes tendered by the holders thereof and such failure would
result in an event of default under the Indenture. In addition, a Change of
Control would constitute a default under the New Credit Facilities and is
otherwise restricted by the New Credit Facilities and may be prohibited or
limited by, or create an event of default under, the terms of other agreements
relating to borrowings which the Company may enter into from time to time,
including other agreements relating to secured indebtedness or Senior Debt. No
payment or distribution may be made on the Notes, nor may any of the Notes be
acquired, by or on behalf of the Company while a payment default is continuing
under any Senior Debt or, under certain circumstances and for a specified time,
if a non-payment default exists with respect to certain Senior Debt. See
"Description of Notes -- Subordination." Also, if the Company's obligations
under the New Credit Facilities or any other secured Indebtedness of the Company
or its subsidiaries were accelerated due to a default thereunder, the lenders
thereunder would have a priority claim on the proceeds from the sale of the
collateral securing such Indebtedness.
COMPETITION
The Company faces substantial competition from other companies which
manufacture or market specialty beds, mattress overlays, mattress replacement
systems or medical devices. The Company's principal competitor has financial and
other resources substantially in excess of those available to the Company.
Competitive pressures include increased price competition and the introduction
of new products by the Company's competitors, which could have a material
adverse effect on the Company's business, financial condition or results of
operations. See "Business -- Competition."
UNCERTAINTY OF HEALTH CARE REFORM
There are widespread efforts to control health care costs in the United
States and abroad. As an example, the Balanced Budget Act of 1997 (the "BBA")
significantly reduces federal spending on Medicare and Medicaid over the next
five years by reducing annual payment updates to acute care hospitals, changing
payment systems for both skilled nursing facilities and home health care
services from cost-based to prospective payment systems, eliminating annual
payment updates for durable medical equipment ("DME"), and allowing states
greater flexibility in controlling Medicaid costs at the state level. Until the
Health Care Financing Administration ("HCFA") issues regulations implementing
this legislation in late 1997 and early 1998, the Company cannot reliably
predict the timing of or the exact effect which these initiatives could have on
the pricing and profitability of, or demand for, the Company's products.
However, certain of the provisions of the BBA, such as the changes in the manner
Medicare Part A reimburses skilled nursing facilities, may change the manner in
which the Company's customers make renting and purchasing decisions and could
have a material adverse effect on the Company. The Company also believes it is
likely that efforts by governmental and private payors to contain costs through
managed care and other efforts and to reform health systems will continue in the
future. There can be no assurance that current or future initiatives will not
have a material adverse effect on the Company's business, financial conditions
or results of operations. See "Management Discussion and Analysis of Financial
Condition and Results of Operations -- General" and "Business -- Reimbursement".
CONSOLIDATION OF PURCHASING ENTITIES
One of the most tangible results of the health care reform debate in the
United States has been that it has caused health care providers to examine their
cost structures and reassess the manner in which they provide health care
services. This review, in turn, has led many health care providers to merge or
consolidate with
20
<PAGE> 24
other members of their industry in an effort to reduce costs or achieve
operating synergies. A substantial number of the Company's customers, including
group purchasing organizations, hospitals, national nursing home companies and
national home health care agencies, have been affected by this consolidation.
Because larger purchasers or groups of purchasers tend to have more leverage in
negotiating prices, this trend could have a material adverse effect on the
Company's business, financial condition or results of operations. In addition,
the consolidation of health care providers often results in the renegotiation of
contracts and in the granting of price concessions. Finally, as group purchasing
organizations and integrated health care systems increase in size, each contract
represents a greater concentration of market share and the adverse consequences
of losing a particular contract increases considerably. As of September 30,
1997, the Company's ten largest group purchasing contracts accounted for
approximately 41% of the Company's total revenue.
REIMBURSEMENT OF HEALTH CARE COSTS
The Company's products are rented and sold principally to hospitals,
skilled nursing facilities and DME suppliers who receive reimbursement for the
products and services they provide from various public and private third party
payors, including Medicare, Medicaid and private insurance programs. The Company
also acts as a Durable Medical Equipment Supplier under 42 U.S.C. 1395 et seq.
and as such furnishes its products directly to customers and bills payors. As a
result, the demand for the Company's products in any specific care setting is
dependent in part on the reimbursement policies of the various payors in that
setting. In order to be reimbursed, the products generally must be found to be
reasonable and necessary for the treatment of medical conditions and must
otherwise fall within the payor's list of covered services. For example, the
Company is seeking to establish coverage and payment by Medicare Part A and
Medicare Part B for the V.A.C., its chronic wound treatment product, and the
PlexiPulse, its circulatory treatment product, in skilled nursing facilities and
home care. Although clinical acceptance of these products has continued to
increase, neither product has been officially classified as a covered item by
either Part A or Part B. In light of increased controls on Medicare spending,
there can be no assurance on the outcome of future coverage or payment decisions
for any of the Company's products by governmental or private payors. If
providers, suppliers and other users of the Company's products and services are
unable to obtain sufficient reimbursement for the provision of KCI products, a
material adverse impact on the Company's business, financial condition or
operations will likely result. See "Business -- Reimbursement."
FRAUD AND ABUSE LAWS
The Company is subject to various federal and state laws pertaining to
health care fraud and abuse including prohibitions on the submission of false
claims and the payment or acceptance of kickbacks or other remuneration in
return for the purchase or lease of Company products. The United States
Department of Justice and the Office of the Inspector General of the United
States Department of Health and Human Services has launched an enforcement
initiative which specifically targets the long term care, home health and DME
industries. Sanctions for violating these laws include criminal penalties and
civil sanctions, including fines and penalties, and possible exclusion from the
Medicare, Medicaid and other federal health care programs. Although the Company
believes its business arrangements comply with federal and state fraud and abuse
laws, there can be no assurance that the Company's practices will not be
challenged under these laws in the future or that such a challenge would not
have a material adverse effect on the Company's business, financial condition or
results of operations. See "Business -- Government Regulation -- Fraud and Abuse
Laws."
PRODUCT LIABILITY
The manufacturing and marketing of medical products necessarily entails an
inherent risk of product liability claims. Although the Company has not
experienced any significant losses due to product liability claims and currently
maintains umbrella liability insurance coverage, there can be no assurance that
the amount or scope of the coverage maintained by the Company will be adequate
to protect it in the event a significant product liability claim is successfully
asserted against the Company. See "Business -- Legal Proceedings."
21
<PAGE> 25
GOVERNMENT REGULATION
The Company's products are subject to regulation by numerous governmental
authorities, principally the United States Food and Drug Administration (the
"FDA") and corresponding state and foreign regulatory agencies. Noncompliance
with applicable requirements can result in, among other things, fines,
injunctions, civil penalties, recall or seizure of products, total or partial
suspension of production, failure of the government to grant premarket clearance
or premarket approval for medical devices, withdrawal of marketing clearances or
approvals and criminal prosecution. The FDA also has the authority to request
repair, replacement or refund of the cost of any product manufactured or
distributed by the Company.
On October 6, 1997, at the conclusion of an inspection of the Company's
principal manufacturing facility, the FDA issued the Company a Form 483 which
identified eight observations of conditions that the FDA believed to be in
violation of the FDA's Quality System Regulations ("QSR") (formerly Good
Manufacturing Practices) and Medical Device Reporting ("MDR") requirements.
Several of these observations concerned the Company's TransportAir device and
were similar to previous FDA inspectional observations that became the basis of
a warning letter issued to the Company in August 1995. Specifically, the FDA's
Form 483 stated, among other things, that the Company had not provided solutions
for or verified the implementation of solutions to quality assurance problems
concerning malfunctions of the TransportAir, and that the Company had failed to
submit Medical Device Reports for a number of incidents involving the
TransportAir. The TransportAir device, which provides an auxiliary air supply
for the Company's KinAir, BioDyne, and Therapulse product lines, permits those
bed products to be moved while in full inflation mode. The TransportAir is the
subject of a pending 510(k) notice and has been marketed since 1986 without
specific premarket clearance on the product on a stand-alone basis.
The Company submitted a written response to the FDA's Form 483 observations
on November 20, 1997. However, there can be no assurance that the FDA will agree
with the Company's response or that, regardless of the Company's response, the
FDA will not invoke any of its regulatory or enforcement authority against the
Company. In addition to other regulatory and enforcement actions, the FDA may
issue the Company a Warning Letter which could have an adverse effect on the
Company's ability to obtain Certificates for Products for Export until the FDA's
inspectional observations are corrected to the agency's satisfaction. Federal
agencies could also be advised of the issuance of the Warning Letter which may
be taken into account when considering the award of federal contracts to the
Company. The FDA may also determine that reinspection of the Company's
manufacturing facility is necessary before the agency determines that the
Company's response to the Form 483 is adequate.
The Company has begun modifying the TransportAir to address the problems
that the Company has encountered. If the FDA determines that there is a
reasonable probability that the TransportAir would cause serious, adverse health
consequences or death, the FDA could order the Company to recall the
TransportAir and not allow its redistribution until the Company has verified
that it has implemented appropriate corrective actions. Alternatively, the FDA
could consider the present modification to be a voluntary recall and require the
Company to assure that the modification has been fully implemented and that its
customers are adequately notified of the need for the modification. In addition,
because the TransportAir is not specifically the subject of a cleared 510(k)
notice, the FDA could require the Company to discontinue marketing the device
until it is cleared by the FDA. The failure of the Company to be able to market
the TransportAir would prevent the Company from supplying an alternative power
supply for three of its principal products which could have a material adverse
effect on the Company's ability to market those devices. Any regulatory or
enforcement action invoked by the FDA could have a material adverse effect upon
the Company's business, financial condition or results of operations.
The Company is also subject to numerous federal, state and local laws and
regulations relating to such matters as safe working conditions, manufacturing
practices, fire hazard control and the handling and disposal of hazardous or
potentially hazardous substances. The Company owns and leases properties which
are subject to environmental laws and regulations. There can be no assurance
that the Company will not be required to incur significant costs to comply with
such laws and regulations in the future or that such laws or regulations
22
<PAGE> 26
will not have a material adverse effect upon the Company's business, financial
condition or results of operations. See "Business -- Government Regulation."
CONTROLLING SHAREHOLDERS
Upon consummation of the Merger, Fremont and RCBA, in the aggregate, will
own a majority of the issued and outstanding Shares. There can be no assurance
that the interests of Fremont and RCBA (or their respective affiliates), either
individually or collectively, will not conflict with the interests of the
holders of the Notes.
DEPENDENCE ON KEY PERSONNEL
The Company's business is managed by a small number of key executive
officers. The Company's Chief Executive Officer, Raymond R. Hannigan, and other
members of senior management do not have employment contracts with the Company.
However, Mr. Hannigan and other members of senior management will be Continuing
Shareholders and as such will have an economic incentive (in the form of stock
options and other management incentive plans) to remain with the Company. See
"Management -- Executive Compensation." Nonetheless, there can be no assurance
that Mr. Hannigan or other key executive officers or members of senior
management will continue their employment with the Company. The Company does not
maintain a "key man" insurance policy in respect of its Chief Executive Officer
or any of its senior management. The loss of the services of key senior
management, or the Company's inability to attract and retain additional
management personnel, could have a material adverse effect on the Company's
business, financial condition or results of operations. See "Management."
PATENT LITIGATION
The Company is presently the defendant in five separate lawsuits in which
the plaintiff in the lawsuit has alleged that a product marketed by the Company
infringes a patent held by such plaintiff. Although the Company believes that
its products do not infringe a valid claim of any patent and that it has
meritorious defenses to each of these lawsuits, it is not possible to reliably
predict the outcomes of any of these lawsuits. In the event a court found that
one of the Company's products infringed a valid patent of a third party, the
court may award damages (which in certain of the cases, could be significant)
and enjoin the use of the product in question, either of which could have a
material adverse effect on the Company's business, financial condition or
results of operations. See "Business -- Legal Proceedings."
FRAUDULENT TRANSFER CONSIDERATIONS/AVOIDANCE OF GUARANTEES
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or void the Notes or any
Guarantee in favor of other existing or future creditors of the Company or a
Guarantor.
The incurrence by the Company of indebtedness, such as the Notes, would be
subject to review under relevant federal and state fraudulent conveyance laws in
a bankruptcy case or a lawsuit by or on behalf of unpaid creditors of the
Company or a representative of such creditors, such as a trustee or the Company
as debtor-in-possession. Under such laws, if a court were to find that, at the
time such indebtedness was incurred or the Notes were issued, either (i) the
Company incurred such indebtedness or issued the Notes with intent of hindering,
delaying or defrauding creditors, or (ii) the Company received less than a
reasonably equivalent value or fair consideration for incurring such
indebtedness or issuing the Notes and the Company (a) was insolvent by reason of
the incurrence of such indebtedness, including the Notes, (b) was engaged in a
business or a transaction, or was about to engage in a business or a
transaction, for which any property remaining with Company constituted an
unreasonably small amount of capital or (c) intended to incur, or believed that
it would incur, debts beyond its ability to pay as they matured, such court
could void the Company's obligations under the Notes and direct the repayment of
any amount paid thereunder to the Company to a fund for the benefit of the
Company's creditors, or take other action detrimental to the holder of the
Notes.
23
<PAGE> 27
Similarly, indebtedness under the Guarantees of the Notes also may be
subject to review under relevant federal and state fraudulent conveyance laws in
a bankruptcy of a Guarantor or in a lawsuit brought by or on behalf of creditors
of a Guarantor under the same standard described above with respect to the
incurrence by a Guarantor of the Guarantee of the Notes. A legal challenge of a
Guarantee on fraudulent conveyance grounds could, among other things, focus on
the benefits, if any, realized by a Guarantor as the result of the issuance by
the Company of the Notes. Pursuant to the terms of the Guarantees, the liability
of each Guarantor is limited to the maximum amount of indebtedness permitted, at
the time of the grant of such Guarantee, to be incurred in compliance with
fraudulent conveyance or similar laws.
To the extent any Guarantee was avoided as a fraudulent conveyance, limited
as described above, or held unenforceable for any other reason, holders of the
Notes would, to such extent, cease to have a claim in respect of such Guarantee
and, to such extent, would be creditors solely of the Company and any Guarantor
whose Guarantee was not avoided, limited, or held unenforceable. In such event,
the claims of the holders of the Notes against the issuer of an avoided, limited
or unenforceable Guarantee would be subject to the prior payment of all
liabilities of such Guarantor. There can be no assurance that, after providing
for all prior claims, there would be sufficient assets to satisfy the claims of
the holder of the Notes.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects" and words of similar import, constitute "forward-looking
statements." Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company or industry results to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic and business conditions, both domestic and foreign;
industry and market capacity; demographic changes; existing government
regulations and changes in, or the failure to comply with, government
regulations; legislative proposals for health care reform; liability and other
claims asserted against the Company; competition; the loss of any significant
customers; changes in operating strategy or development plans; the ability to
attract and retain qualified personnel; the significant indebtedness of the
Company after the Merger; the availability and terms of capital to fund the
expansion of the Company's business; and other factors referenced in this
Prospectus. Certain of these factors are discussed in more detail elsewhere in
this Prospectus, including, without limitation, under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Business." Given these uncertainties,
prospective investors are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any obligation to update any
such factors or to publicly announce the result of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.
ABSENCE OF PUBLIC MARKET FOR THE NOTES; RESTRICTIONS ON TRANSFER
There is no existing market for the Notes, and although the Notes are
expected to be eligible for trading in the PORTAL Market, the National
Association of Securities Dealers' screen-based automated market for trading of
securities eligible for resale under Rule 144A, there can be no assurance as to
the liquidity of any market that may develop for the Notes, the ability of
holders of the Notes to sell their Notes, or the price at which holders would be
able to sell their Notes. Future trading prices of the Notes will depend on many
factors, including, among other things, prevailing interest rates, the Company's
operating results and the market for similar securities. The Company does not
intend to apply for listing of the Notes on any securities exchange or the
Nasdaq National Market. The Company has been advised by the Initial Purchasers
that they currently intend to make a market in the Notes. However, the Initial
Purchasers are not obligated to do so and any market-making activities with
respect to the Notes may be discontinued at any time without notice. In
addition, such market-making activity is subject to the limits imposed by the
Securities Act and the Exchange Act, as amended (the "Exchange Act"), and may be
limited during the Exchange Offer and the pendency of any shelf registration
statement.
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<PAGE> 28
CONSEQUENCES OF FAILURE TO EXCHANGE AND REQUIREMENTS FOR TRANSFER OF EXCHANGE
NOTES
Holders of Series A Notes who do not exchange their Series A Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Series A Notes as set forth in the legend
thereon as a consequence of the issuance of the Series A Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Series A Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will register Series A Notes under
the Securities Act. To the extent that Series A Notes are tendered and accepted
in the Exchange Offer, the trading market for untendered and tendered but
unaccepted Series A Notes could be adversely affected.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes the Exchange Notes issued pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred by any holder
thereof (other than any such holder that is an "affiliate" of the Company or any
of the Guarantors within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, PROVIDED that such Exchange Notes are acquired in the
ordinary course of such holder's business and such holder has no arrangement or
understanding with any person to, and does not intend to, participate in the
distribution of such Exchange Notes.
Any Participating Broker-Dealer that acquired Series A Notes for its own
account as a result of market-making activities or other trading activities may
be a statutory underwriter. Each Participating Broker-Dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of Exchange
Notes received in exchange for Series A Notes where such Series A Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities.
The Company and the Guarantors have agreed that they will make this
Prospectus, as it may be amended or supplemented from time to time, available to
any Participating Broker-Dealer for use in connection with any such resale. See
"Plan of Distribution."
If (i) any holder of Series A Notes (A) is prohibited by law or Commission
policy from participating in the Exchange Offer; (B) may not resell the Exchange
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and this Prospectus, as it may be amended or supplemented from time
to time, is not appropriate or available for such resales; or (C) is a
Participating Broker-Dealer and owns Series A Notes acquired directly from the
Company or an affiliate of the Company or either of the Guarantors and (ii) such
holder has satisfied certain conditions relating to the provision of information
to the Company for use therein, the Company and the Guarantors have agreed to
register such Series A Notes pursuant to the Shelf Registration Statement and to
use their respective best efforts to cause it to be declared effective by the
Commission on or prior to 120 days after the date on which the Company and the
Guarantors became obligated to file the Shelf Registration Statement. The
Company and the Guarantors have agreed to maintain the effectiveness of the
Shelf Registration Statement for, under certain circumstances, a maximum of two
years, to cover resales of Series A Notes held by such holders. See "Purpose of
the Exchange Offer."
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<PAGE> 29
THE TRANSACTIONS
The Company and the Investors entered into the Transaction Agreement
pursuant to which the Investors are participating in the Recapitalization.
Pursuant to the Transaction Agreement, the Investors purchased in the aggregate
7,802,180 newly-issued Shares at a per Share price equal to $19.25 in the Stock
Purchase. The proceeds of the Stock Purchase, together with approximately $343.0
million of aggregate proceeds from certain other financings described below, and
the proceeds from the Offering, have been and will be used by the Company to (i)
purchase 31,006,942 Shares tendered pursuant to the terms of the Tender Offer at
a price of $19.25 per Share, net to each seller in cash; (ii) pay all related
fees and expenses; (iii) pay the Merger Consideration for Shares in connection
with the Merger; and (iv) for general corporate purposes.
The Transaction Agreement provides that, among other things, as soon as
practicable after the consummation of the Stock Purchase, the purchase of Shares
pursuant to the Tender Offer, the satisfaction of the other conditions set forth
in the Transaction Agreement, and in accordance with the requirements of
Delaware Law and Texas Law, the Investors will be merged with and into the
Company with the Company as the Surviving Corporation of the Merger. The
consummation of the Merger is subject to the satisfaction or waiver of certain
conditions including the approval of the Transaction Agreement by the requisite
vote of the shareholders of the Company. Under the Company's articles of
incorporation and Texas Law, the affirmative vote of the holders of two-thirds
of the outstanding Shares is required to approve the Transaction Agreement.
Fremont, RCBA and Dr. James Leininger owned approximately 90.2% of the issued
and outstanding Shares as of the Record Date, and all of such Shares owned by
them will be voted in favor of the approval of the Transaction Agreement. As
such, Fremont, RCBA and Dr. James Leininger can effect the Merger without the
affirmative vote of any other shareholder.
At the effective time of the Merger (the "Effective Time"), each Share
issued and outstanding immediately prior to the Effective Time, other than
Shares to be cancelled or to remain outstanding as described in this paragraph
("Continuing Shares"), shall be cancelled and shall be converted automatically
into the right to receive the Per Share Amount (the "Merger Consideration"),
subject to dissenters' rights as provided under Texas Law. Shares held in the
treasury of the Company, each Share owned by any direct or indirect wholly-owned
subsidiary of the Company, and Shares owned by Investors immediately prior to
the Effective Time, will be cancelled without any conversion thereof and no
payment or distribution shall be made with respect thereto. Each share of common
stock of Fremont Investor outstanding immediately prior to the Effective Time
shall be converted and exchanged for a number of validly issued, fully paid and
nonassessable shares of common stock, par value $.001 per share, of the
Surviving Corporation equal to the quotient obtained by dividing the number of
Shares acquired by Fremont Investor in the Stock Purchase by the number of
outstanding shares of common stock of the Fremont Investor and each limited or
general partnership interest of RCBA Investor shall be converted and exchanged
for a number of validly issued, fully paid and nonassessable shares of common
stock, par value $.001 per share, of the Surviving Corporation equal to the
quotient obtained by dividing the number of Shares acquired by the RCBA Investor
in the Stock Purchase by the number of outstanding partnership interests in RCBA
Investor. The 5,939,220 Shares to be held by and registered in the name of Dr.
James Leininger at the Effective Time, 3,871,752 Shares held by and registered
in the names of Stinson Capital Partners, L.P., BK Capital Partners IV, L.P.,
the Carpenters Pension Trust for Southern California, United Brotherhood of
Carpenters and Joiners of America Local Unions and Councils Pension Fund,
Insurance Company Supported Organizations Pension Plan, The Common Fund for
Non-Profit Organizations, Stinson Capital Partners II, L.P., RCBA-KCI Capital
Partners, L.P., Richard C. Blum & Associates, L.P., Richard C. Blum &
Associates, Inc., Richard C. Blum, Prism Partners I, L.P., and Weintraub Capital
Management, 100,000 Shares held by Dr. Peter Leininger and Shares, or Options to
acquire Shares, held by certain members of Company management who have entered
into stock retention agreements, shall not be cancelled and shall remain
outstanding (all of the foregoing persons or entities being herein referred to
as the "Continuing Shareholders").
The Investors have entered into a Shareholder Support Agreement with Dr.
James Leininger, dated as of October 2, 1997 (the "Shareholder Support
Agreement"), providing, subject to certain conditions, for (i) the grant by Dr.
James Leininger to the Fremont Investor of an irrevocable option to purchase up
to 2,529,197 Shares at $19.25 per Share, subject to the conditions set forth
therein, which option terminated upon
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<PAGE> 30
consummation of the Tender Offer, (ii) the grant by Dr. James Leininger to the
RCBA Investor of an irrevocable option to purchase up to 1,670,803 Shares at
$19.25 per Share, subject to the conditions set forth therein, which option
terminated upon consummation of the Tender Offer, (iii) the tender of 13,917,146
Shares owned or controlled by Dr. James Leininger pursuant to the Tender Offer
and (iv) the voting by Dr. James Leininger of all Shares owned or controlled by
him at the time of the shareholders' meeting called to consider the Merger in
favor of the Merger.
Following the consummation of the Merger, Fremont, RCBA, Dr. James
Leininger and Dr. Peter Leininger would own 7,029,922, 4,644,010, 5,939,220 and
100,000 Shares, respectively, representing 39.7%, 26.2%, 33.5% and 0.6% of the
Shares outstanding following such consummation. There would be no other
shareholders at such time, but certain members of management would retain, and
be granted, additional options to purchase Shares.
Funding for the Recapitalization consisted of: (i) gross proceeds from the
Offering of $200.0 million; (ii) borrowings under the New Credit Facilities of
approximately $343.0 million; and (iii) an investment of approximately $348.8
million in equity in the Company (the "Equity Financing"), including the
rollover of approximately $198.6 million of the Continuing Shares by the
Continuing Shareholders and the purchase by the Investors of approximately
$150.2 million of Shares from the Company. The New Credit Facilities provide for
up to $400.0 million in the form of (i) the Term Loan Facility, (ii) the
Revolving Credit Facility and (iii) the Acquisition Facility. See "Use of
Proceeds," and "Description of New Credit Facilities."
PURPOSE OF THE EXCHANGE OFFER
In connection with the initial sale of the Series A Notes, the Company and
the Guarantors agreed, subject to certain conditions, to use their best efforts
to conduct the Exchange Offer pursuant to the terms of the Registration Rights
Agreement by and among the Company, the Guarantors and the Initial Purchasers
(the "Registration Rights Agreement"). Pursuant to the Registration Rights
Agreement, the Company and the Guarantors agreed to (i) cause to be filed with
the Commission, no later than 45 days after the Issue Date, a registration
statement under the Securities Act relating to the Exchange Notes and the
Exchange Offer, and (ii) use their best efforts (a) to cause such registration
statement to be declared effective by the Commission in no event later than 150
days after the Issue Date, (b) to cause the Exchange Offer to remain open for a
period of not less than 20 days (or longer if required by applicable law) and
(c) to consummate the Exchange Offer on or prior to the 180th day after the
Issue Date. The Company's purpose in making the Exchange Offer is to comply with
such agreement and to avoid the increase in interest rate on the Series A Notes
which would occur if the Exchange Offer were not duly and timely consummated.
The Exchange Offer should provide holders of the Series A Notes with the ability
to effect, for federal income tax purposes, a tax-free exchange of such Series A
Notes, which are subject to trading limitations, for Exchange Notes that will
not be subject to such restrictions.
The Exchange Offer provides holders of the Series A Notes with the Exchange
Notes that will generally be freely transferable by holders thereof (other than
any holder who is an "affiliate" or "promoter" of the Company or any of the
Guarantors within the meaning of Rule 405 under the Securities Act), who may
offer for resale, resell or otherwise transfer such Exchange Notes without
complying with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of each such holder's business and such holders have no arrangement or
understanding with any person to participate in a distribution of the Exchange
Notes. Each holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes to be received by it will be acquired in the
ordinary course of its business, that at the time of consummation of the
Exchange Offer such holder will have no arrangement or understanding with any
person to participate in the distribution of the Exchange Notes in violation of
the provisions of the Securities Act, and that such holder is not an affiliate
of the Company or any of the Guarantors within the meaning of the Securities
Act.
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<PAGE> 31
RESALE OF THE EXCHANGE NOTES
With respect to resales of the Exchange Notes, based on interpretations by
the staff of the Commission set forth in no-action letters issued to third
parties, the Company believes that a holder or other person who receives
Exchange Notes, whether or not such person is the holder (other than a person
that is an "affiliate" of the Company or any of the Guarantors within the
meaning of Rule 405 under the Securities Act), in exchange for Series A Notes in
the ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any holder acquires Exchange Notes in the Exchange Offer for the
purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act (with such prospectus containing the selling securityholder
information required by Item 507 of Regulation S-K under the Securities Act) in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for Series A Notes, where such
Series A Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, may be a statutory
underwriter and must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act (which may be this Prospectus, as it may be
amended or supplemented from time to time) in connection with any resale of such
Exchange Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company or any of the Guarantors within the
meaning of Rule 405 under the Securities Act, and (v) the holder or any such
other person acknowledges that if such holder or other person participates in
the Exchange Offer for the purpose of distributing the Exchange Notes it must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale of the Exchange Notes and cannot
rely on such no-action letters. As indicated above, each Participating
Broker-Dealer that receives an Exchange Note for its own account in exchange for
the Series A Notes must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. For a description of the
procedures for such resales by Participating Broker-Dealers, see "Plan of
Distribution."
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for the Series A Notes where such Series A Notes were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that it will make this Prospectus, as amended or
supplemented, available to any Participating Broker-Dealer for use in connection
with any such resale during the period required by the Securities Act.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. The Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the
over-the-counter
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<PAGE> 32
market, in negotiated transactions, through the writing of options on the
Exchange Notes or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to the
purchaser or through brokers or dealers who may receive compensation in the form
of commissions or concessions from any such Participating Broker-Dealer and/or
the purchasers of any such Exchange Notes. Any Participating Broker-Dealer that
resells the Exchange Notes that were received by it for its own account pursuant
to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a Participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. The Company has
agreed to pay all expenses incident to the Exchange Offer other than commissions
or concessions of any brokers or dealers and will indemnify certain parties
against certain liabilities, including liabilities under the Securities Act.
The Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any Participating Broker-Dealer
that requests such documents in the Letter of Transmittal.
THE EXCHANGE OFFER
TERMS OF THE OFFER
The Company hereby offers, upon the terms and conditions set forth herein
and in the related Letter of Transmittal, to exchange the Exchange Notes for a
like principal amount of the outstanding Series A Notes. An aggregate of $200.0
million principal amount of Series A Notes are outstanding. The Exchange Offer
is not conditioned upon any minimum amount of the Series A Notes being tendered.
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, unless extended. The term "Expiration Date" means 5:00 p.m.,
New York City time, on , 1998, unless the Company, in its sole
discretion, notifies the Exchange Agent that the period of the Exchange Offer
has been extended, in which case the term "Expiration Date" means the latest
time and date on which the Exchange Offer as so extended will expire. See
"-- Expiration and Extension."
Holders of the Series A Notes who wish to exchange the Series A Notes for
the Exchange Notes and who validly tender the Series A Notes to the Exchange
Agent or validly tender the Series A Notes by complying with the book-entry
transfer procedures described below and, in each case, who furnish the Letter of
Transmittal and any other required documents to the Exchange Agent, will either
have the Exchange Notes mailed to them by the Exchange Agent or have the
Exchange Notes credited to their account in accordance with the book-entry
transfer procedures described below, promptly after such tender is accepted by
the Company. Subject to the terms and conditions of the Exchange Offer, the
Series A Notes which have been validly tendered prior to the Expiration Date
will be accepted on or promptly after the Expiration Date. Subject to the
applicable rules of the Commission, the Company, however, reserves the right,
prior to the first acceptance of tendered Series A Notes, to delay acceptance of
tendered Series A Notes, or to terminate the Exchange Offer, subject to the
provisions of Rule 14e-1(c) under the Exchange Act, which requires that a tender
offeror pay the consideration offered or return the tendered securities promptly
after the termination or withdrawal of a tender offer.
In addition, the Company reserves the right to waive any condition or
otherwise amend the Exchange Offer in any respect consistent with the Indenture
and the Registration Rights Agreement prior to the acceptance of tendered Series
A Notes. If any amendment by the Company of the Exchange Offer or waiver by the
Company of any condition thereto constitutes a material change in the
information previously disclosed to the holders of Series A Notes, the Company
will, in accordance with the applicable rules of the Commission, disseminate
promptly disclosure of such change in a manner reasonably calculated to inform
such holders of such change. If it is necessary to permit an adequate
dissemination of information regarding
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<PAGE> 33
such material change, the Company will extend the Exchange Offer to permit an
adequate time for holders of the Series A Notes to consider the additional
information.
CERTAIN EFFECTS OF THE EXCHANGE OFFER
Because the Exchange Offer is for any and all Series A Notes, the number of
Series A Notes tendered and exchanged in the Exchange Offer will reduce the
principal amount of Series A Notes outstanding. As a result, the liquidity of
any remaining Series A Notes may be substantially reduced. The Series A Notes
are currently eligible for sale pursuant to Rule 144A through the PORTAL System
of the National Association of Securities Dealers, Inc. Because the Company
anticipates that most holders of Series A Notes will elect to exchange such
Series A Notes for the Exchange Notes due to the more limited restrictions on
the resale thereof under the Securities Act, the Company anticipates that the
liquidity of the market for any Series A Notes remaining after the consummation
of the Exchange Offer may be substantially limited.
EXPIRATION AND EXTENSION
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, unless extended by the Company. The Exchange Offer may be
extended by oral or written notice from the Company to the Exchange Agent at any
time or from time to time, on or prior to the date then fixed for the expiration
of the Exchange Offer. Public announcement of any extension of the Exchange
Offer will be timely made by the Company, but, unless otherwise required by law
or regulation, the Company will not have any obligation to communicate such
public announcement other than by making a release to the Dow Jones News
Service.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Series A Notes, (ii) to extend the Exchange Offer or (iii) if any
conditions set forth below under "-- Conditions" shall not have been satisfied,
to terminate the Exchange Offer by giving oral or written notice of such delay,
extension or termination to the Exchange Agent. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof to the registered holders. If the Exchange
Offer is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders of the
Private Notes, and the Company will extend the Exchange Offer for a period of
five to ten business days, depending upon the significance of the amendment and
the manner of disclosure to the registered holders, if the Exchange Offer would
otherwise expire during such five to ten business day period.
CONDITIONS
The Exchange Offer is subject to the following conditions: (i) the Exchange
Offer does not violate applicable law or any applicable interpretation of the
staff of the Commission, (ii) no action or proceeding is instituted or
threatened in any court or by any governmental agency which might materially
impair the ability of the Company to proceed with the Exchange Offer and no
material adverse development has occurred in any existing action or proceeding
with respect to the Company and (iii) all governmental approvals have been
obtained, which approvals the Company deems necessary for the consummation of
the Exchange Offer.
REGISTRATION RIGHTS
On November 5, 1997, the Company and the Guarantors entered into the
Registration Rights Agreement with the Initial Purchasers pursuant to which the
Company and the Guarantors have, for the benefit of the holders of the Notes, at
the Company's cost, agreed to (i) file the registration statement of which this
Prospectus forms a part (the "Exchange Offer Registration Statement"), under the
Securities Act with respect to the Exchange Offer which constitutes the
Company's offer to exchange the Series A Notes for the Exchange Notes, which
will have terms identical in all material respects to the Series A Notes (except
that the Exchange Notes will not contain terms with respect to transfer
restrictions and will not contain certain provisions relating to an increase in
the interest rate which were applicable to the Series A Notes in certain
circumstances relating to the timing of the Exchange Offer or contain certain
provisions relating to a special
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<PAGE> 34
redemption pertaining to the timing of the Tender Offer), and (ii) cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act within 150 days after the Issue Date. The Company will keep the
Exchange Offer open for not less than 20 calendar days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
holders of the Series A Notes.
In the event that (i) any changes in law or the applicable interpretations
of the staff of the Commission do not permit the Company to effect the Exchange
Offer, (ii) the Exchange Offer is not consummated within 180 days of the Issue
Date, (iii) in certain circumstances, certain holders of unregistered Exchange
Notes so request within 120 days after the consummation of the Exchange Offer or
(iv) in the case of any holder that participates in the Exchange Offer, such
holder does not receive Exchange Notes on the date of the exchange that may be
sold without restriction under state and federal securities laws (other than due
solely to the status of such holder as an affiliate of the Company or any of the
Guarantors within the meaning of the Securities Act) and so notifies the Company
within 90 days after such holder first becomes aware of such restriction and
provides the Company with a reasonable basis for its conclusion, in the case of
each of clauses (i)-(iv) of this sentence, then the Company will promptly
deliver to the holders and the Trustee written notice thereof and the Company
and the Guarantors shall, at the Company's cost, (a) within 45 days after the
delivery of such notice, file a shelf registration statement covering resales of
the Notes (the "Shelf Registration Statement"), (b) use their best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act and (c) use their best efforts to keep the Shelf Registration
Statement effective until two years after its effective date, or such shorter
period ending when (i) all Notes covered by the Shelf Registration Statement
have been sold in the manner set forth and as contemplated therein or (ii) a
subsequent Shelf Registration Statement covering all unregistered Notes has been
declared effective under the Securities Act. The Company will, in the event of
the filing of a Shelf Registration Statement, provide to each holder of the
Notes copies of the prospectus which is a part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement for the
Notes has become effective and take certain other actions as are required to
permit unrestricted resales of the Notes. A holder of Notes that sells such
Notes pursuant to the Shelf Registration Statement generally will be required to
be named as a selling securityholder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations). In
addition, each holder of the Notes will be required to deliver information to be
used in connection with the Shelf Registration Statement and to provide comments
on the Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have its Notes included in the Shelf
Registration Statement and to benefit from the provisions regarding liquidated
damages set forth therein.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available without charge by writing to the Company
at 8023 Vantage Drive, San Antonio, Texas 78230-4726, Attention: Dennis E. Noll,
Secretary.
HOW TO TENDER
A holder of the Series A Notes may tender the Series A Notes by (a)
properly completing and signing the Letter of Transmittal or a facsimile thereof
(all references in this Prospectus to the Letter of Transmittal shall be deemed
to include a facsimile thereof) and delivering the same, together with the
Series A Notes being tendered (or a confirmation of an appropriate book-entry
transfer) to the Exchange Agent on or prior to the Expiration Date or (b)
requesting a broker, dealer, bank, trust company or other nominee to effect the
transaction for such holder prior to the Expiration Date.
If Exchange Notes are to be delivered to an address other than that of the
registered holder appearing on the note register (the "Note Register")
maintained by the registrar of the Notes, the signature on the Letter of
Transmittal must be guaranteed by a firm that is a bank, broker, dealer, credit
union, savings association or other entity which is a member in good standing of
the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program, the Stock Exchange Medallion
31
<PAGE> 35
Program, or by any other bank, broker, dealer, credit union, savings association
or other entity which is an "eligible guarantor institution," as such term is
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended
(each of the foregoing constituting an "Eligible Institution"). Exchange Notes
will not be issued in the name of a person other than that of the registered
holder of the Series A Notes appearing on the Note Register.
The Exchange Agent will establish an account with respect to the Series A
Notes at DTC within two business days after the date of this Prospectus, and any
financial institution which is a participant in DTC may make book-entry delivery
of the Series A Notes by causing DTC to transfer such Series A Notes into the
Exchange Agent's account in accordance with DTC's procedure for such transfer.
Although delivery of the Series A Notes may be effected through book-entry
transfer into the Exchange Agent's account at DTC, the Letter of Transmittal,
with any required signature guarantees and any other required documents, must in
any case be transmitted to and received by the Exchange Agent on or prior to the
Expiration Date at one of its addresses set forth below under "Exchange Agent",
or in compliance with the guaranteed delivery procedure described below.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
All references in this Prospectus to deposit or delivery of Series A Notes shall
be deemed to include DTC's book-entry delivery method.
Notwithstanding the foregoing, any financial institution that is a
participant in the Depositary's Book-Entry Transfer Facility system (the
"Book-Entry Transfer Facility") may make book-entry delivery of the Existing
Notes by causing the Depositary to transfer such Existing Notes into the
Exchange Agent's account in accordance with the Depositary's Automated Tender
Offer Program ("ATOP") procedures for such book-entry transfers. However, the
exchange for the Existing Notes so tendered will only be made after timely
confirmation (a "Book-Entry Confirmation") of such book-entry transfer of
Existing Notes into the Exchange Agent's account, and timely receipt by the
Exchange Agent of an Agent's Message (as such term is defined in the next
sentence) and any other documents required by the Letter of Transmittal. The
term "Agent's Message" means a message, transmitted by the Book-Entry Transfer
Facility and received by the Exchange Agent and forming a part of a Book-Entry
Confirmation, which states that the Book-Entry Transfer Facility has received an
express acknowledgment from a participant tendering the Series A Notes that is
the subject of such Book-Entry Confirmation that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal, and that the
Company may enforce such agreement against such participant.
THE METHOD OF DELIVERY OF THE SERIES A NOTES AND ALL OTHER DOCUMENTS,
INCLUDING DELIVERY THROUGH DTC, IS AT THE ELECTION AND RISK OF THE HOLDER. IF
SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED,
BE USED, AND PROPER INSURANCE BE OBTAINED.
If a holder desires to tender Series A Notes pursuant to the Exchange Offer
and such holder's Series A Notes are not immediately available or time will not
permit all of the above documents to reach the Exchange Agent prior to the
Expiration Date, or such holder cannot complete the procedure of book-entry
transfer on a timely basis, such tender may be effected if the following
conditions are satisfied:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, in substantially the form provided by the Company, is received by
the Exchange Agent as provided below on or prior to the Expiration Date;
and
(c) the Series A Notes, in proper form for transfer (or confirmation
of book-entry transfer of such Series A Notes into the Exchange Agent's
account at DTC as described above), together with a properly completed and
duly executed Letter of Transmittal and all other documents required by the
Letter of Transmittal, are received by the Exchange Agent within three New
York Stock Exchange, Inc. trading days after the date of execution of such
Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mailed to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery.
32
<PAGE> 36
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Series A
Notes (or a timely confirmation received of a book-entry transfer of Series A
Notes into the Exchange Agent's account at DTC) or a Notice of Guaranteed
Delivery from an Eligible Institution is received by the Exchange Agent.
Issuances of Exchange Notes in exchange for Series A Notes tendered pursuant to
a Notice of Guaranteed Delivery by an Eligible Institution will be made only
against delivery of the Letter of Transmittal (and any other required documents)
and the tendered Series A Notes (or a timely confirmation received of a
book-entry transfer of Series A Notes into the Exchange Agent's account at DTC)
with the Exchange Agent.
Partial tenders of Series A Notes may be made only if (i) the principal
amount tendered is equal to $1,000 or an integral multiple thereof and (ii) the
remaining untendered portion of such Series A Note is in a principal amount of
$250,000, or any integral multiple of $1,000 in excess of such amount. Holders
tendering less than the entire principal amount of any Series A Note they hold
in accordance with the foregoing restrictions must appropriately indicate such
fact on the Letter of Transmittal accompanying the tendered Series A Note.
With respect to tenders of Series A Notes, the Company reserves full
discretion to determine whether the documentation is complete and generally to
determine all questions as to tenders, including the date of receipt of a
tender, the propriety of execution of any document, and other questions as to
the validity, form, eligibility or acceptability of any tender. The Company
reserves the right to reject any tender not in proper form or otherwise not
valid or the acceptance for exchange of which may, in the opinion of the
Company's counsel, be unlawful or to waive any irregularities or conditions, and
the Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions on the Letter of Transmittal) will be final and
binding. The Company and the Exchange Agent shall not be obligated to give
notice of any defects or irregularities in tenders and shall not incur any
liability for failure to give any such notice. The Exchange Agent may, but shall
not be obligated to, give notice of any irregularities or defects in tenders,
and shall not incur any liability for any failure to give any such notice. The
Series A Notes shall not be deemed to have been duly or validly tendered unless
and until all defects and irregularities have been cured or waived. All
improperly tendered Series A Notes, as well as Series A Notes in excess of the
principal amount tendered for exchange, will be returned (unless irregularities
and defects are timely cured or waived), without cost to the tendering holder
(or, in the case of Series A Notes delivered by book-entry transfer within DTC,
will be credited to the account maintained within DTC by the participant in DTC
which delivered such shares), promptly after the Expiration Date.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, certain terms and
conditions which are summarized below and are part of the Exchange Offer.
Each holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, unless it is a Participating Broker-Dealer, it
is not engaging and does not intend to engage in the distribution of the
Exchange Notes, that at the time of consummation of the Exchange Offer such
holder will have no arrangement or understanding with any person to participate
in the distribution of the Exchange Notes in violation of the provision of the
Securities Act, that such holder is not an "affiliate" of the Company or any of
the Guarantors within the meaning of the Securities Act and that if it
participates in the Exchange Offer for the purpose of distributing the Exchange
Notes it must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale of the Exchange Notes.
The Series A Notes tendered in exchange for the Exchange Notes (or a timely
confirmation of a book-entry transfer of such Series A Notes into the Exchange
Agent's account at DTC) must be received by the Exchange Agent, with the Letter
of Transmittal and any other required documents, by 5:00 p.m., New York City
time, on or prior to , 1998, unless extended, or within the time
periods set forth above in "-- How to Tender" pursuant to a Notice of Guaranteed
Delivery from an Eligible Institution. The party tendering the Series A Notes
for exchange (the "Holder") will sell, assign and transfer the Series A Notes to
33
<PAGE> 37
the Exchange Agent, as agent of the Company, and irrevocably constitute and
appoint the Exchange Agent as the Holder's agent and attorney-in-fact to cause
the Series A Notes to be transferred and exchanged. The Holder will warrant that
it has full power and authority to tender, exchange, sell, assign and transfer
the Series A Notes and to acquire the Exchange Notes issuable upon the exchange
of such tendered Series A Notes, the Exchange Agent, as agent of the Company,
will acquire good and unencumbered title to the tendered Series A Notes, free
and clear of all liens, restrictions, charges and encumbrances, and that the
Series A Notes tendered for exchange are not subject to any adverse claims or
encumbrance when accepted by the Exchange Agent, as agent of the Company. The
Holder will also covenant and agree that it will, upon request, execute and
deliver any additional documents deemed by the Company or the Exchange Agent to
be necessary or desirable to complete the exchange, sale, assignment and
transfer of the Series A Notes. All authority conferred or agreed to be
conferred in the Letter of Transmittal by the Holder will survive the death or
incapacity of the Holder and any obligation of the Holder shall be binding upon
the heirs, personal representatives, successors and assigns of such Holder.
Signature(s) on the Letter of Transmittal are required to be guaranteed as
set forth above in "-- How to Tender." All questions as to the validity, form,
eligibility (including time of receipt) and acceptability of any tender will be
determined by the Company, in its sole discretion, and such determination will
be final and binding. Unless waived by the Company, irregularities and defects
must be cured by the Expiration Date. The Company will pay all security transfer
taxes, if any, applicable to the transfer and exchange of the Series A Notes
tendered.
WITHDRAWAL RIGHTS
All tenders of the Series A Notes may be withdrawn at any time prior to
acceptance thereof on the Expiration Date. To be effective, a notice of
withdrawal must be timely received by the Exchange Agent at the address set
forth below under "-- Exchange Agent." Any notice of withdrawal must specify the
person named in the Letter of Transmittal as having tendered the Series A Notes
to be withdrawn. If the Series A Notes have been physically delivered to the
Exchange Agent, the tendering holder must also submit the serial number shown on
the particular Series A Notes to be withdrawn. If the Series A Notes have been
delivered pursuant to the book-entry procedures set forth above under "-- How to
Tender," any notice of withdrawal must specify the name and number of the
participant's account at DTC to be credited with the withdrawn Series A Notes.
The Exchange Agent will return the properly withdrawn Series A Notes as soon as
practicable following receipt of notice of withdrawal. All questions as to the
validity, including time of receipt, of notices of withdrawals will be
determined by the Company, and such determinations will be final and binding on
all parties.
ACCEPTANCE OF TENDERS
Subject to the terms and conditions of the Exchange Offer, including the
reservation of certain rights by the Company, the Series A Notes tendered
(either physically or through book-entry delivery as described in "-- How to
Tender") with a properly executed Letter of Transmittal and all other required
documentation, and not withdrawn, will be accepted promptly after the Expiration
Date. Subject to such terms and conditions, Exchange Notes to be issued in
exchange for properly tendered Series A Notes will either be mailed by the
Exchange Agent or credited to the holder's account in accordance with the
appropriate book-entry procedures promptly after the acceptance of the properly
tendered Series A Notes. Acceptance of Series A Notes will be effected by the
delivery of a notice to that effect by the Company to the Exchange Agent.
Subject to the applicable rules of the Commission, the Company, however,
reserves the right, prior to the acceptance of tendered Series A Notes, to delay
acceptance of tendered Series A Notes upon the occurrence of any of the
conditions set forth above under the caption "-- Conditions." The Company
confirms that its reservation of the right to delay acceptance of tendered
Series A Notes is subject to the provisions of Rule 14e-1(c) under the 1934 Act
which requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after the termination or withdrawal of a tender
offer.
Although the Company does not currently intend to do so, if it modifies the
terms of the Exchange Offer, such modified terms will be available to all
holders of Series A Notes, whether or not their Series A Notes
34
<PAGE> 38
have been tendered prior to such modification. Any material modification will be
disclosed in accordance with the applicable rules of the Commission and, if
required, the Exchange Offer will be extended to permit holders of Series A
Notes adequate time to consider such modification.
The tender of Series A Notes pursuant to any one of the procedures set
forth in "-- How to Tender" will constitute an agreement between the tendering
holder and the Company upon the terms and subject to the conditions of the
Exchange Offer.
EXCHANGE AGENT
Marine Midland Bank has been appointed as Exchange Agent for the Exchange
Offer. Letters of Transmittal must be addressed to the Exchange Agent at one of
the addresses set forth below:
<TABLE>
<S> <C>
By Mail: By Courier or By Hand:
Marine Midland Bank Marine Midland Bank
Attn: Corporate Trust Department Attn: Corporate Trust Operations
140 Broadway, Level A 140 Broadway, Level A
New York, New York 10005-1180 New York, New York 10005-1180
</TABLE>
By Facsimile: (212) 658-2292
Attn: Paulette Shaw
Telephone: (212) 658-5931
Delivery to other than the above addresses will not constitute valid
delivery.
SOLICITATION OF TENDERS; EXPENSES
Except as described above under "Exchange Agent," the Company has not
retained any agent in connection with the Exchange Offer and will not make any
payments to brokers, dealers or other persons for soliciting or recommending
acceptances of the Exchange Offer. The Company will, however, pay the Exchange
Agent reasonable and customary fees for its services and will reimburse the
Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company will also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus and related documents to the beneficial
owners of the Series A Notes and in handling or forwarding tenders for their
customers.
35
<PAGE> 39
USE OF PROCEEDS
The Company will not receive any proceeds as a result of the Exchange
Offer.
The net proceeds to the Company from the Offering were approximately $191.7
million after deducting discounts and estimated offering expenses payable by the
Company. The Company utilized and will utilize the net proceeds, together with
borrowings under the New Credit Facilities, the Investors' equity investment and
the Continuing Shareholders' rollover equity investment to consummate the
Recapitalization, pay related fees and expenses and for general corporate
purposes. See "The Transactions." The following table illustrates the sources
and uses of proceeds:
<TABLE>
<CAPTION>
AMOUNT
----------
(DOLLARS
IN
THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
New Credit Facilities
Term Loans...................................................................... $300,000
Revolving Credit Facility(1).................................................... 33,000
Acquisition Facility(2)......................................................... 10,000
Notes............................................................................. 200,000
Fremont Investor equity investment................................................ 135,326
RCBA Investor equity investment................................................... 14,866
Continuing Shareholders' rollover equity investment............................... 198,553
Existing cash reserves............................................................ 2,699
--------
Total Sources................................................................ $894,444
========
USES OF FUNDS:
Purchases of Shares............................................................... $631,638
Net purchase of options........................................................... 20,832
Continuing Shareholders' rollover equity investment............................... 198,553
Fees and expenses................................................................. 43,421
--------
Total Uses................................................................... $894,444
========
</TABLE>
- ---------------
(1) The Revolving Credit Facility has total commitments of $50.0 million.
(2) The Acquisition Facility has total commitments of $50.0 million.
36
<PAGE> 40
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company as of September 30, 1997 (i) on a historical basis and (ii) on a pro
forma basis after giving effect to the Transactions and Acquisitions including
the Offering and the application of the net proceeds therefrom, as if they had
occurred on September 30, 1997. This table should be read in conjunction with
"The Transactions", "Description of Notes", "Description of New Credit
Facilities" and the historical financial data of the Company included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1997
----------------------
ACTUAL PRO FORMA
-------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................. $ 45,535 $ 22,276
Current portion of long-term debt:
New Credit Facilities............................................... $ -- $ 4,800
Capital lease obligation............................................ 137 137
-------- ---------
$ 137 $ 4,937
======== =========
Long-term debt:
Existing bank credit facilities..................................... $ -- $ --
New Credit Facilities(1)............................................ -- 337,850
Notes............................................................... -- 200,000
Capital lease obligation............................................ 340 340
-------- ---------
Total long-term debt.................................................. 340 538,190
-------- ---------
Minority Interest..................................................... 220 220
-------- ---------
Stockholders' equity including paid-in capital:
Common stock, $.001 par value; 100,000,000 shares authorized........ 42 17
Additional paid-in capital.......................................... -- 133,904
Retained earnings (deficit)......................................... 235,579 (407,586)
Other............................................................... (4,795) (4,795)
-------- ---------
Total stockholders' equity....................................... 230,826 (278,460)
-------- ---------
Total Capitalization........................................... $231,386 $ 259,950
======== =========
</TABLE>
- ---------------
(1) As of September 30, 1997, on a pro forma basis after giving effect to the
Transactions and the Acquisitions, the Company would have had availability
of $22.3 million under the Revolving Credit Facility and $35.0 million under
the Acquisition Facility.
37
<PAGE> 41
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements give effect to the Acquisitions and the Transactions. The unaudited
pro forma condensed consolidated balance sheet as of September 30, 1997 gives
effect to the Transactions and the Acquisitions as if they had occurred on
September 30, 1997. The unaudited condensed consolidated statements of earnings
for the nine months ended September 30, 1997, for the year ended December 31,
1996, and for the nine months ended September 30, 1996 give effect to the
Acquisitions and the Transactions as if they had occurred at the beginning of
each period presented.
The information in the column titled "The Company Historical" is summarized
from the historical consolidated financial statements of the Company included
elsewhere in this Prospectus.
The unaudited pro forma condensed consolidated financial statements have
been prepared by Company management and are presented for informational purposes
only. The pro forma adjustments are based on available information and
assumptions that Company management believes are reasonable. These unaudited pro
forma condensed consolidated financial statements may not be indicative of the
results that actually would have occurred if the Transactions and the
Acquisitions had been in effect on the dates indicated or which may be obtained
in the future. The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the Company's consolidated
financial statements appearing elsewhere in this Prospectus.
38
<PAGE> 42
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
THE ---------------------------- THE
COMPANY ACQUISITION THE COMPANY
HISTORICAL OF RIK(a) TRANSACTIONS PRO FORMA
---------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents..................... $ 45,535 $ (23,259) $ (643,741)(b) $ 22,276
133,911(c)
521,854(d)
(12,024)(e)
Accounts receivable, net................. 74,875 3,181 78,056
Inventories.............................. 21,068 627 21,695
Income taxes receivable.................. 7,969(b) 12,568
4,599(e)
Prepaid expenses and other............... 10,653 92 10,745
-------- -------- --------- ---------
Total current assets..................... 152,131 (19,359) 12,568 145,340
Net property, plant and equipment.......... 72,535 2,260 74,795
Notes receivable........................... 3,100 3,100
Goodwill, net.............................. 27,649 17,059 44,708
Other assets, net.......................... 30,608 105 20,796(d) 51,509
-------- -------- --------- ---------
Total Assets..................... $ 286,023 $ 65 $ 33,364 $ 319,452
======== ======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable......................... $ 5,423 $ $ $ 5,423
Current installments of long-term
obligations........................... 4,800(d) 4,800
Current installments of capital lease
obligations........................... 137 137
Accrued expenses......................... 33,631 65 33,696
Income taxes payable..................... 1,776 1,776
-------- -------- --------- ---------
Total current liabilities........ 40,967 65 4,800 45,832
======== ======== ========= =========
New Credit Facility........................ 337,850(d) 337,850
The Notes.................................. 200,000(d) 200,000
Capital leases obligations, excluding
current installments..................... 340 340
Deferred income taxes...................... 13,462 13,462
Other...................................... 208 208
Minority interest.......................... 220 220
-------- -------- --------- ---------
Total Liabilities................ 55,197 65 542,650 597,912
-------- -------- --------- ---------
Shareholders' equity (deficit):
Common stock............................. 42 (32)(b) 17
7(c)
Additional paid-in capital............... 133,904(c) 133,904
Retained earnings (deficit).............. 235,579 (635,740)(b) (407,586)
(7,425)(e)
Other.................................... (4,795) (4,795)
-------- -------- --------- ---------
230,826 (509,286) (278,460)
-------- -------- --------- ---------
Total Liabilities and
Shareholders'
Equity (Deficit)............... $ 286,023 $ 65 $ 33,364 $ 319,452
======== ======== ========= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
39
<PAGE> 43
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
----------------------------
THE ACQUISITION
COMPANY OF RIK THE THE COMPANY
HISTORICAL AND HF(f) TRANSACTIONS PRO FORMA
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue:
Service and rental........................ $ 184,730 $ 8,425 -- $ 193,155
Sales and other........................... 39,781 903 -- 40,684
-------- -------- --------- ---------
Total revenue.......................... 224,511 9,328 -- 233,839
Rental expenses............................. 115,633 5,349 -- 120,982
Cost of goods sold.......................... 16,077 447 -- 16,524
-------- -------- --------- ---------
131,710 5,796 137,506
-------- -------- --------- ---------
Gross profit........................... 92,801 3,532 -- 96,333
Selling, general and administrative
expenses.................................. 44,196 1,971 $ (1,535)(g) 44,632
-------- -------- --------- ---------
Operating earnings..................... 48,605 1,561 1,535 51,701
Interest income............................. 1,421 (873) 548
Interest expense............................ (126) -- (37,013)(h) (37,139)(j)
-------- -------- --------- ---------
Earnings before income taxes and
minority interest.................... 49,900 688 (35,478) 15,110
Income tax.................................. 19,960 263 (13,570)(i) 6,653
Minority interest........................... 37 -- -- 37
-------- -------- --------- ---------
Net earnings........................... $ 29,903 $ 425 $(21,908) $ 8,420
======== ======== ========= =========
Other Information(k):
EBITDA.................................... $ 67,133 $ 2,606 $ 1,535 $ 71,274
EBITDA margin............................. 30% 30%
Depreciation and amortization............. 17,144 1,916 19,060
Capital expenditures...................... 24,004 1,650 25,654
Ratio of EBITDA to cash interest
expense................................ 2.03x
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statement.
40
<PAGE> 44
UNAUDITED PRO FORMA CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
THE --------------------------------
COMPANY ACQUISITION THE THE COMPANY
HISTORICAL OF RIK AND HF(F) TRANSACTIONS PRO FORMA
---------- ---------------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue:
Service and rental....................... $ 225,450 $ 16,025 -- $ 241,475
Sales and other.......................... 44,431 782 -- 45,213
-------- ------- -------- --------
Total revenue......................... 269,881 16,807 286,688
Rental expenses............................ 146,205 10,585 -- 156,790
Cost of goods sold......................... 16,315 305 -- 16,620
-------- ------- -------- --------
162,520 10,890 173,410
-------- ------- -------- --------
Gross profit.......................... 107,361 5,917 -- 113,278
Selling, general and administrative
expenses................................. 52,007 4,883 $ (2,281)(g) 54,609
-------- ------- -------- --------
Operating earnings.................... 55,354 1,034 2,281 58,669
Interest income............................ 9,332 (1,164) 8,168
Interest expense........................... (245) -- (48,930)(h) (49,175)(j)
-------- ------- -------- --------
Earnings (loss) before income taxes
and minority interest............... 64,441 (130) (46,649) 17,622
Income tax................................. 25,454 (50) (17,843)(i) 7,561
-------- ------- -------- --------
Net earnings (loss)................... $ 38,987 $ (80) $(28,806) $ 10,101
======== ======= ======== ========
Other Information(k):
EBITDA................................ $ 81,300 $ 3,208 $ 2,281 $ 86,789
EBITDA margin......................... 30% 30%
Depreciation and amortization......... 21,794 3,338 25,132
Capital expenditures.................. 27,083 2,790 29,873
Ratio of EBITDA to cash interest
expense............................. 1.86x
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
41
<PAGE> 45
UNAUDITED PRO FORMA CONDENSED STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
ADJUSTMENTS
THE --------------------------------
COMPANY ACQUISITION THE THE COMPANY
HISTORICAL OF RIK AND HF(a) TRANSACTIONS PRO FORMA
---------- ---------------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue:
Service and rental......................... $ 167,523 $ 12,019 $ 179,542
Sales and other............................ 32,306 587 32,893
-------- ------- -------- --------
Total revenue.............................. 199,829 12,606 212,435
Rental expenses............................ 109,263 7,939 117,202
Cost of goods sold......................... 11,685 229 11,914
-------- ------- -------- --------
120,948 8,168 129,116
-------- ------- -------- --------
Gross profit............................... 78,881 4,438 83,319
Selling, general and administrative
expenses................................. 38,791 3,674 $ (1,711)(g) 40,754
-------- ------- -------- --------
Operating earnings......................... 40,090 764 1,711 42,565
Interest income............................ 3,055 (873) 2,182
Interest expense........................... (118) (36,655)(h) (36,773)(j)
-------- ------- -------- --------
Earnings (loss) before income taxes and
minority interest........................ 43,027 (109) (34,944) 7,974
Income tax................................. 17,168 (42) (13,366)(i) 3,760
-------- ------- -------- --------
Net earnings (loss)........................ $ 25,859 $ (67) $(21,578) $ 4,214
======== ======= ======== ========
Other Information(k):
EBITDA..................................... $ 59,632 $ 1,980 $ 1,711 $ 63,323
EBITDA margin.............................. 30% 30%
Depreciation and amortization.............. 16,487 2,089 18,576
Capital expenditures....................... 19,137 2,063 21,200
Ratio of EBITDA to cash interest expense... 1.82x
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
42
<PAGE> 46
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
ACQUISITIONS
On February 1, 1997, the Company acquired the assets of H.F. Systems, Inc.
("HF") for approximately $7,955 in cash. On October 1, 1997, the Company
acquired the assets of RIK Medical L.L.C. ("RIK") for approximately $23,259 in
cash plus an earn-out of up to $2,000. The acquisitions were accounted for as
purchase transactions and the results of operations are included in the
Company's audited financial statements from the date of acquisition.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The unaudited pro forma condensed consolidated balance sheet gives effect
to the acquisition of RIK, the Offering and the Recapitalization assuming that
the transactions occurred on that date. The Acquisitions include the acquisition
of RIK on October 1, 1997 and HF on February 1, 1997 in transactions accounted
for as purchases. The Offering and the Recapitalization include the offer to
purchase certain outstanding Shares and the related equity investment by the
Investors and certain financings.
(a) Represents net assets acquired, the excess of purchase price over
net assets acquired, and the related cash payment.
(b) Represents cash payment for 32,358,906 Shares tendered at $19.25
per Share, net purchase of 2,247,015 stock options outstanding and income
tax benefit of $7,969.
(c) Represents proceeds from sale of 7,436,042 Shares to the Investors
and related increases in equity, net of expenses of $9,233.
(d) Represents proceeds of financing from the Term Loan Facility of
$300,000, the Offering of $200,000 and the Revolving Credit Facility and
Acquisition Facility of $42,650, including capitalized costs related
thereto of $20,796. As of November 30, 1997, the amount outstanding under
the Revolving Credit Facility and Acquisition Facility was $43,000.
(e) Represents the expensing of nonrecurring fees and expenses
directly related to the Offering, the Recapitalization and related cash
payment.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
The pro forma condensed consolidated statements of earnings give effect to
the Transactions and the Acquisitions as if all of them had occurred at the
beginning of the year. The Acquisitions reflect the results of operations of RIK
and HF. The Transactions include additional interest expense, certain expense
savings and the related income tax effects.
(f) Represents historical results of RIK and HF, adjusted for
amortization of additional goodwill, expected reductions in operating
expenses due to anticipated efficiencies and consolidations, and the
related income tax effect. Results of HF after the date of acquisition are
included in the Company's historical amounts.
(g) Reflects reductions in compensation and administrative costs
resulting from changes in organizational structure as a result of the
Recapitalization.
(h) Reflects interest expense on the New Credit Facilities at weighted
average interest rates ranging from approximately 7.9% to 8.1% and interest
on the Notes of 9 5/8%. For every 1/8% change in the assumed interest rate
on the Notes, the effect would be an increase of $250 to pretax interest
expense.
(i) Represents income tax effect at an effective tax rate of 38.25%.
43
<PAGE> 47
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The unaudited pro forma condensed consolidated statement of earnings
excludes approximately $12,024 of nonrecurring expenses (principally
compensation and other fees) directly related to the Offering that are expected
to be incurred within the next twelve months.
INTEREST EXPENSE
(j) Includes non-cash charges of amortized deferred financing costs
for the periods ended September 30, 1997, December 31, 1996, and September
30, 1996 of $1,950, $2,600, and $1,950, respectively.
OTHER INFORMATION
(k) EBITDA is defined as earnings before interest expense, income
taxes, depreciation and amortization. EBITDA margin represents the ratio of
EBITDA to total revenues. The ratio of EBITDA to cash interest expense is
calculated by dividing consolidated cash interest expense into EBITDA for
the period. EBITDA and pro forma EBITDA for the year ended December 31,
1996 exclude a one-time gain of $5,180 related to the early repayment of
notes receivable from MEDIQ/PRN that had previously been discounted.
44
<PAGE> 48
1994 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
The following unaudited pro forma condensed consolidated statement of
earnings for the year ended December 31, 1994 gives effect to the dispositions
of Medical Services and KCIFS as if such dispositions had occurred on January 1,
1994. The pro forma information is based on the historical financial statements
of the Company, giving effect to the dispositions and the assumptions and
adjustments set forth in the notes accompanying the unaudited pro forma
condensed consolidated statement of earnings. This unaudited pro forma statement
may not be indicative of the results that actually would have occurred if the
dispositions had occurred during the period indicated. The unaudited pro forma
condensed consolidated statement of earnings should be read in conjunction with
the Company's Consolidated Financial Statements and the notes thereto appearing
elsewhere in this Prospectus.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DIVISIONS SOLD
------------------- PRO FORMA
KINETIC CONCEPTS, INC. MEDICAL ---------------------------
AND SUBSIDIARIES SERVICES KCIFS ADJUSTMENTS AS ADJUSTED
---------------------- -------- ------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental and service........... $228,832 $ 34,495 $ -- $ -- $ 194,337
Sales and other.............. 40,814 9,351 3,716 -- 27,747
-------- -------- ------ ------- --------
Total revenue............. 269,646 43,846 3,716 -- 222,084
Rental expenses................ 159,235 24,014 -- -- 135,221
Cost of goods sold............. 19,388 6,814 -- -- 12,574
-------- -------- ------ ------- --------
Gross profit.............. 91,023 13,018 3,716 -- 74,289
Selling, general and
administrative expenses...... 51,813 14,143 2,017 -- 35,653
Unusual items.................. (84,868) (10,121) -- -- (74,747)
-------- -------- ------ ------- --------
Operating earnings........ 124,078 8,996 1,699 -- 113,383
Interest expense (income),
net.......................... 4,528 310 732 (4,695)(4a) (1,209)
-------- -------- ------ ------- --------
Earnings before income
taxes, minority interest
and cumulative effect of
change in accounting
principle............... 119,550 8,686 967 4,695 114,592
Income taxes................... 55,949 12,820 369 1,831(4b) 44,591
-------- -------- ------ ------- --------
Earnings (loss) before
minority interest and
cumulative effect
of change in accounting
principle............... 63,601 (4,134) 598 2,864 70,001
Minority interest.............. 40 -- -- -- 40
Cumulative effect of change in
accounting for inventory..... 742 -- -- -- 742
-------- -------- ------ ------- --------
Net earnings (loss)....... $ 64,383 $ (4,134) $ 598 $ 2,864 $ 70,783
======== ======== ====== ======= ========
Earnings per share........ $ 1.46 $ 1.60
======== ========
Shares used in earnings
per share
computations............ 44,143 44,143
======== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated statements
of earnings.
45
<PAGE> 49
NOTES TO 1994 UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF EARNINGS
NOTE 1. DISPOSITION OF MEDICAL SERVICES
On September 30, 1994, the Company sold certain assets (the "Assets") of
Medical Services to Mediq/PRN Life Support Services-I, Inc. ("MEDIQ/PRN") under
an Asset Purchase Agreement. Upon consummation of this transaction, MEDIQ/PRN
acquired the Assets and assumed certain liabilities of Medical Services. The
sales price was approximately $84.1 million. Medical Services was in the
business of renting to providers a portfolio of standard-of-care medical
products such as ventilators, monitors and infusion pumps. In conjunction with
the sale, the Company and its affiliates agreed not to rent similar products
manufactured by third parties for five years.
Gross proceeds included a cash payment of approximately $65.3 million and
promissory notes in the aggregate principal amount of $18.8 million. The net
proceeds of $72.8 million, pre-tax gain of $8.1 million and after-tax net loss
of $2.5 million were calculated as follows (in thousands):
<TABLE>
<S> <C>
Cash.............................................................. $ 65,300
Notes receivable, net of discount and allowance................... 9,852
Fees and commissions.............................................. (2,329)
--------
Net proceeds.................................................... 72,823
Equipment and inventory sold...................................... (38,959)
Goodwill.......................................................... (25,778)
Accounts receivable provision..................................... (2,479)
Capital leases assumed............................................ 2,514
--------
Pre-tax gain on disposition at September 30, 1994............... 8,121
Fourth quarter 1994 collection of accounts receivable............. 2,000
--------
Pre-tax gain on disposition at December 31, 1994................ 10,121
Tax expense....................................................... (12,601)
--------
Net loss on disposition................................. $ (2,480)
========
</TABLE>
Tax expense exceeded the pre-tax gain amount due to the nondeductibility of
$25.8 million in unamortized goodwill.
During the fourth quarter of 1994, the Company recognized a $2.0 million
pre-tax gain as a result of the collection of Medical Services' accounts
receivable which had not been included in the sale. These receivables had been
reserved at the time of the sale. Partially offsetting this gain, the Company
recorded post closing adjustments of $1.2 million relating to the operations of
Medical Services.
NOTE 2. DISPOSITION OF KCIFS
On June 15, 1995, the Company sold KCIFS to Cura Capital Corporation
("Cura") for cash under a Stock Purchase Agreement. Upon consummation of this
transaction, Cura acquired all of the outstanding capital stock of KCIFS. Total
proceeds from the sale were $7.2 million. In addition, the Company and its
affiliates agreed not to provide lease financing for medical equipment
manufactured by third parties for a period of three years. KCIFS served as the
leasing agent for Medical Services, certain assets of which were sold in
September 1994.
NOTE 3. SALE OF MRD
On March 27, 1995, the Company sold the assets of MRD, a subsidiary that
refurbished standard hospital beds and furniture. The assets, operations and
sales proceeds of MRD were immaterial to the overall operations of the Company
and, therefore, the unaudited pro forma condensed consolidated statements of
46
<PAGE> 50
NOTES TO 1994 UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF EARNINGS -- (CONTINUED)
earnings do not contain any adjustment for MRD. In addition, the Company and its
affiliates agreed not to refurbish certain hospital beds and related furniture
for a period of three years.
NOTE 4. PRO FORMA ADJUSTMENTS
The unaudited pro forma condensed consolidated statements of earnings give
effect to the following pro forma adjustments:
(a) To decrease interest expense as a result of the application of
proceeds from the dispositions to the repayment of indebtedness as if such
repayment had occurred on January 1, 1994, and to include interest income
which would have been earned under the notes receivable issued in
connection with the disposition of Medical Services.
(b) To adjust income tax expense used to reflect the consolidated
statutory tax rates.
47
<PAGE> 51
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below with respect to
the fiscal years ended December 31, 1992, 1993, 1994, 1995 and 1996 are derived
from the Company's audited consolidated financial statements. The selected
consolidated financial data for the nine months ended September 30, 1996 and
1997 are derived from the Company's unaudited consolidated financial statements
which in the opinion of management include all normal, recurring adjustments
necessary to state fairly the data included therein in accordance with GAAP for
interim financial information. Interim results are not necessarily indicative of
the results to be expected for the entire fiscal year. The unaudited pro forma
selected consolidated financial data set forth below with respect to the fiscal
year ended December 31, 1994 and for the nine months ended September 30, 1996
and 1997 are derived from the Company's unaudited pro forma condensed
consolidated statements of earnings. All of the data set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Consolidated Financial Statements and
the notes thereto, and the Unaudited Pro Forma Condensed Consolidated Statements
of Earnings and the notes relating thereto included in this Prospectus.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
---------------------------------------------------------------
PRO SEPTEMBER 30,
FORMA -------------------
1992 1993 1994 1994(1) 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF EARNINGS DATA:
Revenue:
Rental and service...................... $244,905 $232,250 $228,832 $194,337 $206,653 $225,450 $167,523 $184,730
Sales and other......................... 33,586 36,622 40,814 27,747 36,790 44,431 32,306 39,781
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue......................... 278,491 268,872 269,646 222,084 243,443 269,881 199,829 224,511
-------- -------- -------- -------- -------- -------- -------- --------
Rental expenses........................... 156,682 169,687 159,235 135,221 137,420 146,205 109,263 115,633
Cost of goods sold........................ 18,987 18,666 19,388 12,574 13,729 16,315 11,685 16,077
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit............................ 102,822 80,519 91,023 74,289 92,294 107,361 78,881 92,801
Selling, general and administrative
expenses................................ 47,710 53,279 51,813 35,653 48,502 52,007 38,791 44,196
Unusual items(2).......................... -- 6,705 (84,868) (74,747) -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Operating earnings...................... 55,112 20,535 124,078 113,383 43,792 55,354 40,090 48,605
Interest income (expense), net............ (7,195) (5,908) (4,528) (1,209) 4,554 9,087 2,937 1,295
-------- -------- -------- -------- -------- -------- -------- --------
Earnings before income taxes, minority
interest, extraordinary item and
cumulative effect of changes in
accounting principles................... 47,917 14,627 119,550 114,592 48,346 64,441 43,027 49,900
Income taxes.............................. 19,405 7,175 55,949 44,591 19,905 25,454 17,168 19,960
-------- -------- -------- -------- -------- -------- -------- --------
Earnings before minority interest,
extraordinary item and cumulative
effects of changes in accounting
principles.............................. 28,512 7,452 63,601 70,001 28,441 38,987 25,859 29,940
Minority interest......................... -- 560 40 40 -- -- -- (37)
Extraordinary item -- debt extinguishment,
net..................................... -- (400) -- -- -- -- -- --
Cumulative effect of change in accounting
for inventory(3)........................ -- -- 742 742 -- -- -- --
Cumulative effect of change in accounting
for income taxes(4)..................... -- 450 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net earnings............................ $ 28,512 $ 8,062 $ 64,383 $ 70,783 $ 28,441 $ 38,987 $ 25,859 $ 29,903
======== ======== ======== ======== ======== ======== ======== ========
Earnings per share...................... $ 0.63 $ 0.18 $ 1.46 $ 1.60 $ 0.63 $ 0.86 $ 0.56 $ 0.68
======== ======== ======== ======== ======== ======== ======== ========
Shares used in earnings per share
computations............................ 45,060 44,627 44,143 44,143 45,457 45,489 45,923 43,772
======== ======== ======== ======== ======== ======== ======== ========
Cash flow provided by operations.......... $ 58,007 $ 56,538 $ 96,451 $ 56,782 $ 62,167 $ 40,289 $ 37,115
-------- -------- -------- -------- -------- -------- --------
Cash dividends paid to common
shareholders............................ $ 6,277 $ 6,638 $ 6,588 $ 6,631 $ 6,607 $ 4,988 $ 4,789
-------- -------- -------- -------- -------- -------- --------
Cash dividends per share paid to common
shareholders............................ $ .14 $ .15 $ .15 $ .15 $ .15 $ .11 $ .11
-------- -------- -------- -------- -------- -------- --------
Ratio of earnings to fixed charges........ 5.7x 2.4x 17.0x 21.9x 29.4x 27.3x 26.7x
-------- -------- -------- -------- -------- -------- --------
</TABLE>
48
<PAGE> 52
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- -------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital............................................ $ 55,473 $ 60,907 $ 90,731 $109,413 $107,334 $ 111,164
Total assets............................................... $286,915 $284,573 $232,731 $243,726 $253,393 $ 286,023
Long-term obligations -- noncurrent(5)..................... $102,237 $101,889 $ 2,636 $ -- $ 396 $ 340
Minority interest.......................................... $ 990 $ 40 $ -- $ -- $ -- $ 220
Redeemable convertible preferred stock..................... $ 3,307 $ -- $ -- $ -- $ -- $ --
Other shareholders' equity................................. $123,813 $125,707 $185,423 $210,324 $211,078 $ 230,826
Book value per share(6).................................... $ 2.73 $ 2.76 $ 4.22 $ 4.74 $ 4.98 $ 5.43
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- -------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
DETERMINATION OF RATIO OF EARNINGS TO FIXED CHARGES:
Earnings before income taxes, minority interest,
extraordinary item and cumulative effects of changes in
accounting principles.................................. $47,917 $14,627 $119,550 $48,346 $64,441 $43,027 $49,900
Minority interest........................................ -- 560 40 -- -- -- (37)
Fixed charges
Interest expense....................................... 8,482 8,819 5,846 509 245 118 126
Interest portion of lease expense(7)................... 1,660 1,665 1,635 1,800 2,025 1,515 1,814
------- ------- -------- ------- ------- ------- -------
Earnings before fixed charges............................ $58,059 $25,671 $127,071 $50,655 $66,711 $44,660 $51,803
======= ======= ======== ======= ======= ======= =======
Fixed charges
Interest............................................... $ 8,482 $ 8,819 $ 5,846 $ 509 $ 245 $ 118 $ 126
Interest portion of rental expenses.................... 1,660 1,665 1,635 1,800 2,025 1,515 1,814
Preferred stock dividend requirements.................... 49 26 -- -- -- -- --
------- ------- -------- ------- ------- ------- -------
Fixed charges and preferred stock dividends.............. $10,191 $10,510 $ 7,481 $ 2,309 $ 2,270 $ 1,633 $ 1,940
======= ======= ======== ======= ======= ======= =======
Ratio of earnings to fixed charges..................... 5.7x 2.4x 17.0x 21.9x 29.4x 27.3x 26.7x
======= ======= ======== ======= ======= ======= =======
</TABLE>
- ---------------
(1) The unaudited pro forma selected consolidated financial data is based on the
historical financial statements of the Company, giving effect to the sale of
certain assets of the Medical Services and all of the capital stock of KCIFS
as if such sales had been consummated as of January 1, 1994, and giving
effect to such other assumptions and adjustments as set forth in the notes
accompanying the pro forma condensed consolidated statements of earnings.
See the 1994 Unaudited Pro Forma Condensed Consolidated Statement of
Earnings and the notes thereto included elsewhere in this Prospectus.
(2) See Note 12 of Notes to Consolidated Financial Statements for information on
unusual items.
(3) See Note 1 of Notes to Consolidated Financial Statements for information on
cumulative effect of change in method of accounting for inventory.
(4) See Note 7 of Notes to Consolidated Financial Statements for information on
cumulative effect of change in method of accounting for income taxes.
(5) See Notes 5 and 6 of Notes to Consolidated Financial Statements for
information concerning the Company's borrowing arrangements and lease
obligations.
(6) Based on shares outstanding at end of year or period.
(7) Estimated to approximate 15% of lease expense.
49
<PAGE> 53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The ongoing health care debate continues to create pressure on health care
providers to control costs, provide cost effective therapies and improve patient
outcomes. Industry trends resulting from these pressures include the
accelerating migration of patients from acute care facilities into extended care
(e.g., skilled nursing facilities and rehabilitation centers) and home care
settings, and the consolidation of health care providers and national and
regional group purchasing organizations. In August 1997, in an effort to reduce
the federal deficit and lower overall federal healthcare expenditures, Congress
passed the BBA. The BBA contains a number of provisions which will impact the
federal reimbursement of health care costs and reduce projected payments under
the Medicare system by $115 billion over the next five years. The majority of
the savings are scheduled for the fourth and fifth years of this plan. The
provisions include (i) a reduction exceeding $30 billion in the level of
payments made to acute care hospitals under Medicare Part A over the next five
years (which will be funded primarily through a reduction in future consumer
price index increases); (ii) a change, beginning July 1, 1998 in the manner in
which skilled nursing facilities ("SNFs") are reimbursed from a cost-based
system to a prospective payment system whereby SNFs will receive an all
inclusive, case-mix adjusted per diem payment for each of their Medicare
patients; and (iii) a five-year freeze on consumer price index updates for
Medicare Part B services in the home and the implementation of competitive
bidding trials for five categories of home care products.
Less than 10% of the Company's revenues are received directly from the
Medicare system. However, many of the health care providers who pay the Company
for its products are reimbursed, either directly or indirectly, by the federal
government under the Medicare system for the use of those products. The Company
does not believe that the changes introduced by the BBA will have a substantial
impact on its hospital customers or the dealers who distribute the Company's
products in the home health care market. However, changes introduced by the BBA
may have an impact on the manner in which the Company's extended care customers
make purchasing and rental decisions. Under a fixed payment system, decisions on
selecting the products and services used in patient care are generally based on
clinical and cost-effectiveness.
Industry trends including pricing pressures, the consolidation of health
care providers and national and regional group purchasing organizations and a
shift in market demand toward lower-priced products such as mattress overlays
have had the impact of reducing the Company's overall average daily rental rates
on its products. These industry trends, together with the increasing migration
of patients from acute care to extended and home care settings, have had the
effect of reducing overall acute care market growth. While the Company expects
these industry trends to continue, it has successfully addressed these trends
over the last three years by (i) increasing its marketing efforts beyond its
existing base of more than 1,300 acute care hospitals to market to an additional
1,900 medium to large hospitals in which the Company has previously had a
relatively small presence and (ii) introducing new high-end therapies and
products including the TriaDyne and BariKare beds, the V.A.C. and the PlexiPulse
All-in-1 system. The Company's overall market continues to increase based upon
demographic trends as most of the Company's patients are over 65 years old.
Additionally, through its nationwide distribution network, the Company has
expanded its presence in both the extended and home care settings.
Expansion of the Company's national distribution network has allowed KCI to
leverage a relatively fixed field cost structure across a broad range of
patients and care settings which has resulted in improved operating margins. In
addition, increasing demand for the Company's products in the extended and home
care settings has increased utilization of certain of the Company's products
which were originally developed for acute care settings. Because of cost
pressures within the health care industry, patients are leaving the acute care
setting sooner, thereby increasing the demand for the Company's products in the
extended and home care settings.
Generally, the Company's customers prefer to rent rather than purchase the
Company's products in order to avoid the ongoing service, storage and
maintenance requirements and the high initial capital outlays associated with
purchasing such products, as well as to receive the Company's high-quality
clinical support. As
50
<PAGE> 54
a result, rental revenues are a high percentage of the Company's overall
revenues. More recently, sales have increased as a portion of the Company's
revenues. The Company believes this trend will continue because certain U.S.
health care providers are purchasing products that are less expensive and easier
to maintain such as medical devices, mattress overlays and mattress replacement
systems. In addition, international health care providers tend to purchase
therapeutic surfaces more often than U.S. health care providers.
RESULTS OF OPERATIONS
First Nine Months of 1997 Compared to First Nine Months of 1996
The following table sets forth, for the periods indicated, the percentage
relationship of each item to total revenue as well as the change in each line
item as compared to the first nine months of the prior year (dollars in
thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------
VARIANCE
REVENUE INCREASE
RELATIONSHIP (DECREASE)
------------- -----------------
1997 1996 $ PCT
---- ---- ------- ---
<S> <C> <C> <C> <C>
Revenue:
Rental and service................................ 82% 84% $17,207 11%
Sales and other................................... 18 16 7,475 23
--- --- ------- ---
Total Revenue.................................. 100 100 24,682 12
--- --- ------- ---
Rental expenses..................................... 52 55 6,370 6
Cost of goods sold.................................. 7 6 4,392 38
--- --- ------- ---
Gross profit................................... 41 39 13,920 18
Selling, general and administrative expenses........ 20 19 5,405 14
--- --- ------- ---
Operating earnings............................. 21 20 8,515 21
Interest income, net................................ 1 2 (1,642) (56)
--- --- ------- ---
Earnings before income taxes and minority
interest..................................... 22 22 6,873 16
Income taxes........................................ 9 9 2,792 16
Minority interest.............................. -- -- 37 --
--- --- ------- ---
Net earnings................................... 13% 13% $ 4,044 16%
=== === ======= ===
</TABLE>
The Company's revenue is derived from three primary markets. The following
table sets forth the amount of revenue derived from each of these markets for
the periods indicated (dollars in millions):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1997 1996
------ ------
<S> <C> <C>
Domestic Specialty Surfaces................................ $146.9 $134.4
International.............................................. 51.3 51.6
Medical Devices............................................ 25.6 13.6
Other...................................................... 0.7 0.2
------ ------
$224.5 $199.8
====== ======
</TABLE>
Total revenue for the first nine months of 1997 increased by $24.7 million,
or 12.4%, to $224.5 million. Revenue from the Company's domestic specialty
surface business was $146.9 million, up $12.5 million, or 9.3%, from the nine
months ended September 30, 1996 as all major product lines grew. Revenue from
the Company's international operations of $51.3 million declined less than 1.0%
compared to the nine months ended September 30, 1996 despite unfavorable
currency exchange rate fluctuations of approximately $4.4 million for the
period. Revenue from medical device operations in the first nine months of 1997
was $25.6
51
<PAGE> 55
million, up $12.0 million, or 88.2%, primarily due to increased rental revenue
from both the V.A.C. wound closure device and the PlexiPulse.
Rental expenses were 62.6% of total rental revenue in the nine months ended
September 30, 1997 compared to 65.2% in the nine months of 1996. This decrease
is primarily attributable to the increase in rental revenue, as the majority of
rental expenses are fixed, combined with certain operating efficiencies
associated with implementation of the Genesis service delivery system and
processes. Overall, rental expenses increased $6.4 million, or 5.8% compared to
the first nine months of 1996.
Cost of goods sold increased $4.4 million, or 37.6%, to $16.1 million for
the nine months ended September 30, 1997 from $11.7 million for the nine months
of 1996. This increase is primarily due to increased sales volumes and lower
margin sales associated primarily with business acquisitions made in 1997.
Gross profit increased $13.9 million, or 17.6%, to $92.8 million in the
nine months ended September 30, 1997 due to the increase in revenue, controlled
growth in rental expenses and improved sales volumes.
Selling, general and administrative expenses increased $5.4 million, or
13.9%, to $44.2 million in the first nine months of 1997 from $38.8 million in
the first nine months of 1996. Key investments in marketing programs and
information systems as well as higher legal and professional fees accounted for
the majority of this increase.
Operating earnings for the period increased $8.5 million, or 21.2%, to
$48.6 million compared to $40.1 million in the prior-year resulting largely from
the above-mentioned revenue growth.
Net interest income for the nine months ended September 30, 1997 was $1.3
million compared to $2.9 million in the prior year. The decrease in interest
income resulted from lower invested cash balances due to acquisition activities
in 1997 and the early payment in October 1996 of all remaining notes receivable
from Mediq/PRN.
The Company's effective income tax rate in the first nine months ended
September 30, 1997 was 40%, compared to 39.9% in the first nine months of 1996.
Net earnings increased $4.0 million, or 15.6%, to $29.9 million in the
first nine months of 1997 from $25.9 million in the first nine months of 1996.
This increase was due to the relative decrease in rental expenses and the change
in revenue as discussed above.
52
<PAGE> 56
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
The following table sets forth, for the periods indicated, the percentage
relationship of each item to total revenue as well as the change in each line
item as compared to the prior year (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
VARIANCE
REVENUE INCREASE
RELATIONSHIP (DECREASE)
------------- -----------------
1996 1995 $ PCT
---- ---- ------- ---
<S> <C> <C> <C> <C>
Revenue:
Rental and service................................ 84% 85% $18,797 9%
Sales and other................................... 16 15 7,641 21
--- --- ------- ---
Total Revenue.................................. 100 100 26,438 11
--- --- ------- ---
Rental expenses..................................... 54 56 8,785 6
Cost of goods sold.................................. 6 6 2,586 19
--- --- ------- ---
Gross profit................................... 40 38 15,067 16
Selling, general and administrative expenses........ 19 20 3,505 7
--- --- ------- ---
Operating earnings............................. 21 18 11,562 26
Interest income, net................................ 3 2 4,533 100
--- --- ------- ---
Earnings before income taxes................... 24 20 16,095 33
Income taxes........................................ 10 8 5,549 28
--- --- ------- ---
Net earnings................................... 14% 12% $10,546 37%
=== === ======= ===
</TABLE>
The following table sets forth, for the periods indicated, the amount of
revenue derived from each of the Company's markets (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Domestic Specialty Surfaces............................ $181,266 $163,014
International.......................................... 68,764 60,689
Medical Devices........................................ 19,234 17,151
Other.................................................. 617 2,589
-------- --------
$269,881 $243,443
======== ========
</TABLE>
Total Revenue: Total revenue in 1996 was $269.9 million, an increase of
$26.4 million or 10.9% from 1995. This increase was primarily attributable to
growth in the Company's domestic specialty support surface business combined
with international expansion and penetration. Domestic specialty support surface
revenue includes revenue from acute and extended care facilities as well as
revenue from the home care segment. Revenue from acute care facilities was up
$8.1 million, or 7.3%, from the prior year, due in large part to the continued
success of the TriaDyne, the Company's leading Kinetic Therapy product. Rental
revenue from Kinetic Therapy products grew 31% in 1996. Revenue from extended
care settings in 1996 increased 32%, or $12.0 million, primarily due to
increased patient days and the addition of various new national accounts.
Revenue in the home care segment, which accounts for 5% of total Company
revenue, decreased $1.9 million, or 12.8%, from 1995 primarily due to a change
in Medicare reimbursement policy which had the effect of reducing the number of
reimbursable patient days in the period. Revenue from the Company's
international operations increased $8.1 million, or 13.3%, to $68.8 million in
1996, despite adverse foreign currency exchange fluctuations of approximately $2
million. Strong sales in mattress overlay products accounted for more than half
of this increase. Revenue growth in the German home care market and further
penetration in various emerging markets, e.g., Switzerland and Australia, also
contributed to international revenue growth. Revenue from the Company's two
primary medical devices, PlexiPulse and the V.A.C., was $19.2 million, an
53
<PAGE> 57
increase of $2.1 million, or 12.3%, from 1995. This increase was substantially
due to the introduction of the V.A.C. in the United States.
In November 1996, the Company announced that it had been advised by Premier
Purchasing Partners, L.P. ("Premier"), that its bid to be the primary supplier
for the newly combined group had been awarded to another vendor. Premier is a
new voluntary group purchasing organization which was formed as a result of the
merger of three separate group purchasing organizations. Revenue from hospitals
within Premier for 1996 accounted for approximately 10% of the Company's total
revenue. Because facilities within Premier are not committed to do business with
the group's primary vendor, it is difficult to predict the ultimate effect of
the new agreement on revenue and operating profits.
Rental Expenses: Rental expenses for 1996 totaled $146.2 million, an
increase of $8.8 million, or 6.4%, from the prior year. The addition of extended
care sales representatives, new information systems and international market
expansion accounted for a majority of the increase. As a percentage of total
revenue, 1996 rental expenses were 54.2%, down from 56.4% in the prior period.
This decrease is due primarily to the 1996 revenue increase because most of the
Company's rental or field expenses are relatively fixed in nature.
Gross Profit: Gross profit in 1996 was $107.4 million, an increase of
$15.1 million, or 16.3%, from the year-ago period due substantially to higher
revenue, as discussed previously, combined with relatively fixed field expenses.
Gross profit margin for 1996, as a percentage of total revenue, was 39.8%, up
from 37.9% for the prior year. Rental margins improved to 35.1%, up 1.6% from
1995, while sales margins improved slightly to 63.3%, from 62.7%, as the product
mix continued to shift toward higher margin overlays and disposable products.
Selling, General and Administrative Expenses: Selling, general and
administrative ("SG&A") expenses for 1996 were $52.0 million, an increase of
$3.5 million, or 7.2%, from 1995. Total SG&A expenses for the prior year also
included a $2.9 million nonrecurring loss from the sale of KCIFS in June 1995.
Costs associated with international market expansion, improved information
systems and marketing, legal and professional activities accounted for a
substantial part of this increase. As a percentage of total revenue, SG&A
expenses in 1996 were 19.3%, down slightly from 19.9% in the year-ago period.
Operating Earnings: Operating earnings for 1996 were $55.4 million, an
increase of $11.6 million, or 26.4%, from 1995. The increase was due primarily
to the growth in revenue combined with the implementation of various initiatives
undertaken to improve efficiencies, e.g., new information systems. As a
percentage of total revenue, the Company's operating margin improved to 20.5%,
up more than 2% from 1995.
Net Interest Income: Net interest income for the year was $9.1 million,
which included $5.2 million from the early repayment of all remaining notes
receivable from MEDIQ/PRN. The notes had an aggregate face value of $10 million
and had been discounted to a carrying value of $3.2 million, excluding accrued
interest. The notes were retired for approximately $9 million.
Income Taxes: The Company's effective income tax rate for 1996 was 39.5%
compared to 41.2% in 1995. This decrease was primarily the result of
implementing various tax planning initiatives both domestically and overseas.
Net Earnings: Net earnings for 1996 were $39.0 million, or $0.86 per
share, compared to 1995 net earnings of $28.4 million, or $0.63 per share.
Higher revenue and controlled spending, combined with the one-time increase in
interest income and a lower overall tax rate accounted for the 37% earnings
improvement. Average common and common equivalent shares outstanding were
substantially unchanged year-to-year.
54
<PAGE> 58
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
The following table sets forth, for the periods indicated, the percentage
relationship of each item to total revenue as well as the change in each line
item as compared to the prior year (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
VARIANCE
REVENUE INCREASE
RELATIONSHIP (DECREASE)
------------- ----------------
1995 1994 $ PCT
---- ---- -------- ---
<S> <C> <C> <C> <C>
Revenue:
Rental and service................................ 85% 85% $(22,179) (10)%
Sales and other................................... 15 15 (4,024) (10)
--- --- -------- ---
Total revenue.................................. 100 100 (26,203) (10)
--- --- -------- ---
Rental expenses..................................... 56 59 (21,815) (14)
Cost of goods sold.................................. 6 7 (5,659) (29)
--- --- -------- ---
Gross profit................................... 38 34 1,271 1
Selling, general and administrative expenses........ 20 19 (3,311) (6)
Unusual items....................................... -- (31) 84,868 NM
--- --- -------- ---
Operating earnings............................. 18 46 (80,286) (65)
Interest income, net................................ 2 (1) 9,082 201
--- --- -------- ---
Earnings before income taxes, minority interest
and cumulative effect of change in accounting
principle.................................... 20 45 71,204 (60)
Income taxes........................................ 8 21 (36,044) (64)
Earnings before minority interest and
cumulative effect of change in accounting
principle.................................... 12 24 (35,160) (55)
Minority interest in subsidiary loss................ -- -- (40) --
Cumulative effect of change in accounting
principle......................................... -- -- (742) --
--- --- -------- ---
Net earnings................................... 12% 24% $(35,942) (56)%
=== === ======== ===
</TABLE>
The following table sets forth, for the periods indicated, the amount of
revenue derived from each of the Company's markets (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Domestic Specialty Surfaces............................ $163,014 $157,756
International.......................................... 60,689 46,444
Medical Devices........................................ 17,151 13,854
Other(1)............................................... 2,589 51,592
-------- --------
$243,443 $269,646
======== ========
</TABLE>
- ---------------
(1) Consists of revenue of Medical Services, KCIFS and MRD.
Unusual Items: In September 1994, the Company settled a patent
infringement suit against its principal competitor, Support Systems
International, Inc. ("SSI"), a predecessor in interest to Hill-Rom, Inc., for
$84.8 million. In connection with the settlement, SSI agreed to withdraw its
high-end specialty bed from the market. The comparability of the Company's
financial results for the years ended December 31, 1995 and 1994 was
significantly impacted by (1) this settlement and (2) the pre-tax gain of $10.1
million from the sale of certain assets of Medical Services. Partially
offsetting these items were certain miscellaneous unusual items, primarily
dispositions of overstocked inventory and underutilized rental assets and a
write-down of the carrying
55
<PAGE> 59
value of the assets of MRD which had a negative impact of $6.8 million. The
following is a summary of the unusual items recorded in 1994 (dollars in
thousands):
<TABLE>
<S> <C>
SSI patent litigation settlement................................... $84,750
Legal fees related to SSI patent litigation settlement............. (3,154)
Pre-tax gain on sale of Medical Services........................... 10,121
Miscellaneous...................................................... (6,849)
-------
Unusual items in operating earnings................................ $84,868
=======
</TABLE>
Each following reference to "on an as adjusted basis" shall mean that the
results for the period have been adjusted to reflect the sales of Medical
Services and KCIFS as if such sales had occurred on January 1, 1994.
Total Revenue: Total revenue in 1995 was $243.4 million, a decrease of
$26.2 million, or 9.7%, from 1994. This decrease was directly attributable to
the sale of Medical Services in September 1994. Medical Services generated $43.8
million in revenue during 1994. On an as adjusted basis, total revenue for 1995
would have increased by $19.9 million, or 9.0%, to $242.0 million from $222.1
million in 1994 primarily as a result of growth in the Company's international
operations combined with smaller increases in each of the Company's other
primary markets. Revenue from acute care facilities increased $1.7 million, or
1.6%, from 1994, primarily as a result of increased therapy days in the acute
care setting, due partly to the successful introduction of new products,
including the BariKare and the TriaDyne, offset by a continuing shift in product
mix toward lower-cost overlays. Revenue from extended care settings in 1995 was
$37.5 million, an increase of $3.0 million, or 8.7%, from 1994, primarily due to
increased patient days as patients migrated from high-cost, acute care settings
to lower-cost, extended care settings. Revenue from home care settings increased
$0.6 million or 4.3% from 1994, which reflects the Company's decision to shift
to an independent dealer network at the beginning of the year. This network
provides easier access to a larger patient population; however, revenue received
from dealers is less than that which the Company would receive from direct sales
because revenue from dealers is net of dealer service expense. Revenue from the
Company's international operations was $60.7 million in 1995, up $14.3 million
or 30.8% from 1994. Increased market penetration and increased product sales
contributed to this higher international revenue. In addition, international
operations benefited from favorable currency exchange rate fluctuations which
accounted for $6.6 million of the revenue increase. Revenue from medical device
operations was $17.1 million in 1995, an increase of $3.2 million, or 23.0%,
from 1994, primarily as a result of greater market penetration of the
PlexiPulse.
Rental Expenses: Rental expenses for 1995 were $137.4 million, a decrease
of $21.8 million, or 13.7%, from 1994. This decrease was a result of the sale of
Medical Services in September 1994. On an as adjusted basis, rental expenses for
1995 would have been $137.4 million, an increase of $2.2 million, or 1.6%, over
1994. On an as adjusted basis, as a percentage of total revenue, rental expenses
would have been 56.8% in 1995 compared to 60.9% in 1994. This decrease is
primarily attributable to the as adjusted increase in revenue, as the majority
of these costs are relatively fixed, combined with a reduction in field
headcount and depreciation expense.
Gross Profit: Gross profit in 1995 was $92.3 million, an increase of $1.3
million, or 1.4%, over 1994. On an as adjusted basis, gross profit in 1995 would
have been $90.8 million, an increase of $16.5 million, or 22.2%, from 1994. On
an as adjusted basis, as a percentage of revenue, gross profit margin would have
increased to 37.5% in 1995 from 33.5% in 1994 as a result of the increase in as
adjusted revenue, the relatively fixed nature of the rental expenses, and the
reduction in headcount and depreciation expense as discussed above.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses for 1995 were $48.5 million, a decrease of $3.3 million,
or 6.4%, from 1994 as a result of the sale of Medical Services in September
1994. On an as adjusted basis, selling, general and administrative expenses
would have been $44.7 million, an increase of $9.0 million, or 25.3%, in 1995
from 1994. On an as adjusted basis, as a percentage of revenue, selling, general
and administrative expenses would have been 18.5% in 1995 compared to 16.1% in
1994. These increases related primarily to common overhead costs, previously
allocated to Medical Services, which have been absorbed by the Company, and
costs associated with certain key investments, e.g., improved information
systems.
56
<PAGE> 60
Operating Earnings: Operating earnings for 1995 were $43.8 million, a
decrease of $80.3 million, or 64.7%, from 1994, primarily as a result of the
one-time benefit of the patent litigation settlement and the sale of Medical
Services in 1994. On an as adjusted basis, and excluding the patent litigation
settlement and the other unusual items, operating earnings for 1995 would have
been $46.1 million, an increase of $7.5 million or 19.4% from 1994. On an as
adjusted basis, and excluding the patent litigation settlement and the other
unusual items, as a percentage of revenue, operating earnings would have
increased to 19.1% for 1995 from 17.4% in 1994 substantially due to the improved
gross profit discussed above.
Net Interest Income: Net interest income for 1995 was $4.6 million as
compared to net interest expense of $4.5 million in 1994. This change was a
result of the repayment of the Company's outstanding long-term debt at the end
of the third quarter of 1994. On an as adjusted basis, net interest income for
1995 would have been $4.9 million compared to net interest income of $1.2
million in 1994. This difference was primarily due to the fact that the 1995
results include interest income and a reduction in interest expense resulting
from the additional cash provided by the patent litigation settlement. In
addition, interest income for 1995 included $1.7 million representing the
principal received in excess of the discounted value of the MEDIQ/PRN notes.
Income Taxes: The Company's effective income tax rate for 1995 was 41.2%
compared to 46.8% in 1994. This decrease was primarily a result of the
recognition in 1995 of certain foreign tax credits and the September 1994
write-off of the goodwill associated with Medical Services.
Other: During 1994, the cumulative losses allocated to the minority
interest holder of MRD exceeded the balance of such holder's investment. As a
result, the Company recognized $3.8 million of losses in 1994. These losses and
the diminished opportunities within the refurbishment business contributed
towards the Company's decision to liquidate the assets and discontinue the
operations of MRD. Concurrently, the Company wrote off unamortized goodwill of
$1.5 million and wrote down inventories to net realizable value.
Change in Accounting Principle: During the first quarter of 1994, the
Company recorded the cumulative effect of a change in its inventory accounting
method which resulted in a one-time after-tax earnings increase of $742,000, or
$0.02 per share.
Net Earnings: Net earnings for 1995 were $28.4 million, or $0.63 per
share, a decrease of $36.0 million from $64.4 million, or $1.46 per share, in
1994. This decrease was primarily due to the 1994 benefit from the patent
litigation settlement and the net loss from the sale of KCIFS in 1995, and
offset in part by the net loss from the sale of Medical Services and other
unusual items in 1994. On an as adjusted basis and excluding the effect of the
patent litigation settlement and other unusual items, net earnings would have
increased by 38.6% to $29.4 million, or $0.65 per share, in 1995 from $21.2
million, or $0.48 per share, in 1994. On an as adjusted basis and excluding the
effect of the patent litigation settlement and other unusual items, as a
percentage of revenue, net margin would have increased to 12.1% in 1995 from
9.5% in 1994, primarily as a result of the improvement in gross profit discussed
above.
FINANCIAL CONDITION, SEPTEMBER 30, 1997 COMPARED TO DECEMBER 31, 1996
The change in revenue and expenses experienced by the Company during the
nine months ended September 30, 1997 and other factors resulted in changes to
the Company's balance sheet as follows:
Cash and cash equivalents were $45.5 million at September 30, 1997, a
decrease of $13.5 million from December 1996. The cash decrease is primarily
attributable to business/asset acquisitions totaling $16.9 million and a
temporary increase in accounts receivable resulting from a recent billing
systems conversion, offset by lower spending for repurchase of common stock.
Accounts receivable at September 30, 1997 were $74.9 million, a $16.6
million or 28.6%, increase from year-end. On January 2, 1997, the Company
converted to a new billing and accounts receivable system. Implementation
activities had a negative timing impact on collections for the period. The
Company expects receivable balances to decrease over time. Business acquisition
activities during the first nine months of 1997 have also increased accounts
receivable by approximately $2.4 million.
57
<PAGE> 61
Inventory at September 30, 1997 increased 5.1% to $21.1 million from $20.0
million at December 31, 1996 primarily due to the recent acquisition of Ethos
Medical Group, which had inventory of approximately $860,000.
Prepaid expenses increased $3.8 million, or 55.3%, to $10.7 million for the
nine months ended September 30, 1997 as compared to the year ended December 31,
1996. This change primarily resulted from payment timing differences in
insurance, product development, commissions and vacation accruals related to
business acquisitions during 1997 which are amortized over the year.
Net property, plant and equipment at September 30, 1997 increased 11.2% to
$72.5 million from $65.2 million at December 31, 1996 due in part to asset
acquisitions such as H.F. Systems. Capital expenditures were $22.2 million
during the first nine months of 1997 as the Company invested in new products for
its rental fleet and new computer systems. Depreciation and amortization for the
first nine months of 1997 totaled $17.1 million, up 4.0% from the same period in
1996.
Notes receivable consisted of a $3.0 million note received from James R.
Leininger, M.D., the Company's principal shareholder and chairman of the Board
of Directors. The note is secured by a Deed of Trust/Security Agreement,
Vendor's Lien and 300,000 shares of KCI Common Stock. The note bears interest at
market rates and has a final maturity of February 3, 2002.
Goodwill increased $14.1 million during the period, to $27.6 million, due
primarily to the Company's four business acquisitions in the period.
Accrued expenses at September 30, 1997 increased $3.8 million, or 12.9%, to
$33.6 million from $29.8 million at December 31, 1996. Accruals for payments in
connection with the H.F. Systems acquisition earn-out along with increases in
insurance claim reserves, vacation and payroll tax accruals accounted for the
majority of this increase.
Deferred income taxes were $13.5 million at September 30, 1997, an increase
of $8.4 million from December 31, 1996. The increase is primarily attributable
to tax deferral strategies implemented from December of 1996 through the second
quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Historical
Historically, the Company has financed its operations through internally
generated funds and existing cash reserves. Operating activities generated cash
of $37.1 million and $40.3 million, respectively, in each of the nine month
periods ended September 30, 1997 and 1996. For each of the three years ended
December 31, 1996, 1995 and 1994, operating cash flows were $62.2 million, $56.8
million and $96.5 million, respectively. On an as adjusted basis, excluding the
effects of the patent litigation settlement and the sale of certain assets of
the Medical Services Division, operating cash flows for 1994 would have totaled
approximately $48.5 million.
Cash flows used in investing activities were $43.2 million and $8.7 million
for each of the nine month periods ended September 30, 1997 and 1996,
respectively. Investing activities consist primarily of capital expenditures
related to the Company's rental products and acquisitions as well as investments
in computer hardware and software. In addition, for the nine months ended
September 30, 1997, the Company used cash in acquisitions totaling $16.9 million
while the 1996 period included $10.0 million received from the repayment of a
note receivable from the Company's principal shareholder and Chairman of the
Board of Directors. For each of the three years ended December 31, 1996, 1995
and 1994, cash flows used in (provided by) investing activities were $17.6
million, $42.9 million and $(47.8) million, respectively. On an as adjusted
basis, excluding the sale of certain assets of Medical Services, cash used in
investing activities for the year ended December 31, 1994 would have been $17.5
million.
Cash flows used in financing activities were $4.8 million and $16.6 million
for each of the nine month periods ended September 30, 1997 and 1996,
respectively. For each of the three years ended December 31, 1996, 1995 and 1994
cash flows used by financing activities were $37.3 million, $5.6 million and
$112.6
58
<PAGE> 62
million, respectively. Financing activities for 1994 consisted primarily of the
Company's $102.6 million pay down of substantially all of its outstanding debt.
Post-Recapitalization
After the Recapitalization, the Company's principal sources of liquidity
are expected to be cash flow from operating activities and borrowings under the
Revolving Credit Facility and Acquisition Facility. It is anticipated that the
Company's principal uses of liquidity will be to fund capital expenditures
related to the Company's rental products, provide needed working capital, meet
debt service requirements and finance the Company's strategic plans.
The New Credit Facilities total $400.0 million and consist of (i) a $50.0
million six-year Revolving Credit Facility, (ii) a $50.0 million six-year
Acquisition Facility, (iii) a $120.0 million six-year amortizing Term Loan A,
(iv) a $90.0 million seven-year amortizing Term Loan B and (v) a $90.0 million
eight-year amortizing Term Loan C, (collectively, "the Term Loans"). The Term
Loans were fully drawn to finance a portion of the Tender Offer. The Acquisition
Facility was partially drawn to, in effect, finance the RIK acquisition. The
Acquisition Facility provides the Company with financing to pursue strategic
acquisition opportunities. The Acquisition Facility will remain available to the
Company for a period of three years at which time it will begin to amortize over
the remaining three years of the facility. The Company has utilized and will
utilize borrowings under the Revolving Facility to help effect the Tender Offer,
pay related fees and expenses, fund capital expenditures and meet working
capital needs. See "Description of New Credit Facilities."
The Term Loans are payable in equal quarterly installments(1) subject to an
amortization schedule as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---------------------------------------------------------------- -----------
<S> <C>
1998............................................................ $ 4,800,000
1999............................................................ $ 8,800,000
2000............................................................ $16,800,000
2001............................................................ $31,800,000
2002............................................................ $31,800,000
2003............................................................ $36,800,000
2004............................................................ $85,500,000
2005............................................................ $83,700,000
</TABLE>
- ---------------
(1) The first three quarterly principal installments for 2004 shall be $450,000
with the final installment for that year equal to $84,150,000. For 2005, the
first three installments shall be equal to $225,000 and the final
installment shall be equal to $83,025,000.
The Term Loans and the Notes are subject to customary terms, covenants and
conditions which may partially restrict the uses of future cash flows by the
Company. The Company does not expect that these covenants and conditions will
have a material adverse impact on its operations.
59
<PAGE> 63
BUSINESS
GENERAL
Kinetic Concepts, Inc. is a worldwide leader in innovative therapeutic
systems which prevent and treat the complications of immobility that can result
from disease, trauma, surgery or obesity. The Company's clinically effective
therapeutic systems include specialty hospital beds, specialty mattress overlays
and non-invasive medical devices combined with on-site patient care consultation
by the Company's clinically-trained staff. The complications of immobility
include pressure sores, pneumonia and circulatory problems which can increase
patient treatment costs by as much as $75,000 and, if left untreated, can result
in death. The Company's therapeutic systems can significantly improve clinical
outcomes while reducing the cost of patient care by preventing these
complications or accelerating the healing process, as well as by providing labor
savings. The Company has also been successful in applying its therapeutic
expertise to bring to market innovative medical devices that treat chronic
wounds and help prevent blood clots. For the LTM ended September 30, 1997, the
Company generated unaudited pro forma revenue and EBITDA (as defined) of $308.1
million and $95.2 million, respectively. From 1994 to 1996, KCI increased
revenue and EBITDA (excluding divested businesses and other non-recurring gains)
at compound annual growth rates of 10.2% and 10.1%, respectively.
The Company designs, manufactures, markets and services its products, many
of which are proprietary. KCI's therapeutic systems are used to treat patients
across all health care settings including acute care hospitals, extended care
facilities and patients' homes. Health care providers generally prefer to rent
rather than purchase the Company's products in order to avoid the ongoing
service, storage and maintenance requirements and the high initial capital
outlay associated with purchasing such products, as well as to receive the
Company's high-quality clinical support. KCI's therapeutic systems typically
rent for $20 to $175 per day. The Company can deliver its therapeutic systems to
any major domestic trauma center within two hours of notice through its network
of service centers.
Management believes that approximately two-thirds of the patients who use
the Company's therapeutic systems are over the age of 65. Management believes
that the market for its therapeutic systems will continue to grow due to the
aging of the population and further market penetration of the Company's
therapeutic systems resulting from increased pressure on health care providers
to control costs and improve patient outcomes.
Founded by James R. Leininger, M.D., an emergency room physician, to
provide better care for his patients, the Company was incorporated in Texas in
1976. The Company's principal offices are located at 8023 Vantage Drive, San
Antonio, Texas 78230 and its telephone number is (210) 524-9000.
THERAPIES
The Company's therapeutic systems deliver one or a combination of the
following therapies:
Pressure Relief/Pressure Reduction. The Company's pressure relief and
pressure reduction surfaces provide effective skin care therapy in the treatment
of pressure sores, burns, skin grafts and other skin conditions and help prevent
the formation of pressure sores which develop in certain immobile individuals.
The Company's beds and mattress overlays reduce the amount of pressure at any
point on a patient's skin by using surfaces supported by air, silicon beads, or
a viscous fluid. Some of the products further promote healing through pulsation.
Pulmonary Care. The Company's pulmonary care systems provide Kinetic
Therapy to help prevent and treat acute respiratory problems, such as pneumonia,
by reducing the build-up of fluid in the lungs. The United States Centers for
Disease Control (the "CDC") defines Kinetic Therapy as the lateral rotation of a
patient by at least 40 degrees to each side (a continuous 80 degree arc). KCI is
the only manufacturer of beds which deliver Kinetic Therapy, which the Company
believes is essential to the prevention or effective treatment of pneumonia in
immobile patients. Some of the Company's products combine Kinetic Therapy
60
<PAGE> 64
with additional therapies such as percussion and pulsation which help loosen
mucous buildup and promote circulation.
Bariatric Care. The Company offers a line of bariatric care products which
are designed to accommodate obese individuals. These products are used generally
for patients weighing from 250 to 500 pounds, but can accommodate patients
weighing up to 1,000 pounds. These individuals are often unable to fit into
standard-sized beds and wheelchairs. The Company's most sophisticated bariatric
care product can serve as a bed, chair, scale and x-ray table, helps patients
enter and exit the bed, and contains other features which permit patients to be
treated safely and with dignity. Moreover, treating obese patients is a
significant staffing issue for many health care facilities because moving and
handling these patients increases the risk of worker's compensation claims by
such personnel. Management believes that these products enable health care
personnel to treat these patients in a manner which is safer to hospital
personnel than traditional methods, which can help reduce worker's compensation
claims. Some of the bariatric products also address complications of immobility
and obesity such as pressure sores.
Closure of Chronic Wounds. The Company is the sole provider of a patented,
non-invasive device which uses negative pressure to promote the healing of
chronic wounds. The negative pressure is applied through a proprietary foam
dressing which draws the tissue together, stimulates blood flow, reduces
swelling and decreases bacterial growth. The device heals wounds more quickly
than traditional methods and has been effective at closing chronic wounds which
have, in some cases, been open for years.
Circulatory Improvement. The Company offers a non-invasive device which
improves blood circulation, decreases swelling in the lower extremities and
reduces the incidence of blood clots. The therapy is accomplished by wrapping
inflatable cuffs around a foot or leg and then automatically inflating and
deflating them at prescribed intervals. The products are often used by
individuals who have had hip or knee surgeries, diabetes, or other conditions
which reduce circulation.
COMPETITIVE STRENGTHS
Management believes the following competitive strengths contribute to the
Company's leading market position and its growth in revenue and EBITDA.
Effective therapeutic systems. The Company has focused on therapeutic
systems that are designed to improve patient outcomes and reduce the cost of
patient care. For example, the Company believes that its Kinetic Therapy systems
can reduce the probability of an immobile patient contracting pneumonia in the
acute care setting by as much as 50%, and that its pressure relief systems can
heal pressure sores up to three times faster than traditional methods.
Proprietary products. The Company is the only manufacturer of Kinetic
Therapy systems and has the exclusive license to market its vacuum wound closure
technology. The Company has several other therapeutic products under development
which management believes are unique and further believes the use of such
products will reduce the cost of patient care and yield superior outcomes when
compared to traditional methods.
Established service distribution network and broad product line. With 143
domestic service centers, a fleet of approximately 26,500 surfaces, a clinically
trained sales force that conducts more than 200,000 patient visits annually, and
the ability to deliver therapies to every major domestic trauma center within
two hours, the Company has a national presence that management believes is a
significant competitive advantage. The Company believes its network addresses
the needs of customers by providing nationwide coverage, consistent availability
of a broad range of products and high-quality service.
Industry leadership in clinical research. KCI's therapeutic systems are
supported by the most extensive collection of published clinical studies in the
industry. These studies demonstrate the clinical efficacy demanded by health
care providers and the cost effectiveness of the Company's products.
Strong management team. The Company installed a new, experienced
professional management team beginning in 1994. This team, led by Raymond R.
Hannigan, President and Chief Executive Officer, has
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refocused the Company's strategy toward providing cost-effective,
clinically-proven outcomes. Management's initiatives have resulted in increased
revenue, improved profitability, improved efficiencies and enhanced distribution
and information systems. As a result, from 1994 to 1996, KCI increased revenue
and EBITDA (excluding divested businesses and other non-recurring gains) at
compound annual growth rates of 10.2% and 10.1%, respectively.
BUSINESS STRATEGY
The Company intends to continue to grow operating earnings and improve its
market position by pursuing the following strategies:
Increase presence in extended care and home care markets. Because of the
cost pressures within the health care industry, acute care hospitals are
discharging patients earlier, thereby increasing the demand for the Company's
products in the extended and home care settings. KCI provides therapies to
patients across multiple care settings through its national distribution network
and broad product line which are designed to provide a continuum of care. The
Company's new marketing programs specifically target national and regional
extended care providers.
Further penetrate the acute care market. KCI serves over 1,300 medium to
large hospitals and is presently focusing its marketing efforts on an additional
1,900 similarly-sized hospitals in which the Company has had a relatively small
presence. The Company believes its strong position as the sole manufacturer of
Kinetic Therapy beds and exclusive provider of its wound closure device will
help KCI penetrate these new accounts.
Increase usage of recently introduced products. The Company intends to
increase revenues by improving market awareness for its most recently introduced
products. The Company's newest products include medical devices for treatment of
chronic wounds, specialty surfaces for obese patients and sophisticated Kinetic
Therapy beds. The Company believes these unique products have excellent growth
potential and provide the Company with an opportunity to penetrate competitive
accounts.
Introduce new products. Approximately 30% of the Company's 1996 domestic
revenues were generated by products which have been introduced since 1994. One
of KCI's objectives is to continue to expand revenues by acquiring or developing
new products which improve patient outcomes and reduce the cost of patient care.
In addition, existing products are continuously improved in consultation with
health care professionals to enhance their features and improve their clinical
effectiveness.
Expand internationally. The Company has direct operations in 13 foreign
countries and has 75 independent dealers in other foreign markets. The Company
intends to continue to expand in growing international markets by establishing
additional direct operations and expanding its dealership network.
Pursue strategic acquisitions. The Company intends to pursue strategic
fold-in acquisitions, both domestically and internationally, to enhance its
geographic coverage and broaden its product line. Between January and October
1997, the Company completed five such acquisitions. For example, the Company's
acquisition of substantially all of the assets of RIK in October 1997 broadened
its product line with a new non-powered proprietary support surface.
CORPORATE ORGANIZATION
The Company is organized into four operating divisions: KCI Therapeutic
Services, Inc. ("KCI Therapeutic Services" or "KCTS"), KCI Home Care, KCI
International, Inc. ("KCI International") and KCI New Technologies, Inc.
("NuTech").
KCI Therapeutic Services
KCI Therapeutic Services provides a broad line of therapeutic specialty
support surfaces to patients in acute and sub-acute facilities as well as
extended care settings. This division consists of approximately 1,000 personnel,
many of whom have a medical or clinical background. Sales are generated by a
sales force of
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approximately 300 individuals who are responsible for new accounts in addition
to the management and expansion of existing accounts. A portion of this sales
force is focused exclusively on either the extended care market or the acute
care market although the majority of the sales force is responsible for sales
across both settings.
KCI Therapeutic Services has a national 24-hour, seven days-a-week customer
service communications system which allows it to quickly and efficiently respond
to its customers' needs. The Company distributes its specialty patient support
surfaces to acute and extended care facilities through a network of 143 domestic
service centers. The KCTS service centers are organized as profit centers and
the general managers who supervise the service centers are responsible for both
sales and service operations. Each center has an inventory of specialty beds and
overlays which are delivered to the individual hospitals or extended care
facilities on an as-needed basis.
The KCTS sales and support staff is comprised of approximately 250
employees with medical or clinical backgrounds. The principal responsibility of
approximately 125 of these clinicians is making product rounds and participating
in treatment protocols. These clinicians educate the hospital staff on issues
related to patient treatment, assist in the establishment of protocols and
accumulate outcome data related to the treatment of the patient. The clinical
staff makes approximately 200,000 patient rounds annually. KCTS accounted for
approximately 64%, 61% and 53%, respectively, of the Company's total revenue in
the years ended December 31, 1996, 1995 and 1994.
KCI Home Care
KCI Home Care rents and sells products that address the unique demands of
the home health care market. In January 1995, KCI Home Care started a transition
from a combined direct/dealer distribution system to distributing its products
through home medical equipment ("HME") dealers. The Company believes that
selling through the home care provider network gives it access to a larger
patient population and improves the overall contribution from this business
segment despite a reduction in per patient revenue. KCI Home Care accounted for
approximately 5% of the Company's total revenue in 1996.
KCI International
KCI International offers the Company's therapies and services in 13 foreign
countries including Germany, Austria, the United Kingdom, Canada, France, the
Netherlands, Switzerland, Australia, Italy, Denmark, Sweden, Spain and Ireland.
The Denmark office has recently been expanded to serve all of Scandinavia. In
addition, relationships with 75 independent distributors in Latin America, the
Middle East, Asia and Eastern Europe allow KCI International to serve the
demands of a growing global market. KCI International accounted for
approximately 25%, 25% and 17%, respectively, of the Company's total revenue in
1996, 1995 and 1994. See Note 13 of Notes to Consolidated Financial Statements
for information on foreign and domestic operations.
NuTech
NuTech manufactures and markets the PlexiPulse and PlexiPulse All-in-1
System. The products are sold through a direct sales force and a limited number
of independent distributors and rented through an alliance with MEDIQ/PRN, a
national medical device rental company with a strong portfolio of national
accounts. NuTech accounted for approximately 6% of the Company's total revenue
in 1996.
THERAPIES/PRODUCTS
The Company's "Continuum of Care" is focused on treating wound care
patients, pulmonary patients, large or obese patients and patients with
circulatory problems by providing innovative, outcome driven therapies across
multiple care settings. The Company's therapies include Pressure Relief/Pressure
Reduction, Pulmonary Care, Bariatric Care, Closure of Chronic Wounds and
Circulatory Improvement.
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Pressure Relief/Pressure Reduction
The Company's pressure relief products include a variety of framed beds and
overlays such as the KinAir III, TheraPulse, FluidAir Elite, HomeKair, First
Step TriCell, DynaPulse, First Step Plus, First Step Select, AirWorks Plus,
Impression, RIK mattress, and RIK overlay. The KinAir III has been shown to
provide effective skin care therapy in the treatment of pressure sores, burns
and post operative skin grafts and flaps, and to help prevent the formation of
pressure sores and certain other complications of immobility. The TheraPulse
provides a more aggressive form of treatment through continuous pulsating action
which gently massages the skin to help promote capillary and lymphatic
circulation in patients suffering from severe pressure sores, burns, skin grafts
or flaps, swelling or circulation problems. The FluidAir Elite supports the
patient on a low-pressure surface of air-fluidized silicon beads providing
pressure relief for skin grafts or flaps, burns and pressure sores and also has
built in scales. The HomeKair bed and TriCell overlay are low-cost pressure
relief products designed to be easily transportable directly to a patient's
home. The DynaPulse is a pulsating mattress replacement system that helps
prevent pressure ulcers in patients at high risk for skin breakdown and can also
be used to treat existing pressure ulcers. The First Step family of overlays is
designed to provide pressure relief and help prevent pressure sores. AirWorks
Plus is a low-cost overlay which has air chambers which assist in redistributing
pressure for better skin care. Impression is a self-contained for-sale product
for the prevention of pressure sores which is intended to replace standard
hospital mattresses. The RIK mattress and the RIK overlay are non-powered
products that provide pressure relief utilizing a patented viscous fluid and an
anti-shear layer.
Pulmonary Care
The CDC defines Kinetic Therapy as lateral rotation of a patient by at
least 40 degrees on each side (a continuous 80 degree arc). The Company believes
Kinetic Therapy is essential to the prevention or effective treatment of
pneumonia and other pulmonary complications in immobile patients. The Company's
Kinetic Therapy products include the TriaDyne, RotoRest, RotoRest Delta, BioDyne
II and Q2 Plus. The TriaDyne, introduced in mid-1995, provides patients in acute
care settings with three distinct therapies on an air suspension surface. The
TriaDyne applies Kinetic Therapy by rotating the patient up to 40 degrees to
each side and provides an industry-first feature of simultaneously turning the
patient's torso and lower body in opposite directions while keeping the patient
positioned in the middle of the bed. The TriaDyne can also provide percussion
therapy to the patient's chest to loosen mucous buildup in the lungs and
pulsating therapy to promote capillary circulation. The TriaDyne is built on
Stryker Corporation's critical care frame, which is narrow and well suited to an
ICU environment. The TriaDyne offers several other novel features not available
on other products. The RotoRest Delta is a specialty bed which can rotate a
patient up to a 62 degree angle on each side for the treatment of pulmonary
complications and prevention of pneumonia. The RotoRest has been shown to
improve the care of patients suffering from multiple trauma, spinal cord injury,
severe pulmonary complications, respiratory failure and deep vein thrombosis.
The BioDyne II combines many of the therapeutic benefits of the KinAir III and
the RotoRest and is used by patients suffering from pneumonia, coma, stroke and
chronic neurological disorders.
Bariatric Care
The Company markets a line of therapeutic support surfaces and aids for
patients suffering from obesity, a market that had previously been underserved.
These products not only provide the proper support needed by obese patients, but
also enable nurses to care for these patients in a dignified manner. Moreover,
treating obese patients is a significant staffing issue for many health care
facilities because moving and handling these patients increases the risk of
worker's compensation claims by nurses. The use of the Company's Bariatric
products enables hospital staff to treat and move obese patients in a manner
which is safer to hospital personnel while utilizing fewer hospital personnel.
The most advanced product in this line is the BariKare, which can serve as a
bed, chair, scale and x-ray table. This product is used generally for patients
weighing from 250 to 500 pounds but can be used for patients who weigh up to 850
pounds. The Company believes that the BariKare is the most advanced product of
its type available today. In 1996, the Company also introduced the FirstStep
Select Heavy Duty overlay which incorporates pressure-relieving therapy in a
design that supports
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patients weighing up to 650 pounds. The Company recently introduced the
BariAire, which builds into the BariKare the benefits of the First Step Select
Heavy Duty overlay and adds new features.
Closure of Chronic Wounds
The Company manufactures and markets the Vacuum Assisted Closure device
(the "V.A.C."), a non-invasive, active wound closure therapy that utilizes
negative pressure. The V.A.C. promotes healing in wounds, pressure ulcers and
grafts that frequently do not respond to traditional methods of treatment.
Treatment protocols with the V.A.C. call for a proprietary foam material to be
fitted and placed in or on top of a wound and covered with an airtight,
occlusive dressing. The foam is attached to a separate vacuum pump. When
activated, the vacuum pump creates a negative pressure in the wound that draws
the tissue together. This vacuum action also stimulates blood flow on the
surface of the wound, reduces edema and decreases bacterial colonization, all of
which stimulate healing. The dressing material is replaced every 48 hours and
fitted to accommodate the decreasing size of the wound over time. This is a
significant improvement over the traditional method for treating wounds which
requires the nursing staff to clean and dress a serious wound every 8 to 12
hours.
Circulatory Improvement
The PlexiPulse and PlexiPulse All-in-1 System are non-invasive vascular
assistance devices that aid venous return by pumping blood from the lower
extremities to help prevent deep vein thrombosis ("DVT") and re-establish
microcirculation. The pumping action is created by compressing specific parts of
the foot or calf with specially designed inflatable cuffs that are connected to
a separate pump unit. The cuffs are wrapped around the foot and/or calf and are
inflated in timed increments by the pump. The intermittent inflation compresses
a group of veins in the lower limbs and boosts the velocity of blood flowing
back toward the heart. This increased velocity has been proven to significantly
decrease formation of DVT in non-ambulatory post-surgical and post-trauma
patients. The PlexiPulse is effective in preventing DVT, reducing edema and
improving lower limb blood circulation.
PRODUCT SUPPORT
As both private and government reimbursement programs continue to move
towards systems where facilities receive a fixed payment to cover all medical
expenses based only upon the patient's initial diagnosis, actuarial information
becomes more critical to predict patient outcomes and to develop appropriate
pricing structures. The collection of this valuable data is central to KCI's
effort of proving cost effective patient outcomes.
At the foundation of KCI's clinical advantage ("The Clinical Advantage") is
an active program of sponsoring independent clinical research. KCI's portfolio
of over 60 active and completed studies supports the medical efficacy and cost
effectiveness of utilizing the Company's products and protocols as part of the
healing and prevention process. In addition, KCI's research is focused on
providing the outcome data demanded by today's health care provider.
Health care providers around the world who utilize KCI's therapeutic
systems experience aspects of The Clinical Advantage every day. Whether it is an
emergency placement of a KCI TriaDyne or the V.A.C., participation in developing
a wound care management program, or daily patient rounds to assist facility
staff and collect clinical outcome data, trained KCI team members make more than
200,000 regular patient rounds annually. This staff is comprised of over 1,000
employees with approximately 25% having a medical or clinical background. In
order for the hospital and KCI to collect and process data on patient outcomes,
the Company has developed Genesis, Odyssey and PAO2, three proprietary software
programs.
Genesis is utilized by KCI staff clinicians to assist customers in tracking
asset utilization and patient outcomes. Using hand held computers, KCI
clinicians make regular rounds to document the effect of KCI products on a
patient's overall outcome. At the facility's direction, this information is
entered into a central database and analyzed to determine the effectiveness of
specific treatment protocols.
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Odyssey and PAO2 are sold to KCI customers to enable them to standardize
the information collected on their Wound Management and Pulmonary Management
Protocols, respectively. Health care providers utilize both Odyssey and PAO2 as
tools to document and track wound and pulmonary management programs, including
the resultant patient outcome and the cost of achieving that outcome. Facilities
collect data on their wound and pulmonary patients, and periodically share this
information with KCI for inclusion in a national database. KCI compiles the
information and can generate reports comparing a facility's program or patient
results with those of similar programs or patients on an internal, regional or
national basis. This information enables each facility to continuously improve
its wound and pulmonary management programs, achieving the best outcome at the
lowest total cost of care.
KCI's integrated clinical database consisting of the Genesis, Odyssey and
PAO2 information platforms combined with an extensive clinical field presence
and clinically proven therapies and protocols define KCI's unique product
support advantage in the marketplace -- The Clinical Advantage.
COMPETITION
The Company believes that the principal competitive factors within its
markets are product efficacy, clinical outcomes, service and cost of care.
Furthermore, the Company believes that a national presence with full
distribution capabilities is important to serve large, sophisticated national
and regional health care group purchasing organizations ("GPOs") and providers.
The Company contracts with both proprietary and voluntary GPOs. Proprietary
GPOs own all of the hospitals which they represent and, as a result, can ensure
complete compliance with a national agreement. Voluntary GPOs negotiate
contracts on behalf of member hospital organizations but cannot ensure that
their members will comply with the terms of a national agreement. Approximately
47% of the Company's total revenue during 1996 was generated under national
agreements with GPOs in the acute and extended care settings.
In November 1996, the Company announced that it had been advised by Premier
Purchasing Partners, L.P., that its bid to be the primary supplier for the newly
combined group had been awarded to another vendor. Premier is a new voluntary
group purchasing organization which was formed as a result of the merger of
three separate group purchasing organizations. Revenue from hospitals within
Premier for 1996 accounted for approximately 10% of the Company's total revenue.
Because facilities within Premier are not committed to do business with the
group's primary vendor, it is difficult to predict the ultimate effect of the
new agreement on revenue and operating profits.
The Company competes on a national level with Hill-Rom, Kendall and
Invacare and on a regional and local level with numerous other companies. The
Company competes principally with Invacare in the home care segment. NuTech
competes primarily with Kendall International in the foot and leg compression
market. In the U.S. specialty surface market and certain international markets,
the Company competes principally with Hill-Rom.
RESEARCH AND DEVELOPMENT
The focus of the Company's research and development program has been to
develop new products and make technological improvements to existing products.
Since January 1994, the Company has introduced a number of new products
including: the TriaDyne, the BariKare, the TriCell, the First Step Select Heavy
Duty, the FluidAir Elite, the PlexiPulse All-in-1 System, the BariAire, the
Pedidyne and The V.A.C., a product developed from technology licensed to the
Company. Expenditures for research and development represented approximately 2%
of the Company's total expenditures in 1996. The Company intends to continue its
research and development efforts.
MANUFACTURING
The Company's manufacturing processes for its specialty beds, mattress
overlays, and medical devices include the manufacture of certain components, the
purchase of certain other components from suppliers and
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the assembly of these components into a completed product. Mechanical components
such as blower units, electrical displays and air flow controls consist of a
variety of customized subassemblies which are purchased from suppliers and
assembled by the Company. The Company believes it has an adequate source of
supply for each of the components used to manufacture its products.
PROPERTIES
The Company's corporate headquarters are currently located in a 170,000
square foot building in San Antonio, Texas which was purchased by the Company in
January 1992. The Company utilizes 89,000 square feet of the building with the
remaining space being leased to unrelated entities.
The Company conducts its manufacturing, shipping, receiving and storage
activities in a 153,000 square foot facility in San Antonio, Texas, which was
purchased by the Company in January 1988. In 1989, the Company completed the
construction of a 17,000 square foot addition to the facility which is utilized
as office space. The Company also owns a 37,000 square foot building in San
Antonio, Texas which houses the Company's engineering center and currently
serves as the NuTech division headquarters. In 1992, the Company purchased a
35,000 square foot facility in San Antonio, Texas which is used for storage. The
Company maintains additional storage at two leased facilities in San Antonio,
Texas. In 1994, the Company purchased a facility in San Antonio, Texas which has
been provided to a charitable organization to provide housing for families of
cancer patients. The facility is built on 6.7 acres and consists of a 15,000
square foot building and 2,500 square foot house. In June 1997, the Company
acquired a 28 acre tract of land adjacent to its corporate headquarters. There
are three buildings on the land which contain an aggregate of 40,000 square
feet.
The Company leases approximately 143 domestic distribution centers,
including each of its seven regional headquarters, which range in size from
1,500 to 18,000 square feet.
PATENTS AND TRADEMARKS
The Company seeks patent protection in the United States and abroad. As of
October 1, 1997, the Company had 59 issued U.S. patents relating to its
specialized beds, mattresses and related products. The Company also has 32
pending U.S. Patent applications. Many of the Company's specialized beds,
products and services are offered under trademarks and service marks. The
Company has 28 registered trademarks and service marks in the United States
Patent and Trademark Office.
EMPLOYEES
As of October 1, 1997, the Company had approximately 2,100 employees. The
Company's employees are not represented by labor unions and the Company
considers its employee relations to be good.
GOVERNMENT REGULATION
United States. The Company's products are subject to regulation by
numerous governmental authorities, principally the United States Food and Drug
Administration ("FDA") and corresponding state and foreign regulatory agencies.
Pursuant to the Federal Food, Drug, and Cosmetic Act, and the regulations
promulgated thereunder, the FDA regulates the clinical testing, manufacture,
labeling, distribution and promotion of medical devices. Noncompliance with
applicable requirements can result in, among other things, fines, injunctions,
civil penalties, recall or seizure of products, total or partial suspension of
production, failure of the government to grant premarket clearance or premarket
approval for devices, withdrawal of marketing clearances or approvals, and
criminal prosecution. The FDA also has the authority to request repair,
replacement or refund of the cost of any device manufactured or distributed by
the Company that violates statutory or regulatory requirements.
In the United States, medical devices are classified into one of three
classes (Class I, II or III) on the basis of the controls deemed necessary by
the FDA to reasonably ensure their safety and effectiveness. Class I devices are
subject to general controls (e.g., labeling, premarket notification, and
adherence to QSRs)
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although many Class I devices are exempt from certain FDA requirements. Class II
devices are subject to general and special controls (e.g., performance
standards, postmarket surveillance, patient registries, and FDA guidelines).
Generally, Class III devices are high risk devices that receive greater FDA
scrutiny to ensure their safety and effectiveness (e.g., life-sustaining,
life-supporting and implantable devices, or new devices which have been found
not to be substantially equivalent to legally marketed devices). Before a new
medical device can be introduced in the market, the manufacturer must generally
obtain FDA clearance ("510(k) Clearance") or Premarket Approval ("PMA"). All of
the Company's current products have been classified as Class I or Class II
devices, which typically are legally marketed based upon 510(k) Clearance. The
FDA has announced plans to evaluate its classification system and reclassify or
exempt many devices that are currently classified as Class I devices. 510(k)
Clearance will generally be granted if the submitted information establishes
that the proposed device is "substantially equivalent" to a legally marketed
medical device. The FDA recently has been requiring a more rigorous
demonstration of substantial equivalence than in the past.
A PMA application must be filed if a proposed device is not substantially
equivalent to a legally marketed Class I or Class II device, or if it is a Class
III device for which the FDA has called for PMAs. A PMA application must be
supported by valid scientific evidence which typically includes extensive
testing and manufacturing information, including preclinical and clinical trial
data, to demonstrate the safety and effectiveness of the device. The FDA's
review of a PMA application generally takes one to two years from the date the
PMA is accepted for filing, but it may take significantly longer.
If human clinical trials of a device are required, and the device presents
a "significant risk," the sponsor of the trial (usually the manufacturer or the
distributor of the device) will have to file an Investigational Device Exemption
("IDE") application prior to commencing human clinical trials. If the device
presents a "nonsignificant risk" to the patient, a sponsor may begin the
clinical trial after obtaining approval for the study by one or more appropriate
Institutional Review Boards ("IRBs") without the need for FDA approval. Sponsors
of clinical trials are permitted to sell investigational devices distributed in
the course of the study provided such compensation does not exceed recovery of
the costs of manufacture, research, development and handling.
The Company has submitted four 510(k) notices for new devices which are
currently pending FDA review. The Company also has several 510(k) notifications
pending for modifications to certain of its currently marketed products. Because
the determination of whether a new 510(k) notification must be submitted for a
device modification is subjective, companies sometimes provide information to
the FDA to update their 510(k) files without formally submitting a premarket
notification. In certain circumstances, the FDA allows continued marketing of a
modified device while a 510(k) is pending. There can be no assurance, however,
that the FDA will allow the Company to continue to market any of these devices
pending marketing clearance from the FDA or that the Company will obtain 510(k)
clearance for these devices on a timely basis, if at all. The FDA's failure to
grant any necessary regulatory clearances or approvals or to allow continued
marketing of devices pending clearance could have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company has also made other modifications to its devices which the
Company believes do not require the submission of new 510(k) notices. There can
be no assurance, however, that the FDA would agree with any of the Company's
determinations and would not require the Company to submit a new 510(k) notice
for any of the changes made to the Company's devices. If the FDA requires the
Company to submit a new 510(k) notice for any device modification, the Company
may be prohibited from marketing the modified device until the 510(k) notice is
cleared by the FDA. There can be no assurance that the Company will obtain
premarket clearance or approval on a timely basis, if at all, for any device for
which it has filed or may in the future file a submission.
The Company is sponsoring several clinical trials which have been
determined by IRBs at the participating institutions to be "nonsignificant risk"
studies. There can be no assurance, however, that the FDA would agree with these
determinations and not require the Company to obtain the FDA approval of the
IDEs before continuing the studies.
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All devices manufactured or distributed by the Company are subject to
pervasive and continuing regulation by the FDA and certain state agencies,
including record keeping requirements and mandatory reporting of certain adverse
experiences resulting from use of the devices. Labeling and promotional
activities are subject to regulation by the FDA and, in certain circumstances,
by the Federal Trade Commission. Current FDA enforcement policy prohibits the
marketing of approved medical devices for unapproved uses and the FDA
scrutinizes the advertising of medical devices to ensure that unapproved uses of
medical devices are not promoted.
Manufacturers of medical devices for marketing in the United States are
required to adhere to applicable regulations setting forth detailed Quality
System Regulation ("QSR") (formerly Good Manufacturing Practices) requirements,
which include design, testing, control and documentation requirements.
Manufacturers must also comply with MDR requirements that a company report
certain device-related incidents to the FDA. The Company is subject to routine
inspection by the FDA and certain state agencies for compliance with QSR
requirements, MDR requirements and other applicable regulations. The Company is
also subject to numerous federal, state and local laws relating to such matters
as safe working conditions, manufacturing practices, environmental protection,
fire hazard control and disposal of hazardous or potentially hazardous
substances. Changes in existing requirements or adoption of new requirements
could have a material adverse effect on the Company's business, financial
condition, and results of operations. There can be no assurance that the Company
will not incur significant costs to comply with laws and regulations in the
future or that laws and regulations will not have a material adverse effect upon
the Company's business, financial condition or results of operations.
On October 6, 1997, at the conclusion of an inspection of the Company's
principal manufacturing facility, FDA issued the Company a Form 483 which
identified eight observations of conditions that the FDA believed to be in
violation of the FDA's QSR and MDR requirements. Several of these observations
concerned the Company's TransportAir device and were similar to previous FDA
inspectional observations that became the basis of a Warning Letter issued to
the Company in August of 1995. Specifically, the FDA's Form 483 stated, among
other things, that the Company had not provided solutions for or verified the
implementation of solutions to quality assurance problems concerning
malfunctions of the TransportAir, and that the Company had failed to submit
Medical Device Reports for a number of incidents involving the TransportAir. The
TransportAir device, which provides an auxiliary air supply for the Company's
KinAir, BioDyne and TheraPulse product lines, permits those bed products to be
moved while in full inflation mode. The TransportAir is the subject of a pending
510(k) notice and has been marketed without specific premarket clearance on the
product on a stand-alone basis since 1986.
The Company submitted a written response to the FDA's Form 483 observations
on November 20, 1997. However, there can be no assurance that the FDA will agree
with the Company's response or that, regardless of the Company's response, the
FDA will not invoke any of its regulatory or enforcement authorities against the
Company. In addition to other regulatory and enforcement actions, the FDA may
issue the Company a Warning Letter which could have an adverse effect on the
Company's ability to obtain Certificates for Products for Export until the FDA's
inspectional observations are corrected to the agency's satisfaction. Federal
agencies could also be advised of the issuance of the Warning Letter which may
be taken into account when considering the award of federal contracts to the
Company. The FDA may also determine that reinspection of the Company's facility
is necessary before the agency determines that the Company's response to the
Form 483 is adequate.
The Company has begun modifying its TransportAir devices to address the
problems that the Company has encountered. If the FDA determines that there is a
reasonable probability that the TransportAir would cause serious, adverse health
consequences or death, the FDA could order the Company to recall the
TransportAir and not allow redistribution of the device until the Company has
verified that it has implemented appropriate corrective actions. Alternatively,
the FDA could consider the distribution of the modified version of the
TransportAir to be a voluntary recall and require the Company to assure that the
modification has been fully implemented and that its customers are adequately
notified of the need for the modification. In addition, because the TransportAir
is not specifically the subject of a cleared 510(k) notice, FDA could require
the Company to discontinue marketing the device until it is cleared by FDA. The
failure of the Company to be
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able to market the TransportAir would prevent the Company from supplying an
alternative power supply for three of its principal products which could have a
material adverse effect on the Company's ability to market those devices. Any
regulatory or enforcement action invoked by FDA could have a material adverse
effect upon the Company.
Fraud and Abuse Laws. The Company is subject to federal and state laws
pertaining to health care fraud and abuse. In particular, certain federal and
state laws prohibit manufacturers, suppliers, and providers from offering or
giving or receiving kickbacks or other remuneration in connection with the
ordering or recommending purchase or rental of health care items and services.
The federal anti-kickback statute provides both civil and criminal penalties
for, among other things, offering or paying any remuneration to induce someone
to refer patients to, or to purchase, lease, or order (or arrange for or
recommend the purchase, lease, or order of), any item or service for which
payment may be made by Medicare or certain federally-funded state health care
programs (e.g., Medicaid). This statute also prohibits soliciting or receiving
any remuneration in exchange for engaging in any of these activities. The
prohibition applies whether the remuneration is provided directly or indirectly,
overtly or covertly, in cash or in kind. Violations of the law can result in
numerous sanctions, including criminal fines, imprisonment, and exclusion from
participation in the Medicare and Medicaid programs.
These provisions have been broadly interpreted to apply to certain
relationships between manufacturers and suppliers, such as the Company, and
hospitals, skilled nursing facilities ("SNFs"), and other potential purchasers
or sources of referral. Under current law, courts and the Office of Inspector
General ("OIG") of the United States Department of Health and Human Services
("HHS") have stated, among other things, that the law is violated where even one
purpose (as opposed to a primary or sole purpose) of a particular arrangement is
to induce purchases or patient referrals.
The OIG has taken certain actions which suggest that arrangements between
manufacturers/suppliers of durable medical equipment or medical supplies and
SNFs (or other providers) may be under continued scrutiny. An OIG enforcement
initiative, Operation Restore Trust ("ORT"), has targeted an investigation of
fraud and abuse in a number of states (i.e., California, Florida, Illinois, New
York, and Texas), focusing specifically on the long-term care, home health, and
DME industries. ORT's funding has officially ended and the Inspector General has
announced plans to implement an "ORT-Plus" program in other states in
conjunction with other federal law enforcement bodies. Furthermore, in August
1995, the OIG issued a Special Fraud Alert describing certain relationships
between SNFs and suppliers that the OIG viewed as abusive under the statute.
These initiatives create an environment in the industry in which the Company
operates in which there will continue to be significant scrutiny for compliance
with federal and state fraud and abuse laws.
Several states also have referral, fee splitting and other similar laws
that may restrict the payment or receipt of remuneration in connection with the
purchase or rental of medical equipment and supplies. State laws vary in scope
and have been infrequently interpreted by courts and regulatory agencies, but
may apply to all health care items or services, regardless of whether Medicaid
or Medicaid funds are involved.
The Company is also subject to federal and state laws prohibiting the
presentation (or the causing to be presented) of claims for payment (by
Medicare, Medicaid, or other third party payors) that are determined to be
false, fraudulent, or for an item or service that was not provided as claimed.
In one case, a major DME manufacturer paid more than $4 million to settle
allegations that it had "caused to be presented" false Medicare claims through
advice that its sales force allegedly gave to customers concerning the
appropriate reimbursement coding for its products.
ISO Certification. Due to the harmonization efforts of a variety of
regulatory bodies worldwide, certification of compliance with the ISO 9000
series of International Standards ("ISO Certification") has become particularly
advantageous and, in certain circumstances necessary for many companies in
recent years. Beginning in June of 1998, ISO Certification is expected to be
required for all manufacturers selling and distributing products within the
European Economic Community. Anticipating such requirements, the Company began
preparing for ISO Certification in 1995 and, in early 1997, began working with
an accredited body that has been authorized to grant ISO Certification. Based
upon preliminary assessments, the Company
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expects to attain such certification in the first quarter of 1998. Failure to
obtain ISO Certification by June of 1998 may have an adverse effect on the
Company, particularly on the Company's sale and distribution of products within
the European Economic Community.
Other Laws. The Company owns and leases property that is subject to
environmental laws and regulations. The Company also is subject to numerous
federal, state and local laws and regulations relating to such matters as safe
working conditions, manufacturing practices, fire hazard control and the
handling and disposal of hazardous or potentially hazardous substances.
International. Sales of medical devices outside of the United States are
subject to regulatory requirements that vary widely from country to country.
Premarket clearance or approval of medical devices is required by certain
countries. The time required to obtain clearance or approval for sale in a
foreign country may be longer or shorter than that required for clearance or
approval by the FDA and the requirements may vary. Failure to comply with
applicable regulatory requirements can result in loss of previously received
approvals and other sanctions and could have a material adverse effect on the
Company's business, financial condition or results of operations.
REIMBURSEMENT
The Company's products are rented and sold principally to hospitals,
extended care facilities and HME providers who receive reimbursement for the
products and services they provide from various public and private third-party
payors, including the Medicare and Medicaid programs and private insurance
plans. The Company also directly bills third party payors, including Medicare
and Medicaid, and receives reimbursement from these payors. In such cases,
Medicare beneficiaries are billed twenty percent (20%) for coinsurance. As a
result, demand and payment for the Company's products is dependent in part on
the reimbursement policies of these payors. The manner in which reimbursement is
sought and obtained for any of the Company's products varies based upon the type
of payor involved and the setting in which the product is furnished and utilized
by patients.
Medicare. Medicare is a federally-funded program that reimburses the costs
of health care furnished primarily to the elderly and disabled. Medicare is
composed of two parts: Part A and Part B. The Medicare program has established
guidelines for the coverage and reimbursement of certain equipment, supplies and
support services. In general, in order to be reimbursed by Medicare, a health
care item or service furnished to a Medicare beneficiary must be reasonable and
necessary for the diagnosis or treatment of an illness or injury or to improve
the functioning of a malformed body part. This has been interpreted to mean that
the item or service must be safe and effective, not experimental or
investigational (except under certain limited circumstances involving devices
furnished pursuant to an FDA-approved clinical trial), and appropriate. Specific
Medicare guidelines have not currently been established addressing under what
circumstances, if any, Medicare coverage would be provided for the use of the
PlexiPulse or the V.A.C.
The methodology for determining the amount of Medicare reimbursement of the
Company's products varies based upon, among other things, the setting in which a
Medicare beneficiary receives health care items and services. The recently
enacted BBA will significantly impact the manner in which Medicare reimbursement
is funded over the next five years. Most of the Company's products are furnished
in a hospital, skilled nursing facility or the beneficiary's home.
Hospital Setting. With the establishment of the prospective payment system
in 1983, acute care hospitals are now generally reimbursed by Medicare for
inpatient operating costs based upon prospectively determined rates. Under the
prospective payment system ("PPS"), acute care hospitals receive a predetermined
payment rate based upon the Diagnosis-Related Group ("DRG") into which each
Medicare beneficiary is assigned, regardless of the actual cost of the services
provided. Certain additional or "outlier" payments may be made to a hospital for
cases involving unusually long lengths of stay or high costs. However, outlier
payments based upon length of stay are gradually being phased out and will be
eliminated effective with fiscal year 1998. Furthermore, pursuant to regulations
issued in 1991, and subject to a ten-year transition period, the capital costs
of acute care hospitals (such as the cost of purchasing or renting the Company's
specialty beds) are also reimbursed by Medicare pursuant to an add-on to the
DRG-based payment amount.
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Accordingly, acute care hospitals generally do not receive direct Medicare
reimbursement under PPS for the distinct costs incurred in purchasing or renting
the Company's products. Rather, reimbursement for these costs is deemed to be
included within the DRG-based payments made to hospitals for the treatment of
Medicare-eligible inpatients who utilize the products. Since PPS rates are
predetermined, and generally paid irrespective of a hospital's actual costs in
furnishing care, acute care hospitals have incentives to lower their inpatient
operating costs by utilizing equipment and supplies that will reduce the length
of inpatient stays, decrease labor, or otherwise lower their costs.
The principal manner in which the BBA impacts Medicare Part A in the acute
care setting is that it has reduced the annual DRG payment updates to be paid
over the next five years by more than $40.0 billion. In addition, the BBA
authorizes HCFA to enact regulations which are designed to restrain certain
hospital reimbursement activities which are perceived to be abusive or
fraudulent.
Certain specialty hospitals (e.g., long-term care, rehabilitation and
children hospitals) also use the Company's products. Such specialty hospitals
currently are exempt from the PPS and, subject to certain cost ceilings, are
reimbursed by Medicare on a reasonable cost basis for inpatient operating and
capital costs incurred in treating Medicare beneficiaries. Consequently,
long-term care hospitals may receive separate Medicare reimbursement for
reasonable costs incurred in purchasing or renting the Company's products;
however, Medicare reimbursement for such hospitals are expected to be reduced by
$3.5 billion over the next five years. There can be no assurance that a
prospective payment system will not be instituted for such hospitals in future
legislation.
Skilled Nursing Facility Setting. Skilled Nursing Facility Settings
("SNFs") which purchase or rent the Company's products may be reimbursed
directly under Medicare Part A for some portion of their incurred costs.
Generally speaking, only the costs of treatment during the first 100 days of a
qualifying spell of illness are subject to Medicare reimbursement. The costs
incurred by SNFs in furnishing care to Medicare beneficiaries are categorized as
either routine costs or ancillary costs. Routine costs are those costs which are
incurred for items and services routinely furnished to all patients (e.g.,
general nursing services, items stocked in gross supply). Ancillary costs are
considered those costs which are incurred for items or services ordered to treat
a condition of a specific patient and which are not generally furnished to most
patients. Ancillary costs are not subject to the routine cost limits. Given the
current routine cost limits, SNFs may be more inclined to purchase or rent
products which are reimbursed by Medicare as ancillary items or services than if
these products were reimbursed as routine items or services. At present, the
Company's specialty beds are classified under Medicare Part A as ancillary
items. HCFA currently interprets the definition of ancillary items to include
certain support surfaces such as low air loss mattress replacements, bed overlay
systems and air fluidized therapy. Neither The V.A.C. nor the PlexiPulse have
yet been classified as ancillary items when furnished in a SNF setting.
On July 1, 1998, the manner in which SNFs are reimbursed under Medicare
Part A will change dramatically. On that date, reimbursement for SNFs under
Medicare Part A will change from a cost-based system to a prospective payment
system. The new payment system will be based on resource utilization groups
("RUGs"). Under the RUGs system, a SNF Medicare patient will be assigned to a
RUGs category upon admission to the SNF. The RUGs category to which the patient
will be assigned will depend upon the level of care and resources the patient
requires. The SNF will receive a fixed per diem payment based upon the RUGs
category assigned to each Medicare patient. The per diem payments made to the
SNFs will be based upon a blend of their actual costs and a national average
cost (which is subject to local wage-based adjustments). Initially, 75% of a
SNF's per diem will be based on its costs and 25% of the per diem will be based
on national average cost. At the end of a four-year phase-in period, all per
diem payments will be based on the national average cost. Because the RUG's
system provides SNFs with fixed cost reimbursement, SNFs may be less inclined
than they have in the past to use products which had previously been reimbursed
as ancillary costs. Because the Company believes its products are both cost
effective and efficacious, the Company believes that it will be able to rent and
sell its products effectively under the RUGs system.
Home Setting. The Company's products are also provided to Medicare
beneficiaries in home care settings. Medicare reimburses beneficiaries, or
suppliers accepting assignment, for the purchase or rental of
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DME for use in the beneficiary's home or a home for the aged (as opposed to use
in a hospital or skilled nursing facility setting). So long as the Medicare Part
B coverage criteria are met, certain of the Company's products, including air
fluidized beds, air-powered flotation beds and alternating air mattresses, are
reimbursed in the home setting under the DME category known as "Capped Rental
Items." Pursuant to the fee schedule payment methodology for this category,
Medicare pays a monthly rental fee (for a period not to exceed fifteen months)
equal to 80% of the established allowable charge for the item. Guidelines
concerning under what circumstances, if any, the V.A.C. or the PlexiPulse will
be covered and reimbursed by DME have not been established. Under the BBA, there
will be a five-year freeze on consumer price index updates for Medicare Part B
Services in the home care setting.
Medicaid. The Medicaid program is a cooperative federal/state program that
provides medical assistance benefits to qualifying low income and
medically-needy persons. State participation in Medicaid is optional and each
state is given discretion in developing and administering its own Medicaid
program, subject to certain federal requirements pertaining to payment levels,
eligibility criteria and minimum categories of services. The Medicaid program
finances approximately 50% of all care provided in skilled nursing facilities
nationwide. The Company sells or rents its products to SNFs for use in
furnishing care to Medicaid recipients. SNFs, or the Company, may seek and
receive Medicaid reimbursement directly from states for the incurred costs.
However, the method and level of reimbursement, which generally reflects
regionalized average cost structures and other factors, varies from state to
state.
Private Payors. Many private payors, including indemnity insurers,
employer group health insurance programs and managed care plans, presently
provide coverage for the purchase and rental of the Company's products. The
scope of coverage and payment policies varies among private payors. Furthermore,
many such payors are investigating or implementing methods for reducing health
care costs, such as the establishment of capitated or prospective payment
systems.
The Company believes that government and private efforts to contain or
reduce health care costs are likely to continue. These trends may lead
third-party payors to deny or limit reimbursement for the Company's products,
which could negatively impact the pricing and profitability of, or demand for,
the Company's products.
LEGAL PROCEEDINGS
On February 21, 1992, Novamedix Limited ("Novamedix") filed a lawsuit
against the Company in the United States District Court for the Western District
of Texas. Novamedix manufactures the principal product which directly competes
with the PlexiPulse. 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 ancillary claims. Novamedix seeks injunctive
relief and monetary damages. Initial discovery in this case has been
substantially completed. Although it is not possible to reliably 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 adverse effect on the Company's business,
financial condition or results of operations.
On August 16, 1995, the Company filed a civil antitrust lawsuit against
Hillenbrand Industries, Inc. and one of its subsidiaries, Hill-Rom. The suit was
filed in the United States District Court for the Western District of Texas. The
suit alleges that Hill-Rom used its monopoly power in the standard hospital bed
business to gain an unfair advantage in the specialty hospital bed business.
Specifically, the allegations set forth in the suit include a claim that
Hill-Rom required hospitals and purchasing groups to agree to exclusively rent
specialty beds in order to receive substantial discounts on products over which
they have monopoly power -- hospital beds and head wall units. The suit further
alleges that Hill-Rom engaged in activities which constitute predatory pricing
and refusals to deal. Hill-Rom has filed an answer denying the allegations in
the suit. Although discovery is just beginning and it is not possible to
reliably predict the outcome of this litigation or the damages which might be
awarded, the Company believes that its claims are meritorious.
On October 31, 1996 the Company received a counterclaim which had been
filed by Hillenbrand Industries, Inc. in the antitrust lawsuit which the Company
filed in 1995. The counterclaim alleges that the
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Company's antitrust lawsuit and other actions were designed to enable KCI to
monopolize the specialty therapeutic surface market. Although it is not possible
to reliably predict the outcome of this litigation, the Company believes that
the counterclaim is without merit.
On December 24, 1996, Hill-Rom, a subsidiary of Hillenbrand Industries,
Inc., filed a lawsuit against the Company alleging that the Company's TriaDyne
bed infringes a patent issued to Hill-Rom. This suit was filed in the United
States District Court for the District of South Carolina. Substantive discovery
in the case has not begun. Based upon its preliminary investigation, the Company
does not believe that the TriaDyne bed infringes any valid claims of the
Hill-Rom patent or that this lawsuit will have a material adverse impact on the
Company's business.
The Company is a party to several lawsuits arising in the ordinary course
of its business, including three other lawsuits alleging patent infringement by
the Company, and the Company is contesting adjustments proposed by the Internal
Revenue Service to prior years' tax returns. Provisions have been made in the
Company's financial statements for estimated exposures related to these lawsuits
and adjustments. In the opinion of management, the disposition of these matters
will not have a material adverse effect on the Company's business, financial
condition or results of operations. See "Risk Factors -- Patent Litigation."
The manufacturing and marketing of medical products necessarily entails an
inherent risk of product liability claims. The Company currently has certain
product liability claims pending for which provision has been made in the
Company's financial statements. Management believes that resolution of these
claims will not have a material adverse effect on the Company's business,
financial condition or results of operations. The Company has not experienced
any significant losses due to product liability claims and management believes
that the Company currently maintains adequate liability insurance coverage.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below are the names, ages and positions of the directors and
executive officers of the Company, together with certain other key personnel.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Robert Jaunich II...................... 57 Chairman of the Board
Raymond R. Hannigan.................... 58 Director, President and Chief Executive Officer
James R. Leininger, M.D................ 53 Director
James T. Farrell....................... 33 Director
N. Colin Lind.......................... 41 Director
Jeffrey W. Ubben....................... 36 Director
Dennis E. Noll......................... 42 Senior Vice President, General Counsel and Secretary
Christopher M. Fashek.................. 48 President, KCI Therapeutic Services
Frank DiLazzaro........................ 39 President, KCI International
Richard C. Vogel....................... 43 Vice President and General Manager, NuTech
Michael C. Wells....................... 45 Vice President and General Manager, KCI
Home Care
Michael J. Burke....................... 50 Vice President, Manufacturing
Martin J. Landon....................... 38 Vice President, Accounting and Corporate Controller
</TABLE>
Robert Jaunich II became a director and Chairman of the Board after the
consummation of the Tender Offer. Mr. Jaunich is a Managing Director of Fremont
Partners where he shares management responsibility for the $605 million
investment fund. He is also a Managing Director and a member of the Board of
Directors and Executive Committee of The Fremont Group. Prior to joining the
Fremont Group in 1991, he was Executive Vice President and a member of the Chief
Executive Office of Jacobs Suchard AG a Swiss-based chocolate, sugar
confectionery and coffee company. He currently serves as a director of CNF
Transportation, Inc. and as Chairman of the Managing General Partner of Crown
Pacific Partners, L.P.
Raymond R. Hannigan joined the Company as its President and Chief Executive
Officer in November 1994 and has served as a director of the Company since 1994.
From January 1991 to November 1994, Mr. Hannigan was the President of the
International Division of Sterling Winthrop Consumer Health Group (a
pharmaceutical company with operations in over 40 countries), a wholly-owned
subsidiary of Eastman Kodak. From May 1989 to January 1991, Mr. Hannigan was the
President of Sterling Drug International.
James R. Leininger, M.D. is the founder of the Company and served as
Chairman of the Board of Directors from 1976 until 1997. From January 1990 to
November 1994, Dr. James Leininger served as President and Chief Executive
Officer of the Company. From 1975 until October 1986, Dr. James Leininger was
also the Chairman of the Emergency Department of the Baptist Hospital System in
San Antonio, Texas.
James T. Farrell became a director after the consummation of the Tender
Offer. Mr. Farrell is a Managing Director of Fremont Partners. Before joining
The Fremont Group in 1991, he was an associate at ESL Partners, a private
investment partnership. In 1985, he began his career at Copley Real Estate
Advisors. Mr. Farrell is a former director of Coldwell Banker Corporation. He
also serves as a director of the nonprofit Pacific Research Institute.
N. Colin Lind became a director after the consummation of the Tender Offer.
Mr. Lind is a Managing Director of Richard C. Blum & Associates, L.P. Before
joining RCBA in 1986 he was a Vice President at R. H. Chappell Co., an
investment concern focused on development stage companies, and was previously a
Vice President of Research for two regional brokerage firms, Davis Skaggs, Inc.
and Wheat First Securities. He has previously been a director of two public
companies and seven venture capital backed companies.
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Jeffrey W. Ubben became a director after the consummation of the Tender
Offer. Mr. Ubben is a Managing Director of Richard C. Blum & Associates, L.P.
Before joining RCBA in 1995 he was manager of the $5 billion Fidelity Value Fund
and had been employed by Fidelity for a period of nine years.
Dennis E. Noll joined the Company in February 1992 as its Senior Corporate
Counsel and was appointed Vice President, General Counsel and Secretary in
January 1993. Mr. Noll was promoted to Senior Vice President in September 1995.
Prior to joining the Company in February 1992, Mr. Noll was a shareholder of the
law firm of Cox & Smith Incorporated.
Christopher M. Fashek joined the Company in February 1995 as President,
KCTS. Prior to joining the Company, he served as General Manager, Sterling
Winthrop, New Zealand since February 1993, and served as Vice President Sales of
Sterling Health USA from 1989 until February 1993.
Frank DiLazzaro joined the Company in 1988 as General Manager, KCI Medical
Canada. Mr. DiLazzaro served as Vice President, KCI International, Inc. from
June 1989 to December 1992. Mr. DiLazzaro has served as President, KCI
International, Inc. since January 1993 and was Vice President, Marketing from
April 1993 to September 1995.
Richard C. Vogel joined the Company as its Vice President and General
Manager, NuTech on July 1, 1996. From 1989 to 1996, Mr. Vogel served as
Executive Vice President of Vestar, Inc., a California-based biotechnology
company.
Michael C. Wells joined the Company as Regional Vice President, KCTS, in
August 1994 and served in that role until June 1996 when he was promoted to the
position of Vice President and General Manager, KCI Home Care. Prior to joining
the Company, he served in Sales Management and Infusion Management roles from
1988 to August 1994 with Homedco, which currently operates today as the Apria
Healthcare Group. From 1978 to 1988, Mr. Wells held Marketing and Sales
Management positions with Baxter Healthcare, formerly American Hospital Supply
Corporation.
Michael J. Burke joined the Company in September 1995 as Vice President,
Manufacturing. Prior to joining the Company, Mr. Burke worked for Sterling
Winthrop, Inc., a Division of Eastman Kodak Company, for 25 years, where he
served as Vice President, Manufacturing and as General Manager, Sterling Health
HK/China since 1992.
Martin J. Landon joined the Company in May 1994 as Senior Director of
Corporate Development and was promoted to Vice President, Accounting and
Corporate Controller in October 1994. From 1987 to May 1994, Mr. Landon worked
for Intelogic Trace, Inc., most recently serving as Vice President and Chief
Financial Officer.
EXECUTIVE COMPENSATION
The information set forth in this section relates to the Chief Executive
Officer and the four highest paid executive officers of the Company other than
the CEO (collectively with the CEO, the "named executive officers") as of
December 31, 1996. It is expected that, following the consummation of the
Transactions, the Company will provide its executives with compensation
(including cash compensation and benefits) comparable to the compensation
previously provided to them as executives of KCI, with such additions and
modifications as may be negotiated by the Company and management.
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COMPENSATION SUMMARY
The following table shows all the cash compensation paid or to be paid by
the Company or its subsidiaries, as well as certain other compensation paid or
accrued, during the fiscal years indicated, to the named executive officers for
such period in all capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------
ANNUAL COMPENSATION SECURITIES
-------------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(1) OPTIONS COMPENSATION(2)
- ------------------------------ ---- -------- -------- --------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Raymond R. Hannigan........... 1996 $275,000 $175,000 12,000 $ 4,888
Chief Executive Officer & 1995 250,000 172,500 $39,204 12,000 1,836
President 1994 33,173 23,777 1,000,000(3) 0
Peter A. Leininger, M.D....... 1996 $177,122 $ 86,000 8,000 $ 2,551
Director and Executive 1995 165,436 85,554 $37,717 8,000 1,585
Vice President 1994 151,352 115,000 11,520(4) 1,621
Bianca A. Rhodes.............. 1996 $200,000 $106,000 123,000(5) $ 1,193
Chief Financial Officer & 1995 184,000 105,984 83,000(3) 556
Senior Vice President(6) 1994 165,958 133,000 7,440 530
Frank DiLazzaro............... 1996 $168,000 $ 86,000 78,000(5) $ 884
President, KCI 1995 156,000 85,536 8,000 1,012
International, Inc. 1994 144,200 106,050 63,130(4) 1,085
Christopher M. Fashek......... 1996 $193,000 $115,800 123,000(5) $ 1,647
Chief Executive Officer and 1995 165,000 77,760 83,000 421
President, KCI Therapeutic
Services
</TABLE>
- ---------------
(1) The column entitled "Other Annual Compensation" includes $26,849 paid to Mr.
Hannigan in 1995 for reimbursement of relocation expenses and a personal
benefit received by Dr. Peter A. Leininger for certain transportation
expenses. Except with respect to personal benefits received by Mr. Hannigan
and Dr. Peter Leininger in fiscal 1995, the personal benefits provided to
each of the named executive officers under various Company programs did not
exceed 10% of the individual's combined salary and bonus for the year.
(2) The "All Other Compensation" column for 1996 includes the Company's
contribution to the Company's Employee Stock Ownership Plan of $242 for Dr.
Peter A. Leininger, Ms. Rhodes and Mr. DiLazzaro, which was credited in
1996, a Company contribution of $500 to the Company's 401(k) plan for Dr.
Peter Leininger and Ms. Rhodes, and a premium for term life insurance in an
amount which ranged from $141 to $4,381 depending on the age of the
executive officer and similar amounts for 1995 and 1994.
(3) The referenced stock options for Mr. Hannigan and Ms. Rhodes include stock
options covering 440,000 and 75,000 shares of Common Stock, respectively,
granted to them by Dr. James R. Leininger.
(4) The stock options granted to Dr. Peter Leininger and Mr. DiLazzaro in fiscal
1994 included stock options covering 4,080 and 47,530 Shares, respectively,
which were granted pursuant to a repricing plan. The table does not reflect
the cancellation of stock options covering 6,200 and 21,270 Shares,
respectively, in connection with the repricing plan.
(5) The stock options granted to Ms. Rhodes and Messrs. DiLazzaro and Fashek in
fiscal 1996 include stock options granted pursuant to the Senior Executive
Stock Option Plan covering 115,000, 70,000 and 115,000 Shares, respectively.
A senior executive stock option plan and grants thereunder were
preliminarily approved by the Board of Directors on October 27, 1995 and the
final form of the Senior Executive Stock Option Plan, and the grants
thereunder, were finally approved on December 5, 1996. The plan was approved
by the Company's shareholders on May 13, 1997.
(6) Ms. Rhodes is no longer employed by the Company.
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EMPLOYMENT ARRANGEMENT
Effective November 14, 1994, Raymond R. Hannigan agreed to serve as
President and Chief Executive Officer of the Company with an annual salary of
$250,000 and the right to participate in the Company's Management Incentive
Bonus Plan with an annual target bonus of $125,000. Upon commencement of his
employment, Mr. Hannigan also received a non-qualified option to purchase
560,000 Shares at an exercise price of $4.50 per share, which was the fair
market value on the date he agreed to serve in such capacities. In addition to
other benefits, the Company and Mr. Hannigan agreed that in the event that Mr.
Hannigan's employment is terminated for any reason other than malfeasance or
acts of moral turpitude, he will receive as severance an amount equal to one
year's salary and auto allowance.
EQUITY BASED PLANS
Prior to the Transactions, the Company maintained an employee stock
ownership plan (the "ESOP") and an employee stock purchase plan (the "ESPP").
The Company made contributions of Shares into participants' accounts under the
ESOP. The ESPP allowed participants to purchase Shares at a discount through
payroll deductions. The Company's Board of Directors has voted to terminate both
the ESOP and the ESPP.
Prior to the consummation of the Tender Offer, the Company maintained the
1997 Stock Incentive Plan (the "1997 Plan"), the 1995 Senior Executive Stock
Option Plan (the "1995 Plan"), the 1988 Directors Stock Option Plan (the
"Directors Plan"), and the 1987 Key Contributor Stock Option Plan (the "1987
Plan" and together with the 1997 Plan, the 1995 Plan and the Directors Plan, the
"Old Plans"). The Old Plans granted participants options to purchase Shares (the
"Old Options") at defined exercise prices. As of December 1, 1996, exercise
prices for the Old Options ranged from $3.00 to $17.00.
In conjunction with the consummation of the Tender Offer, the Old Options
that had not yet vested were accelerated and became fully exercisable. The Old
Options, with the exception of options granted under the 1997 Plan, may, until
the termination of the notice period, be exercised for Shares or exchanged for
cash. Old Options granted under the 1997 Plan may be exercised until the end of
the notice period, or exchanged for cash until the termination of the 90 day
Change of Control Period (as defined in the 1997 Plan). Certain executives will
exchange their Old Options for options ("Exchange Options") granted under the
Company Management Equity Plan (the "MEP"). Old Options that are not exercised
or exchanged will be cancelled at the end of their respective notice periods.
THE MANAGEMENT EQUITY PLAN
In conjunction with the Transactions, the Company anticipates adopting the
MEP, under which the Company will grant awards of nonqualified stock options
(the "New Options") to certain employees of the Company and its subsidiaries,
subject to the execution of an award agreement (the "Agreement") by each such
employee. The MEP also provides for the exchange of Old Options for Exchange
Options and the retention of Shares held prior to the effective date of the MEP,
with such Shares becoming subject to the terms of the MEP and considered
management Shares (the "Management Shares"). Management Shares and Options are
sometimes referred to as "Awards".
Administration. The MEP will be administered by a Committee of the Board
of Directors (the "Committee"). The Committee has authority to adopt rules to
carry out the purposes of the MEP, and to interpret, administer and apply the
terms of the MEP. The Committee's determinations will be final and binding with
respect to all matters relating to the MEP.
Eligible Persons. The Chief Executive Officer of the Company will
recommend for approval by the Board of Directors the individuals to whom Awards
may be granted (the "Participants") and determine the number and form of Awards
to be granted to each Participant. The Board of Directors will determine Awards
granted to the Chief Executive Officer.
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<PAGE> 82
Agreement. The terms and conditions of each grant or sale of Awards will
be combined in an Agreement (the "Agreement") in a form to be approved by the
Committee, which will contain terms and conditions not inconsistent with the MEP
and which will incorporate the MEP by reference.
Restrictions on Transfer. The MEP provides that no Management Share,
Option or Share received upon the exercise of an Option (an "Option Share")
whose terms are governed by the MEP may be sold, transferred, assigned, pledged
or otherwise encumbered or disposed of to any third party other than the
Company, except as provided in the MEP or Agreement, or to a Permitted
Transferee (as defined in the MEP). Each Permitted Transferee (other than the
Company) will, as a condition to the transfer, execute an agreement pursuant to
which it will become a party to the Agreement applicable to the transferor.
Number of Shares Issuable. The maximum number of Shares that may be issued
in connection with Awards granted under the MEP (together with any Shares issued
in connection with Management Shares and Options) is 6.5% of the initial Shares
outstanding as of the Effective Time, subject to adjustment. Any Management
Shares forfeited or repurchased by the Company or any Option that expires or is
surrendered without being exercised in full, may again be available for issuance
in connection with future grants or offerings of Awards.
Options. Options entitle the Participants to purchase Shares, upon payment
of the relevant Option Price. Each Agreement relating to an Option will specify
the relevant Option Price. Exchange Options will retain the exercise price of
the relevant Old Option. Each New Option will vest and become exercisable in 20%
installments on each of the first five anniversaries of the consummation of the
Tender Offer and will generally be exercisable for a period of seven years,
unless the Committee determines otherwise and so sets forth in the applicable
Agreement. If a Participant's employment is terminated due to death, disability
or retirement, all Options granted to such Participant will vest on the date of
such termination. If a Sale of Stock or a Sale of Assets (as such terms are
defined in the MEP) is completed within three years of the effective date of the
MEP, all outstanding, unvested Options will vest immediately upon such
completion. If an IPO or a Sale by Fremont/RCBA (as such terms are defined in
the MEP) is completed within three years of the effective date of the MEP, half
of all outstanding, unvested Options will vest immediately upon such completion.
Upon termination of a Participant's employment with the Company, all
unvested Options held by such Participant will terminate and be cancelled and
all vested Options will be exercisable until the earlier of (i) 30 days
following the Participant's termination of employment or status (or 180 days, if
the termination is due to the death, disability or retirement of such
Participant), (ii) the Company's exercise of its call rights under the MEP and
(iii) the exercise of the Participant's put rights under the MEP. Upon the
expiration of such period or exercise of such call right or put right, any such
vested Option not theretofore exercised will be cancelled, and the shares of
Common Stock that had been subject thereto will be available for grants of
further Awards under the MEP.
A Participant will have no rights as a stockholder with respect to any
Shares issuable upon exercise of an Option until a certificate evidencing such
shares has been issued to such Participant.
Management Shares. Management Shares may be granted for no consideration,
offered for sale at a purchase price determined by the Committee in its sole
discretion at the time of offering and set forth in the applicable Agreement, or
received in exchange for Shares held by a Participant prior to the effective
date of the MEP. Any offer to sell Management Shares will expire no later than
60 days following the date of such offer. Participants have all rights of a
stockholder as to the Management Shares, including the right to receive
dividends and the right to vote in accordance with the Company's Articles of
Incorporation, subject to restrictions set forth in the MEP and the applicable
Agreement.
Call Rights. If, prior to the completion of an IPO, a Participant's
employment with the Company is terminated for any reason or an Involuntary
Transfer occurs (as such term is defined in the MEP), the Company has the right
to repurchase all Management Shares, vested Options and Option Shares held by
such Participant or his Permitted Transferee under the MEP during the 60-day
period following such termination. The Company's call right will become null and
void subsequent to the completion of an IPO.
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<PAGE> 83
The purchase price to be paid with respect to any call right will be
determined as of the first Valuation Date (as such term is defined in the MEP)
coincident with or following the date of termination or Involuntary Transfer.
The consideration to be paid in respect to Management Shares, vested Options and
Option Shares surrendered for cancellation will be the aggregate Applicable
Management Share Value, Applicable Option Value or Applicable Option Share Value
(as such terms are defined in the MEP), determined as of the first Valuation
Date coincident with or following the date of termination or Involuntary
Transfer, of the Shares issuable upon exercise of such vested Options over the
aggregate Option price of such Option.
The Applicable Management Share Value is defined, as of a date of
determination, as the Public Value of the Shares if the Company is a Public
Company and the Fair Market Value of the Shares if the Company is not a Public
Company (as such terms are defined in the MEP), provided, however, that if the
Company is not a Public Company and the date of determination falls prior to the
fifth anniversary of the effective date of the MEP, the Applicable Management
Share Value will not exceed the lesser of the Fair Market Value of such
Management Share or $19.25 plus 7% compounded annually on each anniversary of
the last day of the Tender Offer (the "Tender Date"). The Applicable Option
Share Value is defined, as of a date of determination, as the Public Value of
the Shares if the Company is a Public Company and the Fair Market Value of the
Shares if the Company is not a Public Company, provided, however, that if the
Company is not a Public Company, and such date falls prior to the fifth
anniversary of the Effective Time and the Option Share was obtained through the
exercise of an Exchange Option, the Applicable Option Share Value will not
exceed the lesser of (A) the Fair Market Value or (B) the sum of (1) $19.25 less
the exercise price of such underlying Exchange Option (the "Spread") plus 7% of
the Spread compounded annually on each anniversary of the Tender Date and (2)
the exercise price of such Option plus 7% of the exercise price compounded
annually on each anniversary of the date of exercise. The Applicable Option
Value is defined, as of a date of determination, as the Public Value of the
Shares if the Company is a Public Company and the Fair Market Value of the
Shares if the Company is not a Public Company, provided, however, that if the
Company is not a Public Company, such date of determination falls prior to the
fifth anniversary of the effective date and the Option to be valued is an
Exchange Option, the Applicable Option Value will not exceed the lesser of (A)
the Fair Market Value of the Shares underlying such Exchange Option less the
exercise price of such Exchange Option or (B) the Spread plus 7% of the Spread
compounded annually on each anniversary of the Tender Date. The Company will
give notice of the purchase price to be paid within a reasonable time from the
date of determination of such price. The Company's call right will become null
and void subsequent to the completion of an IPO.
Put Rights. If, prior to the completion of an IPO, a Participant's
employment with the Company is terminated for any reason, the Participant has
the right to have the Company repurchase any Management Shares, vested Options
and Option Shares beneficially owned by such Participant or his Permitted
Transferees during the 60-day period immediately following the termination. The
purchase price to be paid with respect to any put right will be determined as of
the first Valuation Date coincident with or following the date of termination.
The consideration to be paid in respect to Management Shares, vested Options and
Option Shares surrendered for cancellation will be the aggregate Applicable
Management Share Value, Applicable Option Value or Applicable Option Share
Value, determined as of the first Valuation Date coincident with or following
the date of termination or Involuntary Transfer, of the Shares issuable upon
exercise of such vested Options over the aggregate Option price of such Option.
The Participant's put rights will become null and void subsequent to the
completion of an IPO. The Company retains the right to delay the Participant's
exercise of his put rights in case of limited financial capability of the
Company.
Certain Corporate Changes. In the event of a stock dividend or split, the
Committee may either adjust the number of Options granted pursuant to the MEP
and to each Participant or adjust the exercise price of any Options so as to
provide each Participant with a benefit equivalent to that such Participant
would have been entitled to had the dividend or split not occurred. Upon the
occurrence of certain Reorganization Events (as defined in the MEP) including
the merger of the Company with another entity, the sale of substantially all the
assets of the Company or any other change of control of the Company, the
Committee is authorized to make any adjustments it deems necessary in connection
with the Reorganization Event.
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<PAGE> 84
Amendment of the Plan. The Board of Directors of the Company may, at any
time, alter, amend, suspend or terminate the MEP. No termination or amendment
may adversely affect a Participant's rights under the MEP without such
Participant's consent.
Termination of the Plan. The MEP will continue until terminated by the
Board of Directors, and no further Awards will be made thereunder after the date
of such termination.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options
granted during fiscal 1996 to the named executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED(1) YEAR ($/SH)(2) DATE 5%(4) 10%(4)
- ---------------------------- ----------- ---------- -------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Raymond R. Hannigan......... 12,000 .93% $ 16.50 05/15/06 $124,520 $ 315,560
Peter A. Leininger.......... 8,000 .62% $ 16.50 05/15/06 $ 83,013 $ 210,373
Bianca A. Rhodes............ 8,000 9.56% $ 16.50 05/15/06 $ 83,013 $ 210,373
115,000(3) $ 11.125 10/27/05 $808,377 $2,299,990
Frank DiLazzaro............. 8,000 6.07% $ 16.50 05/15/96 $ 83,013 $ 210,373
70,000(3) $ 11.125 10/27/05 $492,056 $1,391,244
Christopher M. Fashek....... 8,000 9.56% $ 16.50 05/15/06 $ 83,013 $ 210,373
115,000(3) $ 11.125 10/27/05 $808,377 $2,299,990
</TABLE>
- ---------------
(1) Except as otherwise noted, the options vest and become exercisable in twenty
percent (20%) increments on May 15 of each year after the date of grant. The
options are not transferable other than by will or laws of descent and
distribution or pursuant to a qualified domestic relations order.
(2) Except with respect to the options discussed in footnote (3) below, the
exercise price of all options granted by the Company in 1996 was equal to
the fair market value of Shares at the close of business on the date of the
grant.
(3) The stock options granted to Ms. Rhodes and Messrs. DiLazzaro and Fashek in
fiscal 1996 include stock options granted under the Senior Executive Stock
Option Plan covering 115,000, 70,000 and 115,000 shares of Shares,
respectively. A senior executive stock option plan and grants thereunder
were preliminarily approved by the Board of Directors on October 27, 1995
and the final form of the Senior Executive Stock Option Plan, and the grants
thereunder, were finally approved on December 5, 1996. The grants under this
plan were subject to shareholder approval of the Senior Executive Stock
Option Plan which approval was received on May 13, 1997. The exercise price
of the options granted by the Company under this plan is $11.25 per share.
The options vest in 25% increments on December 31 of each of the first four
full calendar years (each such year being a "Vesting Year") following the
date of the option; provided, however, such portion of the option scheduled
to vest in such Vesting Year will not vest if (i) the Company has failed to
achieve 100% of the Company's annual plan approved by the Board for such
calendar year or (ii) the average closing price of the Shares during
December of such Vesting Year does not represent a twenty percent (20%)
increase over the average price of the Shares during December of the
preceding calendar year and such event has occurred in two consecutive
years; provided, however, if such option holder is employed by the Company
and the option is not fully vested on the date six months prior to the
expiration date of such option, the option will then become fully vested.
Notwithstanding the foregoing, the option may not be exercised prior to the
third anniversary of the date of grant except in the event of a change in
control or termination of the senior executive's employment without good
cause. The options are not transferable other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order.
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<PAGE> 85
(4) The information in these columns illustrates the value that might be
realized upon the exercise of the options granted during fiscal 1996
assuming the specified compound rates of appreciation of Shares over the
term of the options. The potential realizable value set forth in the columns
of the foregoing table do not take into account certain provisions of the
options providing for termination of an option following termination of
employment, nontransferability or vesting requirements. With respect to the
options described in footnote (3) above, the options were treated as granted
on December 5, 1996 for purposes of this calculation, the date on which the
Board of Directors adopted and approved the final form of the Senior
Executive Stock Option Plan. The fair market value of Shares at the close of
business on December 5, 1996 was $12.00 per share.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
The following table sets forth certain information concerning the options
exercised by each named executive officer during fiscal 1996 and the number and
value of the options held by the named executive officers at the end of the
fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
SHARES AT FY-END AT FY-END
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Raymond R. Hannigan(2)................... 56,500 $ 530,252 627,200 $ 4,409,800
296,800 2,209,600
Peter A. Leininger, M.D.(3).............. 1,200,000 $15,150,000 34,228 $ 238,648
15,992 64,892
Bianca A. Rhodes(4)(5)................... 25,000 $ 218,750 118,014 $ 609,571
170,426 466,099
Frank DiLazzaro(4)....................... 81,300 $ 915,166 20,284 $ 29,004
80,246 218,154
Christopher M. Fashek(4)................. 16,600 $ 163,250 30,350 $ 32,344
142,450 427,181
</TABLE>
- ---------------
(1) The values are calculated by subtracting the exercise price from the fair
market value of the underlying Common Stock as of December 31, 1996 (based
on a closing price of $12.25 per share on December 31, 1996).
(2) Dr. James R. Leininger granted Mr. Hannigan an option in fiscal 1994 to
purchase 440,000 shares of Common Stock at a purchase price of $5.74 per
share. Mr. Hannigan purchased 56,500 of the shares of Common Stock subject
to such option during fiscal 1996. The remaining portion of the option to
purchase 340,000 shares of Common Stock is currently exercisable and
included herein.
(3) Dr. James R. Leininger granted Dr. Peter A. Leininger an option in 1992 to
purchase 1,200,000 shares of Common Stock at a price of $3.50 per share. Dr.
Peter A. Leininger exercised this option in fiscal 1996.
(4) The options shown for Ms. Rhodes and Messr. DiLazzaro and Fashek include
stock options granted under the Senior Executive Stock Option Plan covering
115,000, 70,000 and 115,000 shares of Common Stock, respectively, of which
28,750, 17,500 and 28,750, respectively, were exercisable as of December 31,
1996. The Senior Executive Stock Option Plan and grants thereunder were
preliminarily approved by the Board of Directors on October 27, 1995 and the
final form of the Senior Executive Stock Option Plan, and the grants
thereunder, were finally approved on December 5, 1996. The grants under this
plan were subject to shareholder approval of the Senior Executive Stock
Option Plan which approval was received on May 13, 1997. The purchase price
of the options is $11.125 per share.
(5) The options shown for Ms. Rhodes include an option to acquire 75,000 shares
of Common Stock at a purchase price of $9.125 per share granted to Ms.
Rhodes by Dr. James R. Leininger, 25,000 of which were exercisable as of
December 31, 1996.
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<PAGE> 86
PRINCIPAL SHAREHOLDERS
Based on information received upon request from the persons concerned, each
person known to be the beneficial owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of more than five percent of the outstanding Shares,
each director, named executive officer and all directors and executive officers
of the Company as a group, owned beneficially as of December 8, 1997, and would
own beneficially upon consummation of the Merger, the number and percentage of
outstanding Shares indicated in the following table:
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO THE MERGER AFTER THE MERGER(2)
------------------------------ ------------------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF
NAMES OF INDIVIDUALS SHARES(1) CLASS SHARES CLASS
- -------------------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
James R. Leininger, M.D............... 5,939,220 30.4% 5,939,220 33.5%
8023 Vantage Drive
San Antonio, TX 78230
Fremont Partners L.P.................. 7,029,922 36.0% 7,029,922 39.7%
and certain related parties
50 Fremont Street, Suite 3700,
San Francisco, CA 94105
Richard C. Blum & Associates, L.P..... 4,644,010 23.8% 4,644,010 26.2%
and certain related parties
909 Montgomery St., Suite 400
San Francisco, CA 94133
Peter A. Leininger, M.D............... 1,158,220(1) 5.9% 158,220 1.0%
Raymond R. Hannigan................... 256,500(2) 1.3% 200,000(2) 1.1%
James T. Farrell(3)................... -- --
Robert Jaunich II(3).................. -- --
N. Colin Lind(4)...................... -- --
Jeffrey W. Ubben(4)................... -- --
Christopher M. Fashek................. 139,800(5) * 139,800(5) *
Frank DiLazzaro....................... 118,530(6) * 118,530(6) *
All directors and executive officers
as a group(18 persons).............. 7,993,970(3)(4)(7) 39.2% 7,993,970(3)(4)(7) 45.1%
</TABLE>
- ---------------
* Less than one (1%) percent
(1) Includes options to purchase 58,220 Shares.
(2) Includes options to purchase 200,000 Shares.
(3) Messrs. Farrell and Jaunich are managing directors of Fremont Partners, L.P.
and certain of its related parties ("Fremont"). The Shares shown do not
include the Shares beneficially owned by Fremont. See "Summary -- Summary of
the Transactions."
(4) Messrs. Lind and Ubben are managing directors of Richard C. Blum &
Associates, L.P. and certain of its related parties ("RCBA"). The Shares
shown do not include the Shares beneficially owned by RCBA. See
"Summary -- Summary of the Transactions."
(5) Includes options to purchase 139,800 Shares.
(6) Includes options to purchase 118,530 Shares.
(7) Includes options to purchase 878,250 Shares.
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<PAGE> 87
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT PARTICIPATION IN THE RECAPITALIZATION
Dr. James Leininger and certain other parties received approximately
$265,500,000 for the sale of the 13,792,211 Shares that he tendered in the
Tender Offer. Additionally, Dr. James Leininger will retain a 33.5% interest in
the Company following the Transactions. The directors and executive officers of
the Company (other than Dr. James Leininger) have received and will receive an
aggregate of approximately $37,650,000 for their Shares and Employee Options in
the Transactions.
INDEMNIFICATION AND INSURANCE
The Transaction Agreement requires the Company to provide indemnification
to each present and former officer, director, employee or agent of the Company,
including, without limitation, each Person controlling any of the foregoing
Persons (the "Indemnified Parties"), against all claims, losses, liabilities,
damages, judgments, fines, fees, cost or expenses, including, without
limitation, attorneys' fees and disbursements (collectively, "Costs"), incurred
in connection with any claim, action, suit proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time of the Merger
(including, without limitation, the Transaction Agreement and the transactions
and actions contemplated thereby and giving effect to the consummation of such
transactions and actions), whether asserted or claimed prior to, at or after the
Effective Time. After the Transactions, the Company is required to maintain, at
no expense to the beneficiaries, directors' and officers' liability insurance
("D&O Insurance") for the Indemnified Parties with respect to matters occurring
at or prior to the Effective Time, issued by a carrier or carriers assigned a
claims-paying ability rating by A.M. Best & Co. of "A (Excellent)" or higher,
providing at least the same coverage as the D&O Insurance currently maintained
by the Company and containing terms and conditions which are not materially less
favorable to the beneficiaries, for a period of at least six years from the
Effective Time; provided, however, that in no event shall the Company be
requested to expend pursuant to the Transaction Agreement more than an amount
per year equal to 200% of current annual premiums paid by the Company for such
insurance.
AGREEMENT AMONG SHAREHOLDERS
The Company, Fremont, RCBA and Dr. James Leininger entered into an
agreement upon the consummation of the Tender Offer (the "Agreement Among
Shareholders") governing the respective obligations and relationship of each
party as shareholders of the Company. The Agreement Among Shareholders provides
that until six months after a public offering of Shares, Fremont, RCBA and Dr.
James Leininger will not sell, transfer, pledge or hypothecate any shares of the
Company then held by them, subject to certain exceptions provided, however, Dr.
James Leininger is permitted to make any transfers of up to 10.5% of the
Company's then outstanding Shares.
The Agreement Among Shareholders provides that (i) if any of Fremont, RCBA
or Dr. James Leininger wishes to sell shares, then such party shall offer to
include in the proposed sale certain Shares designated by any of the other
parties and (ii) if Fremont and RCBA propose to sell all (but not less than all)
of the Shares they own, then Fremont and RCBA may require Dr. James Leininger to
include in such sale all of the Shares held by him, unless he holds less than
10% of the then outstanding shares. Pursuant to the Agreement Among Shareholders
the Company grants to each of Fremont, RCBA and Dr. James Leininger the
preemptive right to purchase shares of the Company in an amount up to the
percentage of all outstanding fully diluted stock of the Company owned by such
party, subject to certain exceptions.
At any time after the fifth anniversary of the Agreement Among
Shareholders, if there has not been a public offering of the Company's Shares,
Fremont, RCBA or Dr. Leininger may request that the Company register at least
33% of the Shares held by such party. In addition, each party will have the
right to request additional registration of at least 33% of the Shares then held
by such party at any time after one year, but before three years, following the
completion of a public offering of the Shares. If the Company shall proceed with
a filing of a registration statement in connection with a proposed offer and
sale of Shares by the Company, the Company will notify Fremont, RCBA and Dr.
James Leininger and shall include in such registration the number of Shares
requested by such parties.
84
<PAGE> 88
The Agreement Among Shareholders further provides that until there is a
public offering of Shares, Fremont, RCBA and Dr. James Leininger will take all
steps to insure that the Board of Directors of the Company shall have eight
members and that the Nominating Committee (as defined therein) of the Board of
Directors will consist of Dr. James Leininger, one director designated by
Fremont and one director designated by RCBA. The eight-member board will consist
of Dr. James Leininger, the Company's then Chief Executive Officer, two persons
designated by Fremont, two persons designated by RCBA and two or more
independent directors designated by the Nominating Committee.
THE SHAREHOLDER SUPPORT AGREEMENT
The Investors have entered into a shareholder support agreement (the
"Shareholder Support Agreement") with Dr. James Leininger. Pursuant to the
Shareholder Support Agreement, Dr. James Leininger agreed, subject to the terms
and conditions thereof, (i) to grant to the Investors an option to purchase from
him at the Per Share Amount, 4,200,000 Shares owned or controlled by him, which
option expired upon consummation of the Tender Offer, (ii) to tender 13,792,211
Shares owned (either beneficially or of record) by Dr. James Leininger pursuant
to the Offer and (iii) to vote all Shares owned (either beneficially or of
record) at the time of the shareholder's meeting to approve the Merger.
TRANSACTION FEES
In the event the Merger is consummated, the Company shall pay, pursuant to
the terms of the Transaction Agreement, transaction fees of $5,119,000 to
Fremont Investor and $3,381,000 to RCBA Investor.
OTHER TRANSACTIONS
In August 1995, the Company loaned $10 million to Dr. James Leininger. This
loan was secured by a stock pledge agreement covering 1,000,000 Shares owned by
Dr. James Leininger. The interest on the loan accrued at 7.94% per annum. In
January 1996, the loan was repaid in full.
On December 18, 1996, a company controlled by Dr. James Leininger acquired
a tract of land (the "Property") from the Company for $395,000. The Property is
comprised of approximately 2.2 acres and is adjacent to the Company's corporate
headquarters. The purchase price was based on the aggregate cost of the Property
to the Company (including acquisition expenses). The Company believes that the
acreage was transferred to Dr. James Leininger at a price equal to its fair
market value. In connection with the purchase of the Property, the Company
loaned Dr. James Leininger $3,000,000 in February 1997 to develop the Property.
The loan bears interest at a rate equal to the prime rate of Texas Commerce Bank
(but such rate shall not be less than 6.15% or greater than 10.25%) and matures
on the fifth anniversary of the loan. The loan is non-recourse to Dr. James
Leininger but is secured by the Property, the improvements on the Property and
300,000 Shares owned by Dr. James Leininger.
Pursuant to the provisions of the Executive Committee Stock Ownership
Policy, the Company loaned funds to Christopher M. Fashek, the President of KCI
Therapeutic Services, Inc. (a wholly-owned subsidiary of the Company), Bianca A.
Rhodes, the Company's Chief Financial Offer at the time and Dennis E. Noll, the
Company's Senior Vice President and General Counsel. These loans were utilized
by such executive officers to acquire Shares in order to meet the standards set
forth in the Company's Executive Committee Stock Ownership Policy. The loans
bear interest at the applicable federal rate established by the Internal Revenue
Service and have a term of five years. At the option of each such executive
officer, the loans are repayable on a biweekly basis through payroll deduction
or in equal installments of principal and interest on an annual basis. The
initial loans made to Mr. Fashek, Ms. Rhodes and Mr. Noll were $109,821,
$170,672 and $86,310, respectively, and the outstanding balance of principal and
accrued interest on such loans as of December 31, 1996 were $87,076, $166,003
and $81,888, respectively. Mr. Noll repaid his loan in February 1997 and Ms.
Rhodes repaid the principal of her loan in July 1997. The Board has amended the
Executive Committee Stock Ownership Policy to make the ownership thresholds in
the policy voluntary and, as a result, the Company will not be making loans to
executive officers under the policy in the future.
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DESCRIPTION OF NEW CREDIT FACILITIES
The Company has entered into New Credit Facilities pursuant to a bank
credit agreement (the "Bank Credit Agreement") with Bank of America National
Trust and Savings Association ("Bank of America"), as Administrative Agent, and
Bankers Trust Company ("Bankers Trust"), as Syndication Agent, and other
institutions party thereto (the "Banks"), which provides loans of up to $400.0
million. Loans under the Bank Credit Agreement consist of (i) $120.0 million in
aggregate principal amount of six-year Tranche A Term Loans, $90.0 million in
aggregate principal amount of seven-year Tranche B Term Loans and $90.0 million
in aggregate principal amount of eight-year Tranche C Term Loans (the "Tranche A
Term Loans," the "Tranche B Term Loans," and the "Tranche C Term Loans" are
referred to collectively as the "Term Loans"), to be used to finance a portion
of the Recapitalization and to pay related fees and expenses, (ii) a $50.0
million six-year revolving credit facility (the "Revolving Credit Facility"), of
which $33.0 million was drawn down in connection with the consummation of the
Tender Offer, and which permits the Company to borrow up to $50.0 million to
finance a portion of the Recapitalization and related fees and expenses as well
as the working capital, letters of credit and other general corporate needs and
(iii) a $50.0 million six-year acquisition facility to finance permitted
acquisitions and related fees and expenses (the "Acquisition Facility"), of
which $10.0 was drawn down in connection with the consummation of the Tender
Offer. This information relating to the Bank Credit Agreement is qualified in
its entirety by reference to the complete text of the documents to be entered
into in connection therewith. The following is a description of the general
terms of the Bank Credit Agreement.
Indebtedness of the Company under the Bank Credit Agreement is guaranteed
by certain of the domestic subsidiaries of the Company and is secured by (i) a
first priority security interest in all, subject to certain customary
exceptions, of the tangible and intangible assets of the Company and its
domestic subsidiaries, including, without limitation, intellectual property and
real estate owned by the Company and its domestic subsidiaries, (ii) a first
priority perfected pledge of all capital stock of the Company's domestic
subsidiaries and (iii) a first priority perfected pledge of up to 65% of the
capital stock of foreign subsidiaries owned directly by the Company or its
domestic subsidiaries.
Indebtedness under the Revolving Credit Facility (other than certain loans
under the Revolving Credit Facility designated in foreign currency), the Term
Loans and the Acquisition Facility initially bears interest at a rate based
upon, at the Company's option, either (i) the Base Rate (defined as the higher
of (x) the rate of interest publicly announced by Bank of America as its
"reference rate" and (y) the federal funds effective rate from time to time plus
0.50%), plus 1.25% in respect of the Tranche A Term Loans, the loans under the
Revolving Credit Facility (the "Revolving Loans") and the loans under the
Acquisition Facility (the "Acquisition Loans"), 1.50% in respect of the Tranche
B Term Loans and 1.75% in respect of the Tranche C Term Loans, or (ii) the
Eurodollar Rate (as defined in the Bank Credit Agreement) for one, two, three or
six months, in each case plus 2.25% in respect of Tranche A Term Loans,
Revolving Loans and Acquisition Loans, 2.50% in respect of Tranche B Term Loans
and 2.75% in respect of the Tranche C Term Loans. Certain Revolving Loans
designated in foreign currency will initially bear interest at a rate based upon
the cost of funds for such loans, plus 2.25% or 2.50%, depending on the type of
foreign currency. Performance-based reductions of the interest rates under the
Term Loans, the Revolving Loans and the Acquisition Loans are available. The
Company is expected to obtain interest rate protection for not less than 50% of
the amount of the Term Loans no later than 90 days after the closing of the Bank
Credit Agreement.
The Term Loans are subject to quarterly amortization payments commencing on
March 31, 1998. Commitments under the Acquisition Facility will expire December
31, 2000 and the Acquisition Facility loans outstanding shall be repayable in
equal quarterly amortization payments commencing March 31, 2001. In addition,
the Bank Credit Agreement provides for mandatory repayments, subject to certain
exceptions, of the Term Loans, the Acquisition Facility and/or the Revolving
Credit Facility based on certain net asset sales outside the ordinary course of
business of the Company and its subsidiaries, the net proceeds of certain debt
and equity issuances and excess cash flows (as defined in the Bank Credit
Agreement).
The Revolving Loans may be repaid and reborrowed. The Company is required
to pay to the Banks under the Bank Credit Agreement a commitment fee initially
equal to 0.50% per annum, payable in arrears on a
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quarterly basis, on the average daily unused portion of the Revolving Credit
Facility and Acquisition Facility during such quarter. The Company also is
required to pay to the Banks participating in the Revolving Credit Facility
letter of credit fees equal to the applicable margin then in effect with respect
to Eurodollar loans under the Revolving Credit Facility on the face amount of
each letter of credit outstanding and to the Bank issuing a letter of credit a
fronting fee of 0.25% on the average daily stated amount of each outstanding
letter of credit issued by such Bank, in each case payable in arrears on a
quarterly basis. Bank of America and Bankers Trust will receive and continue to
receive such other fees as have been separately agreed upon.
The Bank Credit Agreement requires the Company to meet certain financial
tests, including minimum levels of EBITDA (as defined therein), minimum interest
coverage and maximum leverage ratio. The Bank Credit Agreement also contains
covenants which, among other things, limit the incurrence of additional
indebtedness, investments, dividends, loans and advances, capital expenditures,
transactions with affiliates, asset sales, acquisitions, mergers and
consolidations, prepayments of other indebtedness (including the Notes), liens
and encumbrances and other matters customarily restricted in such agreements.
The Bank Credit Agreement contains customary events of default, including
payment defaults, breach of representations and warranties, covenant defaults,
cross-defaults to certain other indebtedness, certain events of bankruptcy and
insolvency, failures under ERISA plans, judgment defaults, failure of any
guaranty, security document security interest or subordination provision
supporting the Bank Credit Agreement to be in full force and effect and change
of control of the Company.
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DESCRIPTION OF NOTES
The Series A Notes were and the Exchange Notes will be issued under an
indenture (the "Indenture"), dated as of November 5, 1997 by and among the
Company, the Guarantors and Marine Midland Bank, as Trustee (the "Trustee"). The
following summary of certain provisions of the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Trust Indenture Act of 1939, as amended (the "TIA"), and to all of the
provisions of the Indenture, including the definitions of certain terms therein
and those terms made a part of the Indenture by reference to the TIA as in
effect on the date of the Indenture. A copy of the Indenture may be obtained
from the Company or the Initial Purchasers. The definitions of certain
capitalized terms used in the following summary are set forth below under
"-- Certain Definitions." For purposes of this section, references to the
"Company" include only the Company and not its Subsidiaries.
The Notes are unsecured obligations of the Company, ranking subordinate in
right of payment to all Senior Debt of the Company.
The Notes are issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as paying agent and registrar for the Notes. The Notes may be presented
for registration or transfer and exchange at the offices of the Registrar, which
initially is the Trustee's corporate trust office. The Company may change any
Paying Agent and Registrar without notice to holders of the Notes (the
"Holders"). The Company will pay principal (and premium, if any) on the Notes at
the Trustee's corporate office in New York, New York. At the Company's option,
interest may be paid at the Trustee's corporate trust office or by check mailed
to the registered address of Holders. Any Series A Notes that remain outstanding
after the completion of the Exchange Offer, together with the Exchange Notes
issued in connection with the Exchange Offer, will be treated as a single class
of securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $300.0 million, of
which $200.0 million were issued in the Offering, and will mature on November 1,
2007. Additional amounts may be issued in one or more series from time to time
subject to the limitations set forth under "-- Certain Covenants -- Limitation
on Incurrence of Additional Indebtedness" and the restrictions contained in the
Credit Agreement. Interest on the Notes accrues at the rate of 9 5/8% per annum
and will be payable semiannually in cash on each May 1 and November 1,
commencing on May 1, 1998, to the persons who are registered Holders at the
close of business on April 15 and October 15, respectively, immediately
preceding the applicable interest payment date. Interest on the Notes will
accrue from and including the most recent date to which interest has been paid
or, if no interest has been paid, from and including the date of issuance.
The Notes are not entitled to the benefit of any mandatory sinking fund.
REDEMPTION
Optional Redemption. The Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after November
1, 2002, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on November 1 of the year set
forth below, plus, in each case, accrued and unpaid interest thereon, if any, to
the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
------------------------------------------------------------------ ----------
<S> <C>
2002.............................................................. 104.813%
2003.............................................................. 103.208%
2004.............................................................. 101.604%
2005 and thereafter............................................... 100.000%
</TABLE>
Optional Redemption upon Equity Offerings. At any time, or from time to
time, on or prior to November 1, 2000, the Company may, at its option, on one or
more occasions use all or a portion of the net
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cash proceeds of one or more Equity Offerings (as defined below) to redeem the
Notes issued under the Indenture at a redemption price equal to 109.625% of the
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the date of redemption; provided that at least 65% of the principal amount of
Notes originally issued remains outstanding immediately after any such
redemption. In order to effect the foregoing redemption with the proceeds of any
Equity Offering, the Company shall make such redemption not more than 120 days
after the consummation of any such Equity Offering.
As used in the preceding paragraph, "Equity Offering" means any offering of
Qualified Capital Stock of the Company.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes, or portions thereof, for redemption will be made
by the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which such Notes are listed or, if such Notes
are not then listed on a national securities exchange, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be redeemed
in part; provided, further, that if a partial redemption is made with the
proceeds of an Equity Offering, selection of the Notes or portions thereof for
redemption shall be made by the Trustee only on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to DTC procedures), unless such
method is otherwise prohibited. Notice of redemption shall be mailed by
first-class mail at least 30 but not more than 60 days before the redemption
date to each Holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the Company
has deposited with the paying agent funds in satisfaction of the applicable
redemption price pursuant to the Indenture.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt. Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash or Cash Equivalents, or such payment duly provided
for to the satisfaction of the holders of Senior Debt, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Notes, or for the acquisition of any of the Notes for cash or property or
otherwise. If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees or commissions with respect to, any
Senior Debt, no payment or distribution of any kind or character shall be made
by or on behalf of the Company or any other Person on its or their behalf with
respect to any Obligations on the Notes or to acquire any of the Notes for cash
or property or otherwise.
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Debt, as such event of default is defined in
the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
Trustee (a "Default Notice"), then, unless and until all events of default have
been cured or waived or have ceased to exist or the Trustee receives notice from
the Representative for the respective issue of Designated Senior Debt
terminating the Blockage Period (as defined below), during the 180 days after
the delivery of such Default Notice (the "Blockage Period"), neither the Company
nor any
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other Person on its behalf shall (x) make any payment or distribution of any
kind or character with respect to any Obligations on the Notes or (y) acquire
any of the Notes for cash or property or otherwise. Notwithstanding anything
herein to the contrary, in no event will a Blockage Period extend beyond 180
days from the date the payment on the Notes was due and only one such Blockage
Period may be commenced within any 360 consecutive days. No event of default
which existed or was continuing on the date of the commencement of any Blockage
Period with respect to the Designated Senior Debt shall be, or be made, the
basis for commencement of a second Blockage Period by the Representative of such
Designated Senior Debt whether or not within a period of 360 consecutive days,
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days (it being acknowledged that any subsequent action,
or any breach of any financial covenants for a period commencing after the date
of commencement of such Blockage Period that, in either case, would give rise to
an event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the Holders of the Notes, may recover less, ratably, than holders of Senior
Debt.
As of September 30, 1997, on a pro forma basis after giving effect to the
Transactions and the Acquisitions, the Company and the Guarantors would have had
approximately $342.7 million of Senior Debt outstanding and approximately $57.3
million of availability under the Credit Agreement.
GUARANTEES
Each Guarantor unconditionally guarantees, on a senior subordinated basis,
jointly and severally, to each Holder and the Trustee, the full and prompt
performance of the Company's obligations under the Indenture and the Notes,
including the payment of principal of and interest on the Notes. The Guarantees
are subordinated to Guarantor Senior Debt on the same basis as the Notes are
subordinated to Senior Debt. The obligations of each Guarantor are limited to
the maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under the Indenture, will result in the obligations of
such Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled to a contribution
from each other Guarantor in an amount pro rata, based on the net assets of each
Guarantor, determined in accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another Guarantor that is a Wholly Owned Restricted Subsidiary of the
Company without limitation, or with or into or to other Persons upon the terms
and conditions set forth in the Indenture. See "Certain Covenants -- Merger,
Consolidation and Sale of Assets." In the event all of the Capital Stock of a
Guarantor is sold by the Company and/or by one or more of the Company's
Restricted Subsidiaries or in the event all or substantially all assets of a
Guarantor are sold by the Company and/or by one of the Company's Restricted
Subsidiaries and (i) such sale complies with the provisions set forth in
"Certain Covenants -- Limitation on Asset Sales" and (ii) such Guarantor is
released from all of its obligations under the Credit Agreement, the Guarantor's
Guarantee will be automatically and unconditionally released. In addition, any
Guarantor that is designated as an Unrestricted Subsidiary in accordance with
the terms of the Indenture will be relieved of its obligations under its
Guarantee.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest to the date of purchase.
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The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) obtain the requisite consents under the Credit
Agreement (so long as the terms of which provide that a Change of Control would
result in a default or event of default or would otherwise require repayment)
and all other Senior Debt (the terms of which provide that a Change of Control
would result in a default or event of default or would otherwise require
repayment) to permit the repurchase of the Notes as provided below or (ii) in
the event a consent is not obtained with respect to such Credit Agreement or any
such other Senior Debt, repay in full and terminate all commitments under
Indebtedness under such Credit Agreement or such other Senior Debt, as the case
may be, or offer to repay in full and terminate all commitments under all
Indebtedness under such Credit Agreement or such other Senior Debt, as the case
may be, and to repay the Indebtedness owed to each lender which has accepted
such offer. The Company shall first comply with the covenant in the immediately
preceding sentence before it shall be required to repurchase Notes pursuant to
the provisions described below. The Company's failure to comply with the
covenant described in the first sentence of this paragraph shall be governed by
clause (iii) and not clause (ii) under "Events of Default" below.
Within 30 days following the date upon which the Change of Control
occurred, the Company must send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"). Holders electing to have a Note purchased pursuant to a Change
of Control Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third business day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company and
its Restricted Subsidiaries to incur additional Indebtedness, to grant liens on
its property, to make Restricted Payments and to make Asset Sales may also make
more difficult or discourage a takeover of the Company, whether favored or
opposed by the management of the Company. Consummation of any such transaction
in certain circumstances may require redemption or repurchase of the Notes, and
there can be no assurance that the Company or the acquiring party will have
sufficient financial resources to effect such redemption or repurchase. Such
restrictions and the restrictions on transactions with Affiliates may, in
certain circumstances, make more difficult or discourage any leveraged buyout of
the Company or any of its Subsidiaries by the management of the Company. While
such restrictions cover a wide variety of arrangements which have traditionally
been used to effect highly leveraged transactions, the Indenture may not afford
the Holders of Notes protection in all circumstances from the adverse aspects of
a highly leveraged transaction, reorganization, restructuring, merger or similar
transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
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CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any of its Restricted
Subsidiaries may incur Indebtedness (including, without limitation, Acquired
Indebtedness) if on the date of the incurrence of such Indebtedness, after
giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage
Ratio of the Company is greater than 2.0 to 1.0.
Limitation on Restricted Payments. The Company will not and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of the Company or warrants,
options or other rights to acquire Qualified Capital Stock (but excluding any
debt security or Disqualified Capital Stock convertible into, or exchangeable
for, Qualified Capital Stock)) on or in respect of shares of the Company's
Capital Stock to holders of such Capital Stock, (b) purchase, redeem or
otherwise acquire or retire for value any Capital Stock of the Company or any
warrants, rights or options to purchase or acquire shares of any class of such
Capital Stock, (c) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Indebtedness of the Company that is subordinate or junior in right of
payment to the Notes, or (d) make any Investment (other than Permitted
Investments) (each of the foregoing actions set forth in clauses (a), (b), (c)
and (d) being referred to as a "Restricted Payment"), if at the time of such
Restricted Payment or immediately after giving effect thereto, (i) a Default or
an Event of Default shall have occurred and be continuing or (ii) the Company is
not able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with the "Limitation on Incurrence of
Additional Indebtedness" covenant or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date (the amount expended for such purposes, if other than in cash, being
the fair market value of such property as determined reasonably and in good
faith by the Board of Directors of the Company, whose determination shall be
conclusive) shall exceed the sum, without duplication, of: (u) 50% of the
cumulative Consolidated Net Income (or if cumulative Consolidated Net Income
shall be a loss, minus 100% of such loss) of the Company earned subsequent to
the Issue Date and on or prior to the date the Restricted Payment occurs (the
"Reference Date") (treating such period as a single accounting period); plus (v)
100% of the aggregate net cash proceeds received by the Company from any Person
(other than a Subsidiary of the Company) from the issuance and sale subsequent
to the Issue Date and on or prior to the Reference Date of Qualified Capital
Stock of the Company; plus (w) 100% of the aggregate net cash proceeds received
after the Issue Date by the Company from the issuance or sale (other than to a
Subsidiary of the Company) of debt securities or Disqualified Capital Stock that
have been converted into or exchanged for Qualified Capital Stock of the
Company, together with (without duplication) any net cash proceeds received by
the Company at the time of such conversion or exchange; plus (x) to the extent
not otherwise included in the Consolidated Net Income of the Company, an amount
equal to the net reduction in Investments (other than reductions in Permitted
Investments) in Unrestricted Subsidiaries resulting from the payments in cash of
interest on Indebtedness, dividends, repayments of loans or advances or other
transfers of assets, in each case to the Company or a Restricted Subsidiary or
from the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary;
plus (y) to the extent not otherwise included in Consolidated Net Income, net
cash proceeds from sale of Investments which were treated as Restricted
Payments, but not to exceed the amounts so treated; plus (z) without duplication
of any amounts included in clause (iii)(v) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Company from a holder of the
Company's Capital Stock (excluding, in the case of clauses (iii)(v) and (z), any
net cash proceeds from an Equity Offering to the extent used to redeem the
Notes); plus (aa) $15.0 million.
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Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend or
redemption payment within 60 days after the date of declaration of such dividend
or redemption payment if the dividend or redemption payment would have been
permitted on the date of declaration; (2) if no Default or Event of Default
shall have occurred and be continuing, the acquisition of any shares of Capital
Stock of the Company, either (i) solely in exchange for shares of Qualified
Capital Stock of the Company (or warrants, options or other rights to acquire
Qualified Capital Stock of the Company (but excluding any debt security or
Disqualified Capital Stock convertible into, or exchangeable for, Qualified
Capital Stock)) or (ii) through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of the
Company) of shares of Qualified Capital Stock of the Company (or warrants,
options or other rights to acquire Qualified Capital Stock of the Company (but
excluding any debt security or Disqualified Capital Stock convertible into, or
exchangeable for, Qualified Capital Stock)); (3) if no Default or Event of
Default shall have occurred and be continuing, the acquisition of any
Indebtedness of the Company or of any Guarantor that is subordinate or junior in
right of payment to the Notes or such Guarantor's Guarantee, as the case may be,
either (i) solely in exchange for shares of Qualified Capital Stock of the
Company (or warrants, options or other rights to acquire Qualified Capital Stock
of the Company (but excluding any debt security or Disqualified Capital Stock
convertible into, or exchangeable for, Qualified Capital Stock)); or (ii)
through the application of net proceeds of a substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of (A) shares of Qualified
Capital Stock of the Company (or warrants, options or other rights to acquire
Qualified Capital Stock of the Company (but excluding any debt security or
Disqualified Capital Stock convertible into, or exchangeable for, Qualified
Capital Stock)); or (B) Refinancing Indebtedness; (4) the purchase of any
Subordinated Indebtedness at a purchase price not greater than 101% of the
principal amount thereof in the event of a Change of Control in accordance with
provisions similar to the "-- Change of Control" covenant; provided that prior
to such purchase the Company has made the Change of Control Offer as provided in
such covenant with respect to the Notes and has purchased all Notes validly
tendered for payment in connection with such Change of Control Offer and that no
Default or Event of Default is in existence prior to or as a result of such
purchase; (5) so long as no Default or Event of Default shall have occurred and
be continuing, repurchases by the Company of Common Stock of the Company from
employees of the Company or any of its Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of such
employees, in an amount not to exceed $10.0 million in the aggregate; and (6)
the acquisition of shares of Capital Stock (or warrants, rights or options to
acquire Capital Stock of the Company) of the Company in connection with the
consummation of the Merger. In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date in accordance with clause (iii) of
the immediately preceding paragraph, amounts expended pursuant to clauses
(2)(ii) and (5) shall be included in such calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations may
be based upon the Company's latest available internal quarterly financial
statements.
Limitation on Asset Sales. The Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents and is received
at the time of such disposition (provided that for purposes of this provision,
the amount of (x) any liabilities (as shown on the most recent balance sheet of
the Company or such Restricted Subsidiary or in the notes thereto) of the
Company or such Restricted Subsidiary that are assumed by the transferee of any
such assets (other than liabilities that are by their terms pari passu with or
subordinated to the Notes or the guarantee of the Guarantors, as applicable) and
(y) any securities or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are immediately converted by the
Company or such Restricted Subsidiary into cash or Cash Equivalents (or as to
which the Company or such Restricted Subsidiary has received at or prior to the
consummation of the Asset Sale a commitment (which may be
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subject to customary conditions) from a nationally recognized investment,
merchant or commercial bank to convert into cash or Cash Equivalents within 180
days of the consummation of such Asset Sale and which are thereafter actually
converted into cash or Cash Equivalents within such 180-day period) will be
deemed to be cash or Cash Equivalents (and shall be deemed to be Net Cash
Proceeds for purposes of the following provisions as and when reduced to cash or
Cash Equivalents) to the extent of the net cash or Cash Equivalents realized
thereon), and (iii) upon the consummation of an Asset Sale, the Company shall
apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 365 days of receipt thereof either (A) to
repay or prepay any Senior Debt and, in the case of any Senior Debt under any
revolving credit facility, effect a permanent reduction in the availability
under such revolving credit facility, (B) to make an investment in properties
and assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of the
Company and its Subsidiaries as existing on the Issue Date or in businesses
which are the same, similar or reasonably related or complementary to the
businesses in which the Company and its Restricted Subsidiaries are engaged on
the Issue Date ("Replacement Assets"), or (C) a combination of prepayment and
investment permitted by the foregoing clauses (iii)(A) and (iii)(B). On the
366th day after an Asset Sale or such earlier date, if any, as the Board of
Directors of the Company or of such Restricted Subsidiary determines not to
apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses
(iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence (each, a "Net
Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which
have not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding
sentence (each a "Net Proceeds Offer Amount") shall be applied by the Company or
such Restricted Subsidiary to make an offer to purchase (the "Net Proceeds
Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor
more than 45 days following the applicable Net Proceeds Offer Trigger Date, from
all Holders on a pro rata basis, that amount of Notes equal to the Net Proceeds
Offer Amount at a price equal to 100% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest thereon, if any, to the date of
purchase; provided, however, that if at any time any non-cash consideration
received by the Company or any Restricted Subsidiary of the Company, as the case
may be, in connection with any Asset Sale is converted into or sold or otherwise
disposed of for cash (other than interest received with respect to any such
non-cash consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this covenant. The Company may defer the Net Proceeds
Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to
or in excess of $10.0 million resulting from one or more Asset Sales (at which
time, the entire unutilized Net Proceeds Offer Amount, and not just the amount
in excess of $10.0 million, shall be applied as required pursuant to this
paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "-- Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold the
properties and assets of the Company and its Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value of such properties and assets of the Company
or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this covenant.
Notwithstanding the two immediately preceding paragraphs, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent (a) the consideration for
such Asset Sale constitutes Replacement Assets and (b) such Asset Sale is for
fair market value.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Holders properly tender Notes in an amount
exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be
purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer
shall remain open for a period of 20 business days or such longer period as may
be required by law.
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If a Net Proceeds Offer is made, there can be no assurance that the Company
will have available funds sufficient to pay the Net Proceeds Offer Amount for
all the Notes that might be delivered by Holders seeking to accept the Net
Proceeds Offer. In the event the Company is required to purchase outstanding
Notes pursuant to a Net Proceeds Offer, the Company expects that it would seek
third party financing to the extent it does not have available funds to meet its
purchase obligations. However, there can be no assurance that the Company would
be able to obtain such financing. In addition, the terms of the instruments
relating to Senior Debt of the Company or a Restricted Subsidiary of the Company
may require the Net Proceeds be used to repay or prepay Senior Debt.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) the Indenture; (3) customary non-assignment
provisions of any contract or any lease governing a leasehold interest of any
Restricted Subsidiary of the Company; (4) any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable to any
Restricted Subsidiaries, or the properties or assets of any Restricted
Subsidiaries, other than the Person or such Person's Subsidiaries or the
properties or assets of the Person so acquired or such Person's Subsidiaries;
(5) agreements existing on the Issue Date to the extent and in the manner such
agreements are in effect on the Issue Date; (6) any agreement to sell assets or
Capital Stock permitted under the Indenture to any Person pending the closing of
such sale; (7) any instrument governing a Permitted Lien, to the extent and only
to the extent such instrument restricts the transfer or other disposition of
assets subject to such Permitted Lien; (8) restrictions on cash or other
deposits imposed by customers under contracts entered into in the ordinary
course of business; (9) customary provisions in joint venture agreements and
other similar agreements; (10) the documentation relating to Indebtedness of
Foreign Subsidiaries incurred pursuant to the terms of the Indenture provided
that such encumbrances or restrictions are not more restrictive than those
contained in the Credit Agreement; (11) the Credit Agreement; (12) the
documentation relating to other Indebtedness permitted to be incurred subsequent
to the Issue Date pursuant to the provisions of the covenant described under
"-- Limitations on Incurrence of Additional Indebtedness"; provided that such
encumbrances or restrictions are not more restrictive than those contained in
the Credit Agreement; (13) the documentation relating to Indebtedness of a
Securitization Entity in connection with a Qualified Securitization Transaction;
provided that such restrictions apply only to such Securitization Entity; (14)
an agreement governing Indebtedness incurred to Refinance the Indebtedness
issued, assumed or incurred pursuant to an agreement referred to in clause (2),
(4), (5) or (11) above; provided, however, that the provisions relating to such
encumbrance or restriction contained in any such Indebtedness are no less
favorable to the Company in any material respect as determined by the Board of
Directors of the Company in their reasonable and good faith judgment than the
provisions relating to such encumbrance or restriction contained in agreements
referred to in such clause (2), (4), (5) or (11). Nothing contained in this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant shall prevent the Company or any Subsidiary of the
Company from creating, incurring, assuming or suffering to exist any Permitted
Liens.
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly Owned
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Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly Owned Restricted Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary of the Company.
Limitation on Liens. The Company will not, and will not cause or permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or upon any
property or assets of the Company or any of its Restricted Subsidiaries whether
owned on the Issue Date or acquired after the Issue Date, or any proceeds
therefrom, or assign or otherwise convey any right to receive income or profits
therefrom unless (i) in the case of Liens securing Indebtedness that is
expressly subordinate or junior in right of payment to the Notes or any
Guarantee, the Notes and such Guarantee, as the case may be, are secured by a
Lien on such property, assets or proceeds that is senior in priority to such
Liens and (ii) in all other cases, the Notes and the Guarantees are equally and
ratably secured, except for (A) Liens existing as of the Issue Date to the
extent and in the manner such Liens are in effect on the Issue Date; (B) Liens
securing the Credit Agreement; (C) Liens securing Senior Debt and Liens securing
Guarantor Senior Debt; (D) Liens securing the Notes and the Guarantees; (E)
Liens of the Company or a Restricted Subsidiary of the Company on assets of any
Subsidiary of the Company; (F) Liens securing Refinancing Indebtedness which is
incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under the Indenture and which has been incurred in accordance with the
provisions of the Indenture; provided, however, that such Liens (y) are no less
favorable to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (z) do not extend to or cover any property or assets of the
Company or any of its Restricted Subsidiaries not securing the Indebtedness so
Refinanced; and (G) Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. The Company will
not, and will not permit any Guarantor to, incur or suffer to exist Indebtedness
that is senior in right of payment to the Notes or any Guarantee, as the case
may be, and expressly contractually subordinate in right of payment to any other
Indebtedness of the Company or such Guarantor, as the case may be.
Merger, Consolidation and Sale of Assets. The Company will not, in a
single transaction or series of related transactions, consolidate or merge with
or into any Person (other than the Merger), or sell, assign, transfer, lease,
convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of
the Company to sell, assign, transfer, lease, convey or otherwise dispose of)
all or substantially all of the Company's assets (determined on a consolidated
basis for the Company and the Company's Restricted Subsidiaries) whether as an
entirety or substantially as an entirety to any Person unless: (i) either (1)
with respect to such a consolidation or merger, the Company shall be the
surviving or continuing corporation or (2) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or the
Person which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and of the Company's
Restricted Subsidiaries substantially as an entirety (the "Surviving Entity")
(x) shall be a corporation organized and validly existing under the laws of the
United States or any State thereof or the District of Columbia and (y) shall
expressly assume, by supplemental indenture (in form and substance satisfactory
to the Trustee), executed and delivered to the Trustee, the due and punctual
payment of the principal of, and premium, if any, and interest on all of the
Notes and the performance of every covenant of the Notes, the Indenture and the
Registration Rights Agreement on the part of the Company to be performed or
observed; (ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect to
any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, shall be able to incur at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"-- Limitation on Incurrence of Additional Indebtedness" covenant; (iii)
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including, without limitation, giving
effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to
be incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default shall have occurred or be
continuing; and (iv) the Company or the Surviving Entity, as the case may be,
shall have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that such consolidation, merger, sale, assignment,
transfer,
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lease, conveyance or other disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture comply
with the applicable provisions of the Indenture and that all conditions
precedent in the Indenture relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The Indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the Notes with the same effect as if such
surviving entity had been named as such.
Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the Indenture in connection
with any transaction complying with the provisions of the "-- Limitation on
Asset Sales" covenant) will not, and the Company will not cause or permit any
Guarantor to, consolidate with or merge with or into any Person other than the
Company or any other Guarantor unless: (i) the entity formed by or surviving any
such consolidation or merger (if other than the Guarantor) or to which such
sale, lease, conveyance or other disposition shall have been made is a
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia; (ii) such entity assumes by
supplemental indenture all of the obligations of the Guarantor on the Guarantee;
and (iii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing. Any merger or
consolidation of a Guarantor with and into the Company (with the Company being
the surviving entity) or another Guarantor that is a Wholly Owned Restricted
Subsidiary of the Company need only comply with clause (iv) of the first
paragraph of this covenant.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
on terms that are no less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's-length basis from
a Person that is not an Affiliate of the Company or such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property with a fair market value in excess of $1.5 million shall be
approved by the Board of Directors of the Company or such Restricted Subsidiary,
as the case may be, such approval to be evidenced by a Board Resolution stating
that such Board of Directors has determined that such transaction complies with
the foregoing provisions. If the Company or any Restricted Subsidiary of the
Company enters into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) that involves an aggregate fair market
value of more than $10.0 million, the Company or such Restricted Subsidiary, as
the case may be, shall, prior to the consummation thereof, obtain a favorable
opinion as to the fairness of such transaction or series of related transactions
to the Company or the relevant Restricted Subsidiary, as the case may be, from a
financial point of view, from an Independent Financial Advisor and file the same
with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i) fees
and compensation paid to and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company or any Restricted Subsidiary
of the Company in the ordinary course of business of the Company or such
Restricted Subsidiary; (ii) transactions exclusively between or among the
Company and any of its Restricted Subsidiaries or exclusively between or among
such Restricted Subsidiaries, provided such transactions are not otherwise
prohibited by the Indenture; (iii) any agreement as in effect as of the Issue
Date or any amendment thereto or
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any transaction contemplated thereby (including pursuant to any amendment
thereto) in any replacement agreement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the Holders in any material
respect than the original agreement as in effect on the Issue Date; (iv) so long
as no Default or Event of Default has occurred and is continuing, the payment of
amounts owing pursuant to the Management Agreement; (v) so long as no Default or
Event of Default has occurred and is continuing, the payment of amounts owing
pursuant to the Transaction Agreement; (vi) loans or advances to employees not
to exceed $5.0 million at any time outstanding; (vii) issuance of employee stock
options approved by the Board of Directors of the Company and the shareholders
of the Company; (viii) transactions effected as part of a Qualified
Securitization Transaction; and (ix) Restricted Payments permitted by the
Indenture.
Additional Subsidiary Guarantees. If the Company or any of its Restricted
Subsidiaries transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any Restricted Subsidiary (other
than a Foreign Subsidiary or Securitization Entity) that is not a Guarantor, or
if the Company or any of its Restricted Subsidiaries shall organize, acquire or
otherwise invest in another Restricted Subsidiary (other than a Foreign
Subsidiary or Securitization Entity) having total assets with a book value in
excess of $500,000, then such transferee or acquired or other Restricted
Subsidiary shall within 15 days of the end of the next succeeding fiscal quarter
(unless the book value of such Restricted Subsidiary is in excess of $5.0
million in which case, contemporaneously with the organization, acquisition or
other investment in such Restricted Subsidiary, as the case may be) (i) execute
and deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Notes and
the Indenture on the terms set forth in the Indenture and (ii) deliver to the
Trustee an opinion of counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and constitutes
a legal, valid, binding and enforceable obligation of such Restricted
Subsidiary. Thereafter, such Restricted Subsidiary shall be a Guarantor for all
purposes of the Indenture.
In the event that (i) a Restricted Subsidiary shall be required pursuant to
the preceding paragraph to deliver the documents described above in clauses (i)
and (ii) of the preceding paragraph (the "Additional Guarantee Documents"), (ii)
the Company would be required to publicly disclose separate financial statements
of such Restricted Subsidiary for the periods required by Rules 3-01 and 3-02 of
Regulation S-X under the Securities Act, (iii) such Restricted Subsidiary is not
a Significant Subsidiary of the Company, and (iv) the Company shall be able to
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the covenant described under "-- Limitation on
Incurrence of Additional Indebtedness," then such Restricted Subsidiary shall
not be required to deliver the Additional Guarantee Documents to the Trustee
until the earlier of (x) one year and three months from the date such Restricted
Subsidiary would otherwise have had to deliver the Additional Guarantee
Documents and (y) the date such financial statements would not be required to be
publicly disclosed; provided that in no event shall more than one such
Restricted Subsidiary not be required to deliver the Additional Guarantee
Documents at any one time pursuant to this paragraph.
Conduct of Business. The Company and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar or reasonably related
or complementary to the businesses in which the Company and its Restricted
Subsidiaries are engaged on the Issue Date.
Reports to Holders. The Indenture provides that the Company will deliver
to the Trustee within 15 days after the filing of the same with the Commission,
copies of the quarterly and annual reports and of the information, documents and
other reports, if any, which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture further
provides that, notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual reports and such information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act. The Company will
also comply with the other provisions of TIA sec. 314(a).
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EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Notes when the same becomes due
and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by the subordination
provisions of the Indenture);
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a
period of 30 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the
Notes (except in the case of a default with respect to the "Merger,
Consolidation and Sale of Assets" covenant, which will constitute an Event
of Default with such notice requirement but without such passage of time
requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company (other than a Securitization Entity) and such failure continues for
a period of 30 days or more, or the acceleration of the final stated
maturity of any such Indebtedness (which acceleration is not rescinded,
annulled or otherwise cured within 30 days of receipt by the Company or
such Restricted Subsidiary of notice of any such acceleration) if the
aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to
pay principal at final maturity or which has been accelerated, in each case
with respect to which the 30-day period described above has passed,
aggregates $20.0 million or more at any time;
(v) one or more judgments which exceeds in the aggregate $20.0 million
(excluding judgments to the extent covered by insurance by a reputable
insurer as to which the insurer has acknowledged coverage) shall have been
rendered against the Company or any of its Significant Subsidiaries that is
a Restricted Subsidiary of the Company and such judgments remain
undischarged, unvacated, unpaid or unstayed for a period of 60 days after
such judgment or judgments become final and non-appealable;
(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries; or
(vii) any of the Guarantees ceases to be in full force and effect or
any of the Guarantees is declared to be null and void and unenforceable or
any of the Guarantees is found to be invalid or any of the Guarantors
denies its liability under its Guarantee (other than by reason of release
of a Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding Notes
may declare the principal of and accrued interest on all the Notes to be due and
payable by notice in writing to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Credit Agreement,
shall become immediately due and payable upon the first to occur of an
acceleration under the Credit Agreement or 5 business days after receipt by the
Company and the representative under the Credit Agreement of such Acceleration
Notice. If an Event of Default specified in clause (vi) above with respect to
the Company occurs and is continuing, then all unpaid principal of, and premium,
if any, and accrued and unpaid interest on all of the outstanding Notes shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind
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and cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, (iii) to the extent the payment
of such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the description above
of Events of Default, the Trustee shall have received an officers' certificate
and an opinion of counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its consequences,
except a default in the payment of the principal of or interest on any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, and satisfied all of their obligations
with respect to the Notes, except for (i) the rights of Holders to receive
payments in respect of the principal of, premium, if any, and interest on the
Notes when such payments are due, (ii) the Company's obligations with respect to
the Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payments, (iii) the rights, powers, trust, duties and immunities of the Trustee
and the Company's obligations in connection therewith and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company released
with respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, reorganization and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in U.S. dollars, non-callable U.S. government obligations,
or a combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be; (ii)
in the case of Legal Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect
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that, and based thereon such opinion of counsel shall confirm that, the Holders
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit; (v) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under the Indenture
or any other material agreement or instrument to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound; (vi) the Company shall have delivered to the
Trustee an officers' certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other creditors of
the Company or with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Company or others; (vii) the Company shall have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with; (viii) the
Company shall have delivered to the Trustee an opinion of counsel to the effect
that (A) the trust funds will not be subject to any rights of holders of Senior
Debt, including, without limitation, those arising under the Indenture and (B)
after the 91st day following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; and (ix) certain other customary
conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
and (iii) the Company has delivered to the Trustee an officers' certificate and
an opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Guarantors and the Trustee, without the
consent of the Holders, may amend the Indenture for certain specified purposes,
including curing ambiguities, defects or inconsistencies, to comply with any
requirements of the Commission in order to effect or maintain qualification
under TIA or to make any change that will provide any additional benefit to the
Holders or does not adversely affect rights of any Holder, so long as such
change does not, in the opinion of the Trustee, adversely affect the rights of
any of the Holders in any material respect. In formulating its opinion on such
matters, the Trustee will be entitled to rely on such evidence as it deems
appropriate, including, without limitation, solely on an opinion of counsel.
Other modifications and amendments of the Indenture may be made with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
issued under the Indenture, except that,
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without the consent of each Holder affected thereby, no amendment may: (i)
reduce the amount of Notes whose Holders must consent to an amendment; (ii)
reduce the rate of or change or have the effect of changing the time for payment
of interest, including defaulted interest, on any Notes; (iii) reduce the
principal of or change or have the effect of changing the fixed maturity of any
Notes, or change the date on which any Notes may be subject to redemption or
repurchase, or reduce the redemption or repurchase price therefor; (iv) make any
Notes payable in money other than that stated in the Notes; (v) make any change
in provisions of the Indenture protecting the right of each Holder to receive
payment of principal of and interest on such Note on or after the due date
thereof or to bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of Notes to waive Defaults or Events of Default;
(vi) amend, change or modify in any material respect the obligation of the
Company to make and consummate a Change of Control Offer in the event a Change
of Control has occurred or make and consummate a Net Proceeds Offer with respect
to any Asset Sale that has been consummated, or, following the occurrence or
consummation of a Change of Control or Asset Sale, modify any of the provisions
or definitions with respect thereto; (vii) modify or change any provision of the
Indenture or the related definitions affecting the subordination or ranking of
the Notes or any Guarantee in a manner which adversely affects the Holders; or
(viii) release any Guarantor from any of its obligations under its Guarantee or
the Indenture otherwise than in accordance with the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it, the Notes and the Guarantees are governed
by, and construed in accordance with, the laws of the State of New York but
without giving effect to applicable principles of conflicts of law to the extent
that the application of the law of another jurisdiction would be required
thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company or a
Guarantor, to obtain payments of claims in certain cases or to realize on
certain property received in respect of any such claim as security or otherwise.
Subject to the TIA, the Trustee is permitted to engage in other transactions;
provided that if the Trustee acquires any conflicting interest as described in
the TIA, it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries (i) existing at the time such Person becomes a Restricted
Subsidiary of the Company or at the time it merges or consolidates with the
Company or any of its Restricted Subsidiaries or (ii) which becomes Indebtedness
of the Company or a Restricted Subsidiary in connection with the acquisition of
assets from such Person, and in each case not incurred by such Person or its
Subsidiary in connection with, or in anticipation or contemplation of, such
Person becoming a Restricted Subsidiary of the Company or such acquisition,
merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting
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securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Restricted Subsidiary of the Company of
(a) any Capital Stock of any Restricted Subsidiary of the Company; or (b) any
other property or assets of the Company or any Restricted Subsidiary of the
Company other than in the ordinary course of business; provided, however, that
Asset Sales shall not include (i) a transaction or series of related
transactions for which the Company or its Restricted Subsidiaries receive
aggregate consideration of less than $1.0 million, (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under "Merger, Consolidation and Sale of
Assets" or any such disposition that constitutes a Change of Control, (iii)
sales of accounts receivable, equipment and related assets (including contract
rights) of the type specified in the definition of "Qualified Securitization
Transaction" to a Securitization Entity for the fair market value thereof,
including cash in an amount at least equal to 75% of the fair market value
thereof, and (iv) transfers of accounts receivable, equipment and related assets
(including contract rights) of the type specified in the definition of
"Qualified Securitization Transaction" (or a fractional undivided interest
therein) by a Securitization Entity in a Qualified Securitization Transaction.
For the purposes of clause (iii), Purchase Money Notes shall be deemed to be
cash.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the four highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United
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States of America or any state thereof or the District of Columbia or any U.S.
branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $100.0 million; (v) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; (vi) investments in money market
funds which invest substantially all their assets in securities of the types
described in clauses (i) through (v) above; and (vii) investments made by
Foreign Subsidiaries in local currencies in instruments issued by or with
entities of such jurisdiction having correlative attributes to the foregoing.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates thereof (whether
or not otherwise in compliance with the provisions of the Indenture); (ii) the
approval by the holders of Capital Stock of the Company of any plan or proposal
for the liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of the Indenture); (iii) any Person or Group
(other than any of the Permitted Holders(s)) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 50% of
the aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; or (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (B) Consolidated Interest
Expense, (C) the aggregate depreciation and amortization (including amortization
of goodwill and other intangibles) of such Person and its Restricted
Subsidiaries for such period, and (D) other non-cash charges of such Person and
its Restricted Subsidiaries for such period, less any non-cash charges
increasing Consolidated Net Income during such period and less the amount of all
cash payments made by such Person or any of its Restricted Subsidiaries during
such period to the extent such payments relate to non-cash charges that were
added back in determining Consolidated EBITDA for such period or any prior
period, all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or
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one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (provided that such Consolidated EBITDA shall be included
only to the extent includable pursuant to the definition of "Consolidated Net
Income") attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Four Quarter Period) occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset Sale,
Asset Acquisition (including the incurrence, assumption or liability for any
such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount, (b) the net costs under
Interest Swap Obligations, (c) all capitalized interest and (d) the interest
portion of any deferred payment obligation, but excluding amortization or
write-off of deferred financing costs; and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, (e) the net income of any Person
in which the referant Person has an interest, other than a Restricted Subsidiary
of the referent Person, except to the extent of cash dividends or distributions
paid to the referent Person or to a Restricted Subsidiary of the referent Person
by such Person, (f) any restoration to income of any contingency reserve in
accordance with GAAP, except to the extent that provision for such reserve was
made out of Consolidated Net Income accrued at any time following the Issue
Date, (g) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during
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such period whether or not such operations were classified as discontinued), and
(h) in the case of a successor to the referent Person by consolidation or merger
or as a transferee of the referent Person's assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of assets.
"Continuing Directors" means, as of the date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Agreement" means the Credit Agreement to be dated on or about
November 3, 1997, among the Company, certain subsidiary borrowers from time to
time parties thereto, the lenders party thereto in their capacities as lenders
thereunder and Bank of America National Trust and Savings Association, as
Administrative Agent, and Bankers Trust Company, as Syndication Agent, together
with the related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented,
restated or otherwise modified from time to time, including any agreement (and
related documents) extending the maturity of, refinancing, replacing or
otherwise restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by the
"Limitation on Incurrence of Additional Indebtedness" covenant above) or adding
Restricted Subsidiaries of the Company as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement (and
related documents) or any successor or replacement agreement (and related
documents) and whether by the same or any other agent, lender or group of
lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt which,
at the time of determination, has an aggregate principal amount of at least
$25.0 million and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof on or prior to the final
maturity date of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.
"Fremont" means Fremont Partners, L.P. and its Affiliates.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company which
(i) is not organized under the laws of the United States, any state thereof or
the District of Columbia and (ii) conducts substantially all of its business
operations in a country other than the United States of America.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other
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entity as may be approved by a significant segment of the accounting profession
of the United States, as in effect from time to time.
"Guarantor" means (i) the domestic Subsidiaries of the Company on the Issue
Date and (ii) each of the Company's Restricted Subsidiaries that in the future
executes a supplemental indenture in which such Restricted Subsidiary agrees to
be bound by the terms of the Indenture as a Guarantor; provided that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Guarantee is released in accordance with the terms
of the Indenture.
"Guarantor Senior Debt" means with respect to any Guarantor, (i) the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy or the commencement of any
bankruptcy, insolvency, reorganization, receivership or other similar proceeding
at the rate provided for in the documentation with respect thereto, whether or
not such interest is an allowed claim under applicable law) and fees and
expenses (including costs of collection), indemnity obligations on, and all
other amounts and obligations owing in respect of, any Indebtedness of a
Guarantor, whether outstanding on the Issue Date or thereafter created, incurred
or assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Guarantor. Without limiting the generality of
the foregoing, "Guarantor Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy or the commencement of any bankruptcy,
insolvency, reorganization, receivership or other similar proceeding at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, (x) all monetary obligations of every nature of the Company
or such Guarantor under the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, commissions, expenses and indemnities, (y) all Interest
Swap Obligations of such Guarantor and (z) all obligations of such Guarantor
under Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Debt"
shall not include (i) any Indebtedness of such Guarantor to a Subsidiary of such
Guarantor or any Affiliate of such Guarantor or any of such Affiliate's
Subsidiaries, (ii) Indebtedness of such Guarantor to, or guaranteed by such
Guarantor on behalf of, any shareholder, director, officer or employee of such
Guarantor or any Restricted Subsidiary of such Guarantor (including, without
limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or owing
by such Guarantor, (vi) Indebtedness incurred in violation of the Indenture
provisions set forth under "Limitation on Incurrence of Additional
Indebtedness," (but, as to any such obligation, no such violation shall be
deemed to exist for purposes of this clause (vi) if the holder(s) of such
Indebtedness or their representative and the Trustee shall have received an
officers' certificate of the Company to the effect that the incurrence of such
Indebtedness does not (or, in the case of revolving credit Indebtedness or other
Indebtedness available to be borrowed under the Credit Agreement after the date
of the initial borrowing thereunder, that the incurrence of the entire committed
amount thereof at the date on which the initial borrowing thereunder is made
would not) violate such provisions of the Indenture), (vii) Indebtedness which,
when incurred and without respect to any election under Section 1111(b) of Title
11, United States Code, is without recourse to the Company and (viii) any
Indebtedness which is, by its express terms, subordinated in right of payment to
any other Indebtedness of such Guarantor.
"Indebtedness" means with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings), (v) all
Obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (vi) guarantees and other
contingent obligations in respect
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of Indebtedness of other Persons of the type referred to in clauses (i) through
(v) above and clause (viii) below, (vii) all Obligations of any other Person of
the type referred to in clauses (i) through (vi) which are secured by any Lien
on any property or asset of such Person, the amount of such Obligation being
deemed to be the lesser of the fair market value of such property or asset or
the amount of the Obligation so secured, (viii) all Obligations under Currency
Agreements and Interest Swap Obligations of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of Indebtedness
represented by such Disqualified Capital Stock being equal to the greater of its
voluntary or involuntary liquidation preference and its maximum fixed repurchase
price, but excluding accrued dividends, if any. For purposes hereof, the
"maximum fixed repurchase price" of any Disqualified Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such fair
market value shall be determined reasonably and in good faith by the Board of
Directors of the issuer of such Disqualified Capital Stock.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect material financial interest in the Company and (ii) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged, and may include a
commercial or investment banking, appraisal or accounting firm.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any other Person. "Investment" shall exclude extensions of trade credit by
the Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of the "Limitation on
Restricted Payments" covenant, (i) "Investment" shall include and be valued at
the fair market value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary
(proportionate to the Company's equity interest in such Subsidiary) and shall
exclude, and the aggregate amount of all Restricted Payments made as Investments
since the Issue Date shall exclude and be reduced by, the fair market value of
the net assets of any Unrestricted Subsidiary (proportionate to the Company's
equity interest in such Subsidiary) at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary, such exclusion and reduction
not to exceed the amount of Investments previously made by the referant person
and its Restricted Subsidiaries and treated as Restricted Payments and (ii) the
amount of any Investment shall be the original cost of such Investment, without
any adjustments for increases or decreases in value, or write-ups, write-downs
or write-offs with respect to such Investment, reduced by the payment of
dividends or distributions in connection with such Investment or any other
amounts received in respect of such Investment; provided that no such payment of
dividends or distributions or receipt of any such other amounts shall reduce the
amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If the
Company or any Restricted Subsidiary of the Company sells or otherwise disposes
of any Common Stock of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, it
ceases to be a Subsidiary of the Company, the Company shall be deemed to have
made an Investment on the date of any such sale or disposition equal to the fair
market value of the Capital Stock of such Restricted Subsidiary not sold or
disposed of.
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"Issue Date" means the date of original issuance of the Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Management Agreement" means a management agreement to be entered into
among the Company, Fremont and RCBA and which provides for the payment or
accrual of not more than $2,000,000 of compensation annually beginning on
November 1 and ending on October 31 of the following year.
"Merger" means the merger of Freemont and RCBA with and into the Company
pursuant to the Transaction Agreement.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of its Restricted Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) taxes paid or payable after taking into account any
reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of Indebtedness that
is required to be repaid in connection with such Asset Sale and (d) appropriate
amounts (determined by the Company in good faith) to be provided by the Company
or any Restricted Subsidiary, as the case may be, as a reserve, against any post
closing adjustments or liabilities associated with such Asset Sale and retained
by the Company or any Restricted Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale.
"Non-Recourse Indebtedness" means Indebtedness secured only by an asset and
which is expressly stated to be without recourse to the Company or its
Restricted Subsidiaries from the date of incurrence of such Indebtedness.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, commissions, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing any Indebtedness.
"Permitted Holder(s)" means RCBA and Fremont.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes offered hereby and the Guarantees
thereof;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $400.0
million, less (x) the aggregate amount of any Indebtedness of
Securitization Entities in Qualified Securitization Transactions incurred
at a time that the Company is not able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
covenant described under "-- Limitation on Incurrence of Additional
Indebtedness", provided that the Company may elect in writing to the
Trustee to have the amount of said reduction resulting from such
Indebtedness incurred in connection with a Qualified Securitization
Transaction to be reduced by an amount (the "Transferred Reduction Amount")
up to the then remaining amount of Permitted Indebtedness that could be
incurred pursuant to clause (xiii) below, and in the event of such
election, the amount of Permitted Indebtedness that can be incurred
pursuant to clause (xiii) will be reduced by the Transferred Reduction
Amount, (y) the amount of all scheduled principal payments actually made by
the Company and (z) the amount of all required permanent prepayments of
Indebtedness under the Credit Agreement actually made with the proceeds of
an Asset Sale;
(iii) Indebtedness incurred by Foreign Subsidiaries not to exceed
$20.0 million (or the equivalent amount thereof, at the time of incurrence,
in other foreign currencies);
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(iv) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or permanent mandatory prepayments when actually paid
or permanent reductions thereon;
(v) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; provided, however, that such
Interest Swap Obligations are entered into to protect the Company and its
Restricted Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with the Indenture to the extent the notional
principal amount of such Interest Swap Obligation does not exceed the
principal amount of the Indebtedness to which such Interest Swap Obligation
relates;
(vi) Indebtedness under Currency Agreements; provided that such
Currency Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vii) Indebtedness of a Restricted Subsidiary of the Company to the
Company or to a Restricted Subsidiary of the Company for so long as such
Indebtedness is held by the Company or a Restricted Subsidiary of the
Company, in each case subject to no Lien (other than a Lien in connection
with the Credit Agreement and Permitted Liens which are not consensual)
held by a Person other than the Company or a Restricted Subsidiary of the
Company; provided that if as of any date any Person other than the Company
or a Restricted Subsidiary of the Company owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness (other than a
Lien in connection with the Credit Agreement and Permitted Liens which are
not consensual), such date shall be deemed the incurrence of Indebtedness
not constituting Permitted Indebtedness by the issuer of such Indebtedness;
(viii) Indebtedness of the Company to a Restricted Subsidiary of the
Company for so long as such Indebtedness is held by a Restricted Subsidiary
of the Company, in each case subject to no Lien (other than a Lien in
connection with the Credit Agreement and Permitted Liens which are not
consensual); provided that (a) any Indebtedness of the Company to any
Restricted Subsidiary of the Company (other than a Restricted Subsidiary
which is a Guarantor) is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under the Indenture and the Notes
and (b) if as of any date any Person other than a Restricted Subsidiary of
the Company owns or holds any such Indebtedness or any Person holds a Lien
in respect of such Indebtedness (other than a Lien in connection with the
Credit Agreement and Permitted Liens which are not consensual), such date
shall be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the Company;
(ix) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days of incurrence;
(x) Indebtedness of the Company or any Restricted Subsidiary
represented by performance bonds, warranty or contractual service
obligations, standby letters of credit or appeal bonds, in each case to the
extent incurred in the ordinary course of business of the Company or such
Restricted Subsidiary in accordance with customary industry practices, in
amounts and for the purposes customary in the Company's industry;
(xi) the incurrence by a Securitization Entity of Indebtedness in a
Qualified Securitization Transaction that is not recourse to the Company or
any Subsidiary of the Company (except for Standard Securitization
Undertakings);
(xii) Refinancing Indebtedness; and
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(xiii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $75.0 million
at any one time outstanding (which may be Indebtedness under the Credit
Agreement in addition to that permitted by clause (ii)).
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Restricted Subsidiary of the Company or that
will merge or consolidate into the Company or a Restricted Subsidiary of the
Company, (ii) Investments in the Company by any Restricted Subsidiary of the
Company; provided that any Indebtedness evidencing such Investment is unsecured
and subordinated, pursuant to a written agreement, to the Company's obligations
under the Notes and the Indenture; (iii) investments in cash and Cash
Equivalents; (iv) loans and advances to employees and officers of the Company
and its Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $5.0 million at any one time outstanding; (v)
Currency Agreements and Interest Swap Obligations entered into in the ordinary
course of the Company's or its Restricted Subsidiaries' businesses and otherwise
in compliance with the Indenture; (vi) Investments in Unrestricted Subsidiaries
not to exceed $10.0 million at any one time outstanding; (vii) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; (viii) Investments made by the Company or its
Restricted Subsidiaries as a result of consideration received in connection with
an Asset Sale made in compliance with the "Limitation on Asset Sales" covenant;
(ix) Investments existing on the date of the Indenture; (x) accounts receivable,
advances, loans, guarantees or extensions of credit created or acquired in the
ordinary course of business, consistent with past or industry practice; (xi) any
Investment by the Company or a Wholly Owned Restricted Subsidiary of the Company
in a Securitization Entity or any Investment by a Securitization Entity in any
other Person in connection with a Qualified Securitization Transaction; provided
that any Investment in a Securitization Entity is in the form of a Purchase
Money Note or an equity interest; and (xii) Investments committed to by the
Company or its Restricted Subsidiaries on the Issue Date not to exceed $1.5
million in the aggregate.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory, contractual and common law Liens of landlords to
secure rent payments and Liens of carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen and other Liens imposed by law incurred
in the ordinary course of business for sums not yet delinquent or being
contested in good faith, if such reserve or other appropriate provision, if
any, as shall be required by GAAP shall have been made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens securing judgments not giving rise to an Event of
Default;
(v) easements, rights-of-way, zoning restrictions, restrictive
covenants, minor imperfections in title and other similar charges or
encumbrances in respect of real property not interfering in any material
respect with the ordinary conduct of the business of the Company or any of
its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
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(vii) purchase money Liens to finance property or assets (including
the cost of construction) of the Company or any Restricted Subsidiary of
the Company acquired in the ordinary course of business; provided, however,
that (A) the related purchase money Indebtedness shall not exceed the cost
of such property or assets and shall not be secured by any property or
assets of the Company or any Restricted Subsidiary of the Company other
than the property and assets so acquired or constructed and (B) the Lien
securing such Indebtedness shall be created within 180 days of such
acquisition or construction;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in accordance
with the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the
Company or of any of its Restricted Subsidiaries other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Restricted
Subsidiary of the Company and are no more favorable to the lienholders than
those securing the Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company;
(xiv) Liens arising under the Indenture;
(xv) leases or subleases granted to others that do not materially
interfere with the business of the Company and its Restricted Subsidiaries;
(xvi) Liens in connection with any filing of Uniform Commercial Code
financing statements regarding leases;
(xvii) Liens securing Non-Recourse Indebtedness incurred pursuant to
the Indenture;
(xviii) Liens arising from a bank or financial institution honoring a
check or draft inadvertently drawn against insufficient funds in the
ordinary course of business; and
(xix) Liens on assets transferred to a Securitization Entity or on
assets of a Securitization Entity, in either case incurred in connection
with a Qualified Securitization Transaction.
"Person" means an individual, partnership, corporation, unincorporated
organization, limited liability company, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Purchase Money Note" means a promissory note of a Securitization Entity
evidencing a line of credit, which may be irrevocable, from the Company or any
Subsidiary of the Company in connection with a
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Qualified Securitization Transaction to a Securitization Entity, which note
shall be repaid from cash available to the Securitization Entity, other than
amounts required to be established as reserves pursuant to agreements, amounts
paid to investors in respect of interest, principal and other amounts owing to
such investors, amounts paid in connection with the purchase of newly generated
receivables or newly acquired equipment and amounts paid for administrative
costs in the ordinary course of business.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Securitization Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any or its Subsidiaries may sell, convey or
otherwise transfer to (a) a Securitization Entity (in the case of a transfer by
the Company or any of its Subsidiaries) and (b) any other Person (in the case of
a transfer by a Securitization Entity), or may grant a security interest in, any
accounts receivable or equipment (whether now existing or arising or acquired in
the future) of the Company or any of its Subsidiaries, and any assets related
thereto including, without limitation, all collateral securing such accounts
receivable and equipment, all contracts and contract rights and all guarantees
or other obligations in respect of such accounts receivable and equipment,
proceeds of such accounts receivable and equipment and other assets (including
contract rights) which are customarily transferred or in respect of which
security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable and equipment.
"RCBA" means Richard C. Blum & Associates, Inc. and its Affiliates.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant (other than
pursuant to clause (ii), (iii), (v), (vi), (vii), (viii), (ix), (x), (xi) or
(xiii) of the definition of Permitted Indebtedness), in each case that does not
(1) result in an increase in the aggregate principal amount of Indebtedness of
such Person as of the date of such proposed Refinancing (plus the amount of any
premium required to be paid under the terms of the instrument governing such
Indebtedness or the amount of any premium reasonably determined to be necessary
to accomplish such refinancing and plus the amount of reasonable expenses
incurred by the Company and any Restricted Subsidiary in connection with such
Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided that (x) if such
Indebtedness being Refinanced is Indebtedness solely of the Company or any
Restricted Subsidiary or is Indebtedness solely of the Company and any
Restricted Subsidiary or Restricted Subsidiaries, then such Refinancing
Indebtedness shall be Indebtedness solely of the Company or such Restricted
Subsidiary or the Company and such Restricted Subsidiary or Restricted
Subsidiaries, as the case may be, and (y) if such Indebtedness being Refinanced
is subordinate or junior to the Notes, then such Refinancing Indebtedness shall
be subordinate to the Notes at least to the same extent and in the same manner
as the Indebtedness being Refinanced.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that (a) if,
and for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times constitute
the holders of a majority in outstanding principal amount of such Designated
Senior Debt in respect of any Designated Senior Debt and (b) the administrative
agent (or any successor thereto) shall be a Representative of the lenders under
the Credit Agreement.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any
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property, whether owned by the Company or any Restricted Subsidiary at the Issue
Date or later acquired, which has been or is to be sold or transferred by the
Company or such Restricted Subsidiary to such Person or to any other Person from
whom funds have been or are to be advanced by such Person on the security of
such Property.
"Securitization Entity" means a Wholly Owned Restricted Subsidiary of the
Company (or another Person in which the Company or any Subsidiary of the Company
makes an Investment and to which the Company or any Subsidiary of the Company
transfers accounts receivable or equipment and related assets) which engages in
no activities other than in connection with the financing of accounts receivable
or equipment and which is designated by the Board of Directors of the Company
(as provided below) as a Securitization Entity (a) no portion of the
Indebtedness or any other Obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any Subsidiary of the Company (excluding guarantees
of Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings), (ii) is recourse to or
obligates the Company or any Subsidiary of the Company in any way other than
pursuant to Standard Securitization Undertakings or (iii) subjects any property
or asset of the Company or any Subsidiary of the Company, directly or
indirectly, contingently or otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization Undertakings, (b) with which neither the
Company nor any Subsidiary of the Company has any material contract, agreement,
arrangement or understanding other than on terms no less favorable to the
Company or such Subsidiary than those that might be obtained at the time from
Persons that are not Affiliates of the Company, other than fees payable in the
ordinary course of business in connection with servicing receivables of such
entity, and (c) to which neither the Company nor any Subsidiary of the Company
has any obligation to maintain or preserve such entity's financial condition or
cause such entity to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolution of the
Board of Directors of the Company giving effect to such designation and an
officer's certificate certifying that such designation complied with the
foregoing conditions.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy or the commencement of any bankruptcy, insolvency, reorganization,
receivership or other similar proceeding at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) and fees and expenses (including costs of
collection), indemnity obligations on, and all other amounts and obligations
owing in respect of, any Indebtedness of the Company, whether outstanding on the
Issue Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Debt" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy or the commencement of any
bankruptcy, insolvency, reorganization, receivership or other similar proceeding
at the rate provided for in the documentation with respect thereto, whether or
not such interest is an allowed claim under applicable law) on, and all other
amounts owing in respect of, (x) all monetary obligations of every nature of the
Company under the Credit Agreement, including, without limitation, obligations
to pay principal and interest, reimbursement obligations under letters of
credit, guaranteed obligations, fees, commissions, expenses and indemnities, (y)
all Interest Swap Obligations and (z) all obligations under Currency Agreements,
in each case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include (i) any
Indebtedness of the Company to a Subsidiary of the Company or any Affiliate of
the Company or any of such Affiliate's Subsidiaries, (ii) Indebtedness of the
Company to, or guaranteed by the Company on behalf of, any shareholder,
director, officer or employee of the Company or any Subsidiary of the Company
(including, without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or other
taxes owed or owing by the Company, (vi) Indebtedness incurred in violation of
the Indenture provisions set forth under "Limitation on Incurrence of Additional
Indebtedness" (but, as to any such obligation, no such violation shall be deemed
to exist for purposes of this clause (vi) if the holder(s) of such Indebtedness
or their representative and the
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Trustee shall have received an officers' certificate of the Company to the
effect that the incurrence of such Indebtedness does not (or, in the case of
revolving credit Indebtedness or other Indebtedness available to be borrowed
under the Credit Agreement after the date of the initial borrowing thereunder,
that the incurrence of the entire committed amount thereof at the date on which
the initial borrowing thereunder is made would not) violate such provisions of
the Indenture), (vii) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of the
Company.
"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(w)
of Regulation S-X under the Securities Act.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company which are reasonably customary in an accounts receivable or equipment
securitization transaction.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Transaction Agreement" means the transaction agreement dated as of October
2, 1997 among Fremont Purchaser II, Inc., RCBA Purchaser I, L.P. and the Company
as in effect on the Issue Date.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors may designate any Subsidiary (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary
owns any Capital Stock of, or owns or holds any Lien on any property of, the
Company or any Restricted Subsidiary of the Company that is not a Subsidiary of
the Subsidiary to be so designated; provided that (x) the Company certifies to
the Trustee that such designation complies with the "Limitation on Restricted
Payments" covenant and (y) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the lender
has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries (other than the assets of such Restricted Subsidiary to be
designated an Unrestricted Subsidiary and its Subsidiaries). In the event that
any Restricted Subsidiary is designated an Unrestricted Subsidiary in accordance
with the above provisions, the Guarantee of such Subsidiary will be released.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if (x) immediately
after giving effect to such designation, the Company is able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant, unless such designated Subsidiary shall, at the time of designation,
have no Indebtedness outstanding other than Permitted Indebtedness, and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an officers' certificate certifying that such designation
complied with the foregoing provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
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"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than, in the case of a foreign Restricted Subsidiary, directors' qualifying
shares or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law) are owned by such Person or any Wholly Owned
Restricted Subsidiary of such Person.
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CERTAIN TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
consequences related to the Exchange Offer and the associated with the
acquisition, ownership, and disposition of the Notes. The following summary does
not discuss all of the aspects of federal income taxation that may be relevant
to a prospective holder of the Notes in light of his or her particular
circumstances, or to certain types of holders which are subject to special
treatment under the federal income tax laws (including persons who hold the
Notes as part of a conversion, straddle or hedge, dealers in securities,
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers and S corporations). Further, this summary pertains only to
holders that are citizens or residents of the United States, corporations,
partnerships or other entities created in or under the laws of the United States
or any state thereof, or estates or trusts the income of which is subject to
United States federal income taxation regardless of its source. In addition,
this summary does not describe any tax consequences under state, local, or
foreign tax laws.
This summary is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations (the "Regulations"), rulings and
pronouncements issued by the Internal Revenue Service ("IRS") and judicial
decisions now in effect, all of which are subject to change at any time by
legislative, judicial or administrative action. Any such changes may be applied
retroactively in a manner that could adversely affect the holders of the Notes.
The Company has not sought and will not seek any rulings from the IRS or
opinions from counsel with respect to the matters discussed below except for the
opinion of counsel with respect to the federal income tax consequences of the
Exchange Offer delivered to the Company. There can be no assurance that the IRS
will not take positions concerning the tax consequences of the Exchange Offer or
the valuation, purchase, ownership or disposition of the Notes which are
different from those discussed herein.
TAX CONSEQUENCES OF THE EXCHANGE OFFER
An exchange of the Series A Notes for the Exchange Notes pursuant to the
Exchange Offer should not be treated as a significant modification of the Series
A Notes; accordingly, an Exchange Note should be treated as a continuation of
the corresponding Series A Note and an exchanging holder should not recognize
any gain or loss as a result of participating in the Exchange Offer. In
addition, an exchanging holder's basis in an Exchange Note should be equal to
the basis of the corresponding Series A Note and the holding period for an
Exchange Note would include such holder's holding period for the corresponding
Series A Note.
The Exchange Offer will not have any federal income tax consequences to a
non-exchanging holder.
Each exchanging holder should consult with his or her individual tax
advisor concerning any foreign, state or local tax consequences of the Exchange
Offer as well as to the effect of his or her particular facts and circumstances
on the matters discussed herein.
TAXATION OF ACCRUED STATED INTEREST ON NOTES
Accrued stated interest paid on a Note will generally be taxable to a
holder as ordinary interest income at the time it accrues or is received, in
accordance with the holder's regular method of accounting for federal income tax
purposes.
The Company will annually furnish to certain record holders of the Notes
and the IRS information with respect to any stated interest accruing during the
calendar year as may be required under applicable Regulations.
MARKET DISCOUNT
If a holder purchases a Note, other than in connection with the Offering or
the Exchange Offer, for less than the stated redemption price of the Note at
maturity, the difference is considered "market discount," unless such difference
is "de minimis," i.e., less than one-fourth of one percent of the stated
redemption price of the Note at maturity multiplied by the number of complete
years to maturity (after the holder acquires the Note). Under market discount
rules, any gain realized by the holder on a taxable disposition of a Note having
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"market discount," as well as any partial principal payment made with respect to
such a Note, will be treated as ordinary income to the extent of the then
"accrued market discount" of the Note. The rules concerning the calculation of
"accrued market discount" are set forth in the paragraph immediately below. In
addition, a holder of such a Note may be required to defer the deduction of all
or a portion of the interest expense on any indebtedness incurred to purchase or
carry a Note having "market discount."
Any market discount will accrue ratably from the date of acquisition to the
maturity date of the Note, unless the holder elects, irrevocably, to accrue
market discount on a constant interest rate method. The constant interest rate
method generally accrues interest at times and in amounts equivalent to the
result which would have occurred had the market discount been original issue
discount computed from the date of the holder's acquisition of the Note through
the maturity date. The election to accrue market discount on a constant interest
rate method is irrevocable but may be made separately as to each Note held by
the holder.
Accrual of market discount will not cause the accrued amounts to be
included currently in a holder's taxable income, in the absence of a disposition
of, or principal payment on, the Note. Nevertheless, a holder may elect to
currently include market discount in income as it accrues on either a ratable or
constant interest rate method. In such event, interest expense relating to the
acquisition of a Note which would otherwise be deferred would be currently
deductible to the extent otherwise permitted by the Code. The election to
include market discount in income currently, once made, applies to all market
discount obligations acquired by such holder on or after the first day of the
first taxable year to which the election applies and all subsequent years unless
revoked with the consent of the IRS. Accrued market discount which is included
in a holder's gross income will increase the adjusted tax basis of the Note in
the hands of the holder.
ACQUISITION PREMIUM
If a subsequent holder acquires a Note for an amount which is greater than
the stated redemption price of the Note at maturity, such holder will be
considered to have purchased such Note with "amortizable bond premium" equal to
the amount of such excess. The holder may elect to amortize the premium using a
constant yield method employing six month compounding over the period from the
acquisition date to the maturity date of the Note. Amortized amounts may be
offset only against interest paid with respect to the Note and will reduce the
holder's adjusted tax basis in the Note to the extent so used. Once made, an
election to amortize and offset interest on the Note may be revoked only with
the consent of the IRS and will apply to all Notes held by the holder on the
first day of the taxable year to which the election relates and to subsequent
taxable years and to all Notes subsequently acquired by the holder.
SALE, EXCHANGE OR OTHER TAXABLE DISPOSITION OF THE NOTES
The sale, redemption or other taxable disposition of a Note will result in
the recognition of gain or loss to the holder in an amount equal to the
difference between (i) the amount of cash and fair market value of property
received (except to the extent attributable to the payment of accrued stated
interest) in exchange therefore and (ii) the holder's adjusted tax basis in such
Note. A holder's initial tax basis in a Note purchased by such holder will be
equal to the issue price of the Note.
Any gain or loss on the sale, redemption or other taxable disposition of a
Note will be capital gain or loss, except to the extent of any "accrued market
discount," assuming a purchaser of the Note holds such security as a "capital
asset" (generally property held for investment) within the meaning of Section
1221 of the Code. In the case of an individual holder, such capital gain
generally will be subject to a maximum federal tax rate of 20% if the individual
has held the Note for more than 18 months, or 28% if the individual has held the
Note for more than one year and up to 18 months. The deductibility of capital
losses is subject to certain limitations. Payments on such disposition for
accrued stated interest not previously included in income will be treated as
ordinary interest income. Prospective holders should consult their own tax
advisors in this regard.
PURCHASE OR REDEMPTION OF NOTES
Effect of Change of Control and Asset Sale. Upon a Change of Control, the
Company is required to offer to redeem all outstanding Notes for a price equal
to 101% of the principal amount thereof plus accrued
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and unpaid stated interest. See "Description of Notes -- Change of Control."
Under the Regulations, such a Change of Control redemption requirement will not
affect the yield or maturity date of the Notes unless, based on all the facts
and circumstances as of the issue date, it is more likely than not that a Change
of Control giving rise to the redemption will occur. Upon certain asset sales,
the Company will be obligated to offer to repurchase the Notes at one hundred
percent (100%) of the principal amount thereof plus accrued and unpaid interest
to the date of redemption. The Company will not treat the Change of Control or
the asset sale redemption provisions of the Notes as affecting the calculation
of the yield to maturity of any Note.
Optional Redemption. The Company, at its option, may redeem part or all of
the Notes at any time on or after November 1, 2002, at the redemption prices set
forth herein, plus accrued and unpaid interest to the date of redemption. In
addition, if the Company consummates an Equity Offering on or before November 1,
2000, the Company may, at its option, use all or a portion of the proceeds from
such Equity Offering to redeem up to thirty-five percent (35%) of the aggregate
principal amount of the Notes originally issued in the Offering at a redemption
price equal to 109.625%, together with accrued and unpaid interest to the date
of redemption; provided, however, that, after giving effect to any such
redemption, at least 65% of the aggregate principal amount of the Notes
originally issued remains outstanding. See "Description of Notes -- Redemption."
For purposes of determining whether the Notes are issued with any "original
issue discount," the Regulations generally provide that an issuer will be
treated as exercising any such option if its exercise would lower the yield of
the debt instrument. A redemption of Notes at the optional redemption prices,
however, would increase rather than decrease the effective yield of the debt
instrument as calculated from the issue date.
The Company does not currently intend to exercise any of the options
described above with respect to the Notes. Should the Company exercise an option
and redeem a Note, the holder of the Note would be required to treat any amount
paid by the Company which exceeds the Note's then principal balance and all
accrued and unpaid interest thereon as an amount received in exchange for the
Note.
BACKUP WITHHOLDING
The backup withholding rules require a payor to deduct and withhold a tax
if (i) the payee fails to properly furnish a taxpayer identification number
("TIN") to the payor, (ii) the IRS notifies the payor that the TIN furnished by
the payee is incorrect, (iii) the payee has failed to report properly the
receipt of "reportable payments" and the IRS has notified the payor that
withholding is required, or (iv) there has been a failure of the payee to
certify under a penalty of perjury that a payee is not subject to withholding
under Section 3406 of the Code. As a result, if any one of the events discussed
above occurs with respect to a holder of Notes, the Company, its paying agent or
other withholding agent will be required to withhold a tax equal to 31% of any
"reportable payment" made in connection with the Notes to such holder. A
"reportable payment" includes, among other things, amounts paid in respect of
interest or original issue discount and amounts paid through brokers in
retirement of securities. Any amounts withheld from a payment to a holder under
the backup withholding rules will be allowed as a refund or credit against such
holder's federal income tax, provided, that the required information is
furnished to the IRS. Certain holders (including, among others, corporations and
certain tax-exempt organizations) are not subject to the backup withholding
rules.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW, WHICH IS SUBJECT TO
CHANGE, POSSIBLY WITH RETROACTIVE EFFECT. PROSPECTIVE HOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
EXCHANGE OFFER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND
FOREIGN TAX LAWS.
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BOOK-ENTRY; DELIVERY AND FORM
The Certificates representing the Exchange Notes will be issued in fully
registered form, without coupons and will be deposited with, or on behalf of,
the Depositary, and registered in the name of Cede & Co., as the Depository's
nominee in the form of a global Exchange Note certificate (the "Global
Certificate") or will remain in the custody of the Trustee.
Except as set forth below, the Global Certificate may be transferred, in
whole and not in part, only by the Depositary to its nominee to such Depositary
or another nominee of the Depositary or by the Depositary or its nominee to a
successor of the Depositary or a nominee of such successor.
The Company understands that the Depositary is a limited-purpose trust
company which was created to hold securities for its participating organizations
(the "Participants") and to facilitate the clearance and settlement of
transactions in such securities between Participants through electronic
book-entry changes in accounts of its Participants. Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to the
Depository's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("indirect
participants"). Persons who are not Participants may beneficially own securities
held by the Depositary through Participants or indirect participants.
Pursuant to procedures established by the Depositary (i) upon deposit of
the Global Certificate, the Depositary will credit the accounts of Participants
with portions of the principal amount of the Global Certificate and (ii)
ownership of the Exchange Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interest of the Depository's participants), the
Depository's Participants and the Depository's indirect participants.
The laws of some jurisdictions require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer interests in the Global Certificate will be limited to such
extent.
So long as the nominee of the Depositary is the registered owner of the
Global Certificate, such nominee will be considered the sole owner or holder of
the Exchange Notes for all purposes under the Indenture. Except as provided
below, the owners of interests in the Global Certificate will not be entitled to
have Exchange Notes registered in their names, will not receive or be entitled
to receive physical delivery of Exchange Notes in definitive form and will not
be considered the owners or holders thereof under the Indenture. As a result,
the ability of a person having a beneficial interest in Exchange Notes
represented by the Global Certificate to pledge such interest to persons or
entities that do not participate in the Depository's system or to otherwise take
actions in respect to such interest may be affected by the lack of a physical
certificate evidencing such interest.
Neither the Company, the Trustee nor any paying agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of interests in the Global Certificate or for
maintaining, supervising or reviewing any records relating to such interests.
Principal and interest payments on the Global Certificate registered in the
name of the Depository's nominee will be made by the Company or through a paying
agent to the Depository's nominee as the registered owner of the Global
Certificate. Under the terms of the Indenture, the Company and the Trustee will
treat the persons in whose names the Exchange Notes are registered as the owners
of such Exchange Notes for the purpose of receiving payments of principal and
interest on such Exchange Notes and for all other purposes whatsoever.
Therefore, neither the Company, the Trustee nor any paying agent has any direct
responsibility or liability for the payment of principal or interest on the
Exchange Notes to owners of interests in the Global Certificate. The Depositary
has advised the Company and the Trustee that its present practice is, upon
receipt of any payment of principal or interest, to credit immediately the
account of the Participants with payments in amounts proportionate to their
respective holdings in principal amount of interests in the Global Certificate
as shown on the records of the Depositary. Payments by Participants and indirect
participants to owners of interests in the Global Certificate will be governed
by standing instructions and customary practices,
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as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of such
Participants or indirect participants.
If the Depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the Company within 90
calendar days, the Company will issue Exchange Notes in certificated form in
exchange for the Global Certificate. In addition, the Company may at any time
determine not to have the Exchange Notes represented by a Global Certificate,
and, in such event, will issue Exchange Notes in certificated form in exchange
for the Global Certificate. In either instance, an owner of an interest in the
Global Certificate would be entitled to physical delivery of such Exchange Notes
in certificated form. Exchange Notes so issued in certificated form will be
issued in denominations of $1,000 and integral multiples thereof and will be
issued in registered form only.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or its nominee in identifying the beneficial owners or the related
Exchange Notes, and each such person may conclusively rely on, and shall be
protected in relying on, instructions from the Depositary or its nominee for all
purposes (including with respect to the registration and delivery, and the
respective principal amounts, of the Exchange Notes to be issued).
AVAILABLE INFORMATION
The Company and the Guarantors have filed with the Commission a
Registration Statement on Form S-4 (the "Exchange Offer Registration Statement",
which term shall encompass all amendments, exhibits, annexes and schedules
thereto) pursuant to the Securities Act and the rules and regulations
promulgated thereunder, covering the Exchange Notes being offered hereby. This
Prospectus does not contain all the information set forth in the Exchange Offer
Registration Statement. For further information with respect to the Company and
the Exchange Offer, reference is made to the Exchange Offer Registration
Statement. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Exchange Offer Registration Statement, reference is made to the
exhibit for a more complete description of the document or matter involved, and
each such statement shall be deemed qualified in its entirety by such reference.
The Exchange Offer Registration Statement, including the exhibits thereto, can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Regional Offices of the Commission at 7 World Trade Center, New York, New
York 10048 and at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Company was until recently subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith filed reports, proxy and information
statements and other information with the Commission. Such material filed by the
Company with the Commission may be inspected by anyone without charge at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material may also be obtained at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of such site is http://www.sec.gov.
As a result of filing the Exchange Offer Registration Statement with the
Commission, the Company and the Guarantors will become subject to the
informational requirements of the Exchange Act, and in accordance therewith will
be required to file periodic reports and other information with the Commission.
The obligation of the Company and the Guarantors to file periodic reports and
other information with the Commission will be suspended if the Notes are held of
record by fewer than 300 holders as of the beginning of any fiscal year of the
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Company and the Guarantors other than the fiscal year in which the Exchange
Offer Registration Statement is declared effective.
In the event that the Company ceases to be subject to the informational
reporting requirements of the Exchange Act, the Company has agreed that, so long
as the Series A Notes or the Exchange Notes remain outstanding, it will file
with the Commission and distribute to holders of the Series A Notes or the
Exchange Notes, as applicable, copies of the financial information that would
have been contained in annual reports and quarterly reports, including
management's discussion and analysis of financial condition and results of
operations, that the Company would have been required to file with the
Commission pursuant to the Exchange Act. Such financial information shall
include annual reports containing consolidated financial statements and notes
thereto, together with an opinion thereon expressed by an independent public
accounting firm, as well as quarterly reports containing unaudited condensed
consolidated financial statements for the first three quarters of each fiscal
year. The Company will also make such reports available to prospective
purchasers of the Series A Notes or the Exchange Notes, as applicable,
securities analysts and broker-dealers upon their request. In addition, the
Company has agreed that for so long as any of the Series A Notes remain
outstanding it will make available to any prospective purchaser of the Series A
Notes or beneficial owner of the Series A Notes in connection with any sale
thereof the information required by Rule 144A(d)(4) under the Securities Act,
until such time as the Company has either exchanged the Series A Notes for
securities identical in all material respects which have been registered under
the Securities Act or until such time as the holders thereof have disposed of
such Series A Notes pursuant to an effective registration statement filed by the
Company.
INDEPENDENT ACCOUNTANTS
The consolidated balance sheets of the Company as of December 31, 1995 and
1996, and the related consolidated statements of earnings, cash flows, and
shareholders' equity for each of the years in the three year period ended
December 31, 1996 included in this Prospectus have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, as stated in their report
appearing herein. The report of KPMG Peat Marwick LLP covering the December 31,
1994 financial statements refers to a change in the method of applying overhead
to inventory in 1994.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Cox & Smith Incorporated, San Antonio, Texas.
122
<PAGE> 126
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements:
Report of Independent Auditors...................................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995........................ F-3
Consolidated Statements of Earnings for the Years Ended December 31, 1996, 1995 and
1994............................................................................. F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995
and 1994......................................................................... F-5
Consolidated Statements of Shareholders' Equity for the Years Ended December 31,
1996, 1995 and 1994.............................................................. F-6
Notes to Consolidated Financial Statements.......................................... F-7
Interim Financial Statements (Unaudited):
Condensed Consolidated Balance Sheet as of September 30, 1997 (Unaudited)........... F-32
Condensed Consolidated Statements of Earnings for the Three Months and Nine Months
Ended September 30, 1997 and 1996 (Unaudited).................................... F-33
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September
30, 1997 and 1996 (Unaudited).................................................... F-34
Notes to Condensed Consolidated Financial Statements (Unaudited)...................... F-35
</TABLE>
F-1
<PAGE> 127
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Kinetic Concepts, Inc.:
We have audited the accompanying consolidated balance sheets of Kinetic
Concepts, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of earnings, cash flows and shareholders' equity
for each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Kinetic
Concepts, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the Consolidated Financial Statements, the
Company changed its method of applying overhead to inventory in 1994.
/s/ KPMG PEAT MARWICK LLP
--------------------------------------
KPMG PEAT MARWICK LLP
San Antonio, Texas
February 5, 1997
F-2
<PAGE> 128
CONSOLIDATED BALANCE SHEETS
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 59,045 $ 52,399
Accounts receivable, net............................................. 58,241 56,032
Inventories.......................................................... 20,042 18,854
Note receivable from principal shareholder........................... -- 10,291
Prepaid expenses and other........................................... 6,860 4,865
-------- --------
Total current assets......................................... 144,188 142,441
-------- --------
Net property, plant and equipment...................................... 65,224 62,276
Other notes receivable, net............................................ -- 3,187
Goodwill, less accumulated amortization of $12,021 in 1996 and
$10,625 in 1995...................................................... 13,541 13,968
Other assets, less accumulated amortization of $5,614 in 1996 and
$5,638 in 1995....................................................... 30,440 21,854
-------- --------
$253,393 $243,726
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 3,974 $ 2,512
Current installments of capital lease obligations.................... 118 --
Accrued expenses..................................................... 29,792 26,490
Income tax payable................................................... 2,970 4,026
-------- --------
Total current liabilities.................................... 36,854 33,028
-------- --------
Capital lease obligations, excluding current installments.............. 396 --
Deferred income taxes, net............................................. 5,065 374
-------- --------
42,315 33,402
-------- --------
Commitments and contingencies (Note 11)
Shareholders' equity:
Common stock; issued and outstanding 42,355 in 1996 and 44,331 in
1995................................................................. 42 44
Additional paid-in capital............................................. -- 12,123
Retained earnings...................................................... 210,816 197,290
Cumulative foreign currency translation adjustment..................... 555 1,052
Notes receivable from officers......................................... (335) (185)
-------- --------
211,078 210,324
-------- --------
$253,393 $243,726
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 129
CONSOLIDATED STATEMENT OF EARNINGS
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Rental and service....................................... $225,450 $206,653 $228,832
Sales and other.......................................... 44,431 36,790 40,814
-------- -------- --------
Total revenue......................................... 269,881 243,443 269,646
-------- -------- --------
Rental expenses............................................ 146,205 137,420 159,235
Cost of goods sold......................................... 16,315 13,729 19,388
-------- -------- --------
162,520 151,149 178,623
-------- -------- --------
Gross profit.......................................... 107,361 92,294 91,023
Selling, general and administrative expenses............... 52,007 48,502 51,813
Unusual items.............................................. -- -- (84,868)
-------- -------- --------
Operating earnings.................................... 55,354 43,792 124,078
Interest income (expense), net............................. 9,087 4,554 (4,528)
-------- -------- --------
Earnings before income taxes, minority interest and
cumulative effect of change in accounting
principle........................................... 64,441 48,346 119,550
Income taxes............................................... 25,454 19,905 55,949
-------- -------- --------
Earnings before minority interest and cumulative
effect of change in accounting principle............ 38,987 28,441 63,601
Minority interest in subsidiary loss....................... -- -- 40
Cumulative effect of change in accounting for inventory.... -- -- 742
-------- -------- --------
Net earnings.......................................... $ 38,987 $ 28,441 $ 64,383
======== ======== ========
Earnings per common and common equivalent share:
Earnings before cumulative effect of change in accounting
principle............................................. $ 0.86 $ 0.63 $ 1.44
Cumulative effect of change in accounting for
inventory............................................. -- -- 0.02
-------- -------- --------
Earnings per share.................................... $ 0.86 $ 0.63 $ 1.46
======== ======== ========
Shares used in earnings per share computations............. 45,489 45,457 44,143
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 130
CONSOLIDATED STATEMENTS OF CASH FLOWS
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
-------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings............................................ $ 38,987 $ 28,441 $ 64,383
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization........................ 21,794 22,760 38,795
Provision for uncollectible accounts receivable...... 2,457 1,883 1,100
Noncash portion of unusual items..................... -- -- 4,797
Loss (gain) on KCIFS and Medical Services
dispositions....................................... -- 2,933 (10,121)
Gain on early repayment of notes receivable.......... (5,180) -- --
Change in assets and liabilities net of effects from
purchase of subsidiaries and unusual items:
Decrease (increase) in accounts receivable, net.... (4,626) (2,695) 7,316
Decrease (increase) in notes receivable............ 3,187 6,014 (9,201)
Decrease (increase) in inventory................... (1,034) (998) 2,735
Decrease (increase) in prepaid and other assets.... (1,927) (593) 3,947
Increase (decrease) in accounts payable............ 1,525 (895) (3,672)
Increase (decrease) in accrued expenses............ 3,349 (520) 2,781
Increase (decrease) in income taxes payable........ (1,056) (3,999) 5,378
Increase (decrease) in deferred income taxes....... 4,691 4,451 (11,787)
-------- -------- ---------
Net cash provided by operating activities....... 62,167 56,782 96,451
-------- -------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment.............. (27,783) (36,104) (13,814)
Decrease (increase) in inventory to be converted into
equipment for short-term rental...................... 700 (1,000) 4,250
Dispositions of property, plant and equipment........... 5,400 3,231 2,869
Proceeds from sale of KCIFS and Medical Services
divisions............................................ -- 7,182 65,300
Excess principal repayment on discounted notes
receivable........................................... 5,180 -- --
Business acquired in purchase transactions, net of cash
acquired............................................. (1,146) -- --
Decrease (increase) in finance lease receivables, net... -- 339 (1,561)
Note (received) repaid from principal shareholder....... 10,000 (10,000) --
Increase in other assets................................ (9,960) (6,531) (9,230)
-------- -------- ---------
Net cash provided (used) by investing
activities.................................... (17,609) (42,883) 47,814
-------- -------- ---------
Cash flows from financing activities:
Repayments of notes payable and long-term obligations... -- (800) (102,625)
Borrowing (repayments)of capital lease obligations...... 457 (64) (2,382)
Proceeds from the exercise of stock options............. 4,264 4,919 915
Purchase and retirement of treasury stock............... (35,241) (2,849) (1,157)
Cash dividends paid to shareholders..................... (6,607) (6,631) (6,588)
Other................................................... (150) (185) (791)
-------- -------- ---------
Net cash used by financing activities........... (37,277) (5,610) (112,628)
-------- -------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................. (635) 869 1,324
-------- -------- ---------
Net increase in cash and cash equivalents................. 6,646 9,158 32,961
Cash and cash equivalents, beginning of year.............. 52,399 43,241 10,280
-------- -------- ---------
Cash and cash equivalents, end of year.................... $ 59,045 $ 52,399 $ 43,241
======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 131
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY
COMMON PAID-IN RETAINED TRANSLATION TREASURY LOAN TO
STOCK CAPITAL EARNINGS ADJUSTMENT STOCK ESOP
------ ---------- -------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1993................. $ 46 $ 18,803 $117,685 $ (1,602) $(8,510) $(655)
Net earnings................................ -- -- 64,383 -- -- --
Exercise of stock options................... -- 803 -- -- -- --
Forgiveness of officer receivable........... -- -- -- -- -- --
Tax benefit realized from stock option
plan...................................... -- 112 -- -- -- --
Treasury stock purchased.................... -- -- -- -- (1,157) --
Treasury stock retired...................... (2) (9,665) -- -- 9,667 --
Cash dividends on common and preferred
preferred stock -- $0.15 per share........ -- -- (6,588) -- -- --
Payments on loan to ESOP.................... -- -- -- -- -- 655
Foreign currency translation adjustment..... -- -- -- 1,448 -- --
--- ------- -------- ------- ------- -----
Balances at December 31, 1994................. 44 10,053 175,480 (154) -- --
--- ------- -------- ------- ------- -----
Net earnings................................ -- -- 28,441 -- -- --
Exercise of stock options................... -- 4,024 -- -- -- --
Tax benefit realized from stock
option plan............................... -- 895 -- -- -- --
Treasury stock purchased.................... -- -- -- -- (2,849) --
Treasury stock retired...................... -- (2,849) -- -- 2,849 --
Cash dividends on common stock -- $0.15 per
share..................................... -- -- (6,631) -- -- --
Foreign currency translation adjustment..... -- -- -- 1,206 -- --
--- ------- -------- ------- ------- -----
Balances at December 31, 1995................. 44 12,123 197,290 1,052 -- --
--- ------- -------- ------- ------- -----
Net earnings................................ -- -- 38,987 -- -- --
Exercise of stock options................... -- 2,098 -- -- -- --
Tax benefit realized from stock
option plan............................... -- 2,166 -- -- -- --
Treasury stock purchased.................... -- -- -- -- (35,241) --
Treasury stock retired...................... (2) (16,387) (18,854) -- 35,241 --
Cash dividends on common stock -- $0.15 per
share..................................... -- -- (6,607) -- -- --
Foreign currency translation adjustment..... -- -- -- (497) -- --
--- ------- -------- ------- ------- -----
Balances at December 31, 1996................. $ 42 $ -- $210,816 $ 555 $ -- $ --
=== ======= ======== ======= ======= =====
<CAPTION>
NOTES RECEIVABLE FROM TOTAL
OFFICERS FOR EXERCISE SHAREHOLDERS'
OF STOCK OPTIONS EQUITY
--------------------- -------------
<S> <<C> <C>
Balances at December 31, 1993................. $ (60) $ 125,707
Net earnings................................ -- 64,383
Exercise of stock options................... -- 803
Forgiveness of officer receivable........... 60 60
Tax benefit realized from stock option
plan...................................... -- 112
Treasury stock purchased.................... -- (1,157)
Treasury stock retired...................... -- --
Cash dividends on common and preferred
preferred stock -- $0.15 per share........ -- (6,588)
Payments on loan to ESOP.................... -- 655
Foreign currency translation adjustment..... -- 1,448
----- --------
Balances at December 31, 1994................. -- 185,423
----- --------
Net earnings................................ -- 28,441
Exercise of stock options................... (185) 3,839
Tax benefit realized from stock
option plan............................... -- 895
Treasury stock purchased.................... -- (2,849)
Treasury stock retired...................... -- --
Cash dividends on common stock -- $0.15 per
share..................................... -- (6,631)
Foreign currency translation adjustment..... -- 1,206
----- --------
Balances at December 31, 1995................. (185) 210,324
----- --------
Net earnings................................ -- 38,987
Exercise of stock options................... (150) 1,948
Tax benefit realized from stock
option plan............................... -- 2,166
Treasury stock purchased.................... -- (35,241)
Treasury stock retired...................... -- (2)
Cash dividends on common stock -- $0.15 per
share..................................... -- (6,607)
Foreign currency translation adjustment..... -- (497)
----- --------
Balances at December 31, 1996................. $(335) $ 211,078
===== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 132
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Kinetic
Concepts, Inc. ("KCI") and all subsidiaries (collectively, the "Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation. Certain reclassifications of amounts related to prior years have
been made to conform with the 1996 presentation.
(b) Nature of Operations and Customer Concentration
The Company designs, manufactures, markets and distributes therapeutic
products, primarily specialty hospital beds, mattress overlays and medical
devices that treat and prevent the complications of immobility. The principal
markets for the Company's products are domestic and international health care
providers, predominantly hospitals and extended care facilities throughout the
U.S. and Western Europe. Receivables from these customers are unsecured.
The Company contracts with both proprietary and voluntary purchasing
organizations ("GPOs"). Proprietary GPOs own all of the hospitals which they
represent and, as a result, can ensure complete compliance with an executed
national agreement. Voluntary GPOs negotiate contracts on behalf of member
hospital organizations but cannot ensure that their members will comply with the
terms of an executed national agreement. Approximately 47% of the Company's
revenue during 1996 was generated under national agreements with GPOs.
The Company operates directly in ten foreign countries including Germany,
Austria, the United Kingdom, Canada, France, the Netherlands, Switzerland,
Australia, Sweden and Italy (see Note 13).
(c) Revenue Recognition
Service and rental revenue are recognized as services are rendered. Sales
and other revenue are recognized when products are shipped. Through June 15,
1995, the Company leased certain medical equipment under long-term lease
agreements which were accounted for as direct financing leases. Unearned
interest was amortized to income over the term of the lease using the interest
method (see Note 2).
(d) Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of ninety days or less to be cash equivalents.
(e) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value). Costs include material, labor and manufacturing overhead
costs. Inventory expected to be converted into equipment for short-term rental
has been reclassified to property, plant and equipment.
On January 1, 1994, the Company changed its method of applying overhead to
inventory. Historically, a single labor overhead rate and a single materials
overhead rate were used in valuing ending inventory. Labor overhead was applied
as labor was incurred while materials overhead was applied at the time of
shipping.
(f) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Betterments which extend
the useful life of the equipment are capitalized.
F-7
<PAGE> 133
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(g) Depreciation and Amortization
Depreciation on property, plant and equipment is calculated on the
straight-line method over the estimated useful lives (thirty to forty years for
the buildings and between three and ten years for most of the Company's other
property and equipment) of the assets.
(h) Goodwill
Goodwill represents the excess purchase price over the fair value of net
assets acquired and is amortized over five to thirty-five years from the date of
acquisition using the straight-line method.
The carrying value of goodwill is based on management's current assessment
of recoverability. Management evaluates recoverability using both objective and
subjective factors. Objective factors include management's best estimates of
projected future earnings and cash flows and analysis of recent sales and
earnings trends. Subjective factors include competitive analysis, technological
advantage or disadvantage, and the Company's strategic focus.
(i) Other Assets
Other assets consist principally of patents, trademarks, system development
costs, long-term investments, cash and investments restricted for use by the
Company's captive insurance company, and the estimated residual value of assets
subject to leveraged leases. Patents and trademarks are amortized over the
estimated useful life of the respective asset using the straight-line method.
(j) Income Taxes
The Company recognizes certain transactions in different time periods for
financial reporting and income tax purposes. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. The provision for deferred income
taxes represents the change in deferred income tax accounts during the year.
(k) Common Stock and Earnings Per Common and Common Equivalent Share
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.
(l) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(m) Insurance Programs
The Company established the KCI Employee Benefits Trust (the "Trust") as a
self-insurer for certain risks related to the Company's U.S. employee health
plan and certain other benefits. The Company funds the
F-8
<PAGE> 134
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Trust based on the value of expected future payments, including claims incurred
but not reported. The Company has purchased insurance which limits the Trust's
liability under the benefit plans.
The Company's wholly-owned captive insurance company, KCI Insurance
Company, Ltd. (the "Captive"), reinsures the primary layer of commercial general
liability, workers' compensation and auto liability insurance for certain
operating subsidiaries. Provisions for losses expected under these programs are
recorded based upon estimates of the aggregate liability for claims incurred
based on actuarial reviews. The Company has obtained insurance coverage for
catastrophic exposures as well as those risks required to be insured by law or
contract.
(n) Foreign Currency Translation
The functional currency for the majority of the Company's foreign
operations is the applicable local currency. The translation of the applicable
foreign currencies into U.S. dollars is performed for balance sheet accounts
using the exchange rates in effect at the balance sheet date and for revenue and
expense accounts using a weighted average exchange rate during the period.
(o) Stock Options
During October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation". The new Statement allows companies to continue accounting for
stock-based compensation under the provisions of APB Opinion 25, "Accounting for
Stock Issued to Employees"; however, companies are encouraged to adopt a new
accounting method based on the estimated fair value of employee stock options.
Companies that do not follow the new fair value based method will be required to
provide expanded disclosures in footnotes to the financial statements. The
Company has elected to continue accounting for stock-based compensation under
the provisions of APB Opinion 25 and has provided the required by disclosures
(See Note 9).
NOTE 2. ACQUISITIONS AND DISPOSITIONS
On June 15, 1995, the Company sold KCI Financial Services ("KCIFS") to Cura
Capital Corporation ("Cura") for cash under a Stock Purchase Agreement. Upon
consummation of this transaction, Cura acquired all of the outstanding capital
stock of KCIFS. Total proceeds from the sale were $7.2 million. This transaction
resulted in a pre-tax loss of $2.9 million which is reflected in selling,
general and administrative expenses in 1995. In addition, the Company and its
affiliates agreed not to provide lease financing for medical equipment
manufactured by third parties for a period of three years. KCIFS served as the
leasing agent for Medical Services, certain assets of which were sold in
September 1994. The operating results of KCIFS for 1995 and 1994 were not
material as compared to the overall results of the Company.
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 operating assets of MRD to HBR Healthcare Co. under an Asset Purchase
Agreement effective March 27, 1995. The sales price was approximately $250,000.
In conjunction with the sale, KCI and its affiliates agreed not to refurbish
certain hospital beds and related furniture for a period of three years.
Goodwill of $1.5 million associated with MRD was written off in 1994. The
write-off was treated as an unusual item. The operating results of MRD for 1995
and 1994 were immaterial to the overall results of the Company.
On September 30, 1994, the Company sold certain assets (the "Assets") used
exclusively by Medical Services to Mediq/PRN under an Asset Purchase Agreement.
Upon consummation of this transaction, Mediq/PRN acquired the Assets and assumed
certain liabilities of Medical Services. The sales price was approximately $84.1
million. In conjunction with the sale, the Company and its affiliates agreed not
to rent or distribute a portfolio of critical care and life support equipment
for five years.
F-9
<PAGE> 135
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Gross proceeds included a cash payment of approximately $65.3 million and
promissory notes in the aggregate principal amount of $18.8 million. The net
proceeds of $72.8 million, pre-tax gain of $10.1 million, and after-tax net loss
of $2.5 million were calculated, as follows (in thousands):
<TABLE>
<S> <C>
Cash.............................................................. $ 65,300
Notes receivable (See Note 3)..................................... 9,852
Fees and commissions.............................................. (2,329)
--------
Net proceeds................................................. 72,823
Equipment and inventory sold...................................... (38,959)
Goodwill.......................................................... (25,778)
Accounts receivable provision..................................... (479)
Capital leases assumed............................................ 2,514
--------
Pre-tax gain on disposition.................................. 10,121
--------
Tax expense....................................................... (12,601)
--------
Net loss on disposition...................................... $ (2,480)
========
</TABLE>
Tax expense exceeded the pre-tax gain amount due to the nondeductibility of
$25.8 million in unamortized goodwill.
During the second quarter of 1996, the Company acquired Astec Medical, a
small overlay company in the United Kingdom. This firm produces a well-received
product which will enable the Company to further penetrate the community
hospital market throughout Europe.
Subsequent to December 31, 1996, the Company acquired H.F. Systems, Inc. of
Los Angeles. H.F. Systems offers a complete line of therapeutic specialty
support surfaces primarily to the West Coast extended care marketplace. The
purchase price was approximately $8 million in cash and other considerations.
NOTE 3. NOTES RECEIVABLE
In August 1995, the Company loaned $10.0 million to James R. Leininger,
M.D., the principal shareholder and chairman of the Company's Board of
Directors. The note was secured by a Stock Pledge Agreement covering one million
shares of common stock in Kinetic Concepts, Inc. Interest was payable in annual
installments at the rate of 7.94%. In January 1996, the note receivable was
collected in full.
Other notes receivable included notes received from Mediq/PRN as part of
the proceeds on the sale of Medical Services effective September 30, 1994. At
the time of the sale, the Company received an opinion from an independent
investment banker on the notes receivable which was used to arrive at the
carrying values. In October of 1996, the Company negotiated the early repayment
of all remaining notes for $8.5 million, plus interest accrued through closing.
As a result of this transaction, the Company recognized a one-time gain of $5.2
million before income taxes which has been included as interest income as of
F-10
<PAGE> 136
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1996. The values of the various notes receivable at December 31,
1995 for accounting purposes are described below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
PRINCIPAL BALANCE
-------------------
1996 1995
------- -------
<S> <C> <C>
Note from PRN Holding, Inc. with 10% interest due
quarterly in arrears beginning March 1996 and principal
due
September 1999......................................... $ -- $10,000
Less discount and valuation allowance.................... -- (6,813)
------- -------
Notes receivable, noncurrent............................. $ -- $ 3,187
======= =======
</TABLE>
NOTE 4. SUPPLEMENTAL BALANCE SHEET DATA
Accounts receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
------- -------
<S> <C> <C>
Trade accounts receivable................................ $63,613 $60,149
Employee and other receivables........................... 2,160 2,060
------- -------
65,773 62,209
Less allowance for doubtful receivables.................. 7,532 6,177
------- -------
$58,241 $56,032
======= =======
</TABLE>
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
------- -------
<S> <C> <C>
Finished goods........................................... $ 5,586 $ 2,890
Work in process.......................................... 1,893 1,040
Raw materials, supplies and parts........................ 17,113 20,174
------- -------
24,592 24,104
Less amounts expected to be converted into equipment for
short-term rental...................................... 4,550 5,250
------- -------
$20,042 $18,854
======= =======
</TABLE>
Net property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Land................................................... $ 1,007 $ 742
Buildings.............................................. 14,254 13,418
Equipment for short-term rental........................ 133,896 110,858
Machinery, equipment and furniture..................... 36,821 27,610
Leasehold improvements................................. 1,388 1,042
Inventory to be converted into equipment............... 4,550 5,250
-------- --------
191,916 158,920
Less accumulated depreciation and amortization......... 126,692 96,644
-------- --------
$ 65,224 $ 62,276
======== ========
</TABLE>
F-11
<PAGE> 137
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER
-------------------
1996 1995
------- -------
<S> <C> <C>
Payroll, commissions and related taxes................... $13,162 $12,589
Insurance accruals....................................... 2,887 3,470
Other accrued expenses................................... 13,743 10,431
------- -------
$29,792 $26,490
======= =======
</TABLE>
The carrying amount of financial instruments in current assets and current
liabilities approximate fair value because of the short maturity of these
instruments.
NOTE 5. NOTE PAYABLE AND LONG-TERM OBLIGATIONS
The Company entered into a revolving credit and term loan agreement (the
"Credit Agreement") with a bank as agent for itself and certain other financial
institutions. The Credit Agreement provides for a $50 million one-year revolving
credit facility with a two-year renewal option. Any advances under the Credit
Agreement are due at the end of the period covered by the Credit Agreement. At
December 31, 1996, the entire $50 million balance was available.
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 governing a change in control of
the Company, and establishes various fees to be paid by the Company. At December
31, 1996, the Company was in compliance with all covenants.
Interest paid on debt during 1996, 1995 and 1994 amounted to $0.2 million,
$0.4 million and $5.4 million, respectively.
NOTE 6. LEASING OBLIGATIONS
The Company is obligated for equipment under various capital leases which
expire at various dates during the next four years. At December 31, 1996 the
gross amount of equipment under capital leases totaled $619,000 and related
accumulated depreciation totaled $175,000.
The Company leases service vehicles, office space, various storage spaces
and manufacturing facilities under noncancelable operating leases which expire
at various dates over the next six years. Total rental expense for operating
leases, net of sublease payments received, was $13.5 million, $12.0 million and
$10.9 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
F-12
<PAGE> 138
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1997...................................................... $ 208 $10,498
1998...................................................... 160 7,947
1999...................................................... 160 5,221
2000...................................................... 93 3,771
2001...................................................... -- 1,073
Later years............................................... -- --
---- -------
Total minimum lease payments.............................. 621 $28,510
=======
Less amount representing interest......................... 107
----
Present value of net minimum capital lease payments....... 514
Less current portion...................................... 118
----
Obligations under capital leases excluding current
installments............................................ $ 396
====
</TABLE>
NOTE 7. INCOME TAXES
Earnings before income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Domestic............................................. $51,771 $37,542 $110,287
Foreign.............................................. 12,670 10,804 9,263
------- ------- --------
$64,441 $48,346 $119,550
======= ======= ========
</TABLE>
Income tax expense attributable to income from continuing operations
consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------
CURRENT DEFERRED TOTAL
------- -------- -------
<S> <C> <C> <C>
Federal.............................................. $14,363 $4,464 $18,827
State................................................ 2,569 552 3,121
International........................................ 3,831 (325) 3,506
------- ------ -------
$20,763 $4,691 $25,454
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------
CURRENT DEFERRED TOTAL
------- -------- -------
<S> <C> <C> <C>
Federal.............................................. $ 8,148 $4,174 $12,322
State................................................ 2,140 277 2,417
International........................................ 5,166 -- 5,166
------- ------ -------
$15,454 $4,451 $19,905
======= ====== =======
</TABLE>
F-13
<PAGE> 139
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------
CURRENT DEFERRED TOTAL
------- -------- -------
<S> <C> <C> <C>
Federal.............................................. $56,697 $(11,031) $45,666
State................................................ 8,212 (756) 7,456
International........................................ 3,282 -- 3,282
------- -------- -------
$68,191 $(11,787) $56,404
======= ======== =======
</TABLE>
Income tax expense attributable to income from continuing operations
differed from the amounts computed by applying the statutory tax rate of 35
percent to pre-tax income from continuing operations as a result of the
following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Computed "expected" tax expense....................... $22,554 $ 16,921 $41,843
Goodwill.............................................. 442 533 9,307
State income taxes, net of Federal benefit............ 2,028 1,571 4,846
Tax-exempt interest from municipal bonds.............. (445) -- --
Foreign income taxed at other than U.S. rates......... 1,145 1,836 350
Utilization of foreign net operating loss
carryforwards....................................... (123) (231) (814)
Nonconsolidated foreign net operating loss............ 67 492 566
Foreign, other........................................ (441) (1,450) 271
Effect of change in inventory accounting method....... -- -- 455
Other, net............................................ 227 233 (420)
------- ------- -------
$25,454 $ 19,905 $56,404
======= ======= =======
</TABLE>
F-14
<PAGE> 140
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1996 and December 31, 1995 are presented below:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred Tax Assets:
Accounts receivable, principally due to allowance for
doubtful accounts......................................... $ 4,458 $ 3,591
Intangible assets, deducted for book purposes but capitalized
and amortized for tax purposes............................ 1 323
Net operating loss carryforwards............................. 67 492
Inventories, principally due to additional costs capitalized
for tax purposes pursuant to the Tax Reform Act of 1986... 664 702
Notes receivable, basis difference........................... -- 397
Legal fees, capitalized and amortized for tax purposes....... 670 402
Accrued liabilities.......................................... 1,015 519
Deferred foreign tax asset................................... 325 --
Other........................................................ 1,089 41
-------- --------
Total gross deferred tax assets........................... 8,289 6,467
Less valuation allowance.................................. (67) (492)
-------- --------
Net deferred tax assets................................... 8,222 5,975
Deferred Tax Liabilities:
Plant and equipment, principally due to differences in
depreciation and basis.................................... (11,722) (5,686)
Deferred state tax liability................................. (973) (421)
Investments, principally due to differences in tax treatment
of certain components..................................... (506) --
Other........................................................ (86) (242)
-------- --------
Total gross deferred tax liabilities.................... (13,287) (6,349)
-------- --------
Net deferred tax liability........................... $ (5,065) $ (374)
======== ========
</TABLE>
At December 31, 1996, the Company had $1.1 million of operating loss
carryforwards available to reduce future taxable income of certain international
subsidiaries. These loss carryforwards must be utilized within the applicable
carryforward periods. A valuation allowance has been provided for the deferred
tax assets related to loss carryforwards. Carryforwards of $712,000 can be used
indefinitely and the remainder expire from 1997 through 2001.
The Company anticipates that the reversal of existing taxable temporary
differences and future taxable income will provide sufficient taxable income to
realize the tax benefit of the remaining deferred tax assets. In accordance with
the Company's accounting policy, U.S. deferred taxes have not been provided on
undistributed earnings of foreign subsidiaries at the end of 1996, as the
Company intends to reinvest these earnings permanently in the foreign operations
or to repatriate such earnings only when it is advantageous for the Company to
do so. The amount of the unrecognized tax liability for these undistributed
earnings was not material at the end of 1996 due to the availability of foreign
tax credits.
Income taxes paid during 1996, 1995 and 1994 were $15.4 million, $15.1
million and $57.3 million, respectively.
F-15
<PAGE> 141
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. SHAREHOLDERS' EQUITY AND EMPLOYEE BENEFIT PLANS
Common Stock:
The Company is authorized to issue 100 million shares of Common Stock,
$.001 par value (the "Common Stock"). The number of shares of Common Stock
issued and outstanding at the end of 1996 and 1995 was 42,355,000 and
44,331,000, respectively.
Treasury Stock:
In July, 1995, the Company's Board of Directors approved a program to
repurchase up to 3,000,000 shares of its Common Stock. The Company repurchased
2,563,000 shares during 1996 and 77,000 shares during 1995. As of December 31,
1996, there were 360,000 remaining shares to be repurchased in the program. In
1994, the Company's Board of Directors adopted a resolution to return all
repurchased shares to the status of authorized but unissued shares. In
accordance with this resolution, the Company retired 2,563,000 and 77,000
treasury shares in 1996 and 1995, respectively. Subsequent to 1996, the
Company's Board of Directors approved a program which authorizes the Company to
purchase up to an additional 3 million shares.
Preferred Stock:
The Company is authorized to issue up to 20 million shares of Redeemable
Preferred Stock, par value $0.001 per share, in one or more series. As of
December 31, 1996 and December 31, 1995, none were issued.
Employee Stock Ownership Plan:
The Company has established an Employee Stock Ownership Plan (the "ESOP")
covering employees of the Company who meet minimum age and length of service
requirements. The ESOP enables eligible employees to acquire a proprietary
interest in the Company.
As of December 31, 1996, all shares of stock owned by the ESOP have been
allocated to employees. Based on the number of shares planned to be allocated
for the year, ESOP expense recorded during 1996, 1995 and 1994 amounted to $0,
$263,000 and $476,000, respectively.
Investment Plan:
The Company has an Investment Plan intended to qualify as a deferred
compensation plan under Section 401(k) of the Internal Revenue Code of 1986. The
Investment Plan is available to all domestic employees and the Company matches
employee contributions up to a specified limit. In 1996, 1995 and 1994,
$498,000, $265,000 and $314,000, respectively, was charged to expense for
matching contributions.
NOTE 9. STOCK OPTION PLANS
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 123, "Accounting for Stock-Based Compensation". While the new
accounting standard encourages the adoption of a new fair-value method for
expense recognition, Statement 123 allows companies to continue accounting for
stock options and other stock-based awards as provided in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). The
Company has elected to follow the provisions of APB 25 and related
interpretations in accounting for its stock options plans because, as discussed
below, the alternative fair-value method prescribed by FASB Statement No. 123
requires the use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options generally equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
F-16
<PAGE> 142
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The 1987 Kinetic Concepts, Inc. Key Contributor Stock Option Plan (the "Key
Contributor Stock Option Plan") covers up to an aggregate of 5,750,000 shares of
the Company's Common Stock. Options may be granted under the Key Contributor
Stock Option Plan to employees (including officers), non-employee directors and
consultants of the Company. The exercise price of the options is determined by a
committee of the Board of Directors of the Company. The Key Contributor Stock
Option Plan permits the Board of Directors to declare the terms for payment when
such options are exercised. Options may be granted with a term not exceeding ten
years.
The 1988 Kinetic Concepts, Inc. Directors Stock Option Plan (the "Directors
Stock Option Plan") covers an aggregate of 300,000 shares of the Company's
Common Stock and may be granted to non-employee directors of the Company. The
exercise price of options granted under the Directors Stock Option Plan shall be
the fair market value of the shares of the Company's Common Stock on the date
that such option is granted.
The 1995 Kinetic Concepts, Inc. Senior Executive Management Stock Option
Plan (the "Senior Executive Stock Option Plan") covers a total of 1,400,000
shares of the Company's Common Stock and may be granted to certain senior
executives of the Company at the recommendation of the Chief Executive Officer
and discretion of the Company's Board of Directors. The exercise price for each
share of common stock covered by an option shall be established by the Board of
Directors but may not in any case be less than the fair market value of the
shares of common stock of the Company on the date of grant. Vesting of options
granted is subject to certain terms and conditions. The Senior Executive Stock
Option Plan is subject to final approval by the Company's shareholders.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair-value method of that
statement. The fair value for options granted during the two fiscal years ended
December 31, 1996 and 1995, respectively, was estimated using a Black-Scholes
option pricing model with the following weighted average assumptions: risk-free
interest rates of 6.1% and 6.0%, dividend yields of 0.9% and 2.1%, volatility
factors of the expected market price of the Company's common stock of .32 and
.33, and a weighted-average expected option life of 5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
underlying assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands except for earnings per share
information):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Net Earnings as Reported................................. $38,987 $28,441
Pro Forma Net Earnings................................... $37,996 $28,238
Earnings Per Share as Reported........................... $ 0.86 $ 0.63
Pro Forma Earnings Per Share............................. $ 0.84 $ 0.62
</TABLE>
The Company is not required to apply the method of accounting prescribed by
Statement 123 to stock options granted prior to January 1, 1995. As such, the
pro forma compensation cost reflected above may not be representative of future
results.
F-17
<PAGE> 143
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summaries information about stock options outstanding
at December 31, 1996 (shares in thousands):
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
OPTIONS CONTRACT AVERAGE OPTIONS AVERAGE
RANGE OF OUTSTANDING LIFE EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICES AT 12/31/96 (YRS) PRICE AT 12/31/96 PRICE
- ----------------------------------- ----------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 3.00 to $ 4.63................... 1,166 6.9 $ 4.22 594 $ 4.23
$ 5.00 to $ 9.50................... 1,272 7.5 $ 6.26 435 $ 6.14
$11.13 to $17.00................... 901 9.2 $15.61 292 $14.23
----- --- ------ ----- ------
3,339 8.0 $ 8.68 1,321 $ 7.07
===== === ====== ===== ======
</TABLE>
A summary of the Company's stock option activity, and related information,
for years ended December 31, 1996, 1995 and 1994 follows (options in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Options Outstanding -- Beginning of
Year................................ 2,833 $ 5.21 3,029 $ 4.50 2,668 $ 5.35
Granted............................. 1,317 $14.47 873 $ 6.89 2,124 $ 4.15
Exercised........................... (628) $ 5.05 (792) $ 4.56 (199) $ 4.07
Forfeited........................... (183) $ 9.34 (277) $ 4.57 (1,564) $ 5.53
----- ------ ----- ----- ------ -----
Options Outstanding -- End of Year.... 3,339 $ 8.68 2,833 $ 5.21 3,029 $ 4.50
===== ====== ===== ===== ====== =====
Exercisable at End of Year............ 1,321 $ 7.07
===== ======
Weighted-Average Fair Value of Options
Granted During the Year............. $ 5.80 $ 2.19
====== =====
</TABLE>
Exercise prices for options outstanding as of December 31, 1996 ranged from
$3.00 to $17.00. The weighted average remaining contractual life of those
options is 8.0 years.
The following table summarizes the activity in the Company's 1987 Key
Contributor Stock Option Plan (in thousands, except per share data):
<TABLE>
<CAPTION>
SHARES OPTION PRICE PER SHARE
------ ----------------------
<S> <C> <C>
Outstanding, January 1, 1994...................................... 2,606 $3.00 to $8.625
Granted......................................................... 2,116 $3.375 to $6.00
Canceled........................................................ (1,556) $3.50 to $8.625
Exercised....................................................... (199) $3.50 to $5.75
----------------
------
Outstanding, December 31, 1994.................................... 2,967 $3.00 to $8.625
----------------
------
Granted......................................................... 865 $5.50 to $11.75
Canceled........................................................ (277) $3.375 to $8.1875
Exercised....................................................... (760) $3.375 to $6.75
----------------
------
Outstanding, December 31, 1995.................................... 2,795 $3.00 to $11.75
----------------
------
Granted......................................................... 806 $11.75 to $17.00
Canceled........................................................ (183) $3.625 to $16.50
Exercised....................................................... (618) $3.50 to $16.50
----------------
------
Outstanding, December 31, 1996.................................... 2,800 $3.00 to $17.00
====== ================
</TABLE>
F-18
<PAGE> 144
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the activity in the Company's 1988 Eligible
Directors Stock Option Plan (in thousands, except per share data):
<TABLE>
<CAPTION>
SHARES OPTION PRICE PER SHARE
------ ----------------------
<S> <C> <C>
Outstanding, January 1, 1994...................................... 62 $ 4.125 to $ 9.375
Granted......................................................... 8 $ 3.75 to $ 4.50
Exercised....................................................... -- $ --
Lapsed.......................................................... (8) $ 5.00 to $ 5.25
------------------
---
Outstanding, December 31, 1994.................................... 62 $ 3.75 to $ 9.375
------------------
---
Granted......................................................... 8 $ 8.125 to $ 9.25
Exercised....................................................... (32) $ 4.125 to $ 5.875
Lapsed.......................................................... -- $ --
------------------
---
Outstanding, December 31, 1995.................................... 38 $ 3.75 to $ 9.375
------------------
---
Granted......................................................... 31 $14.625 to $16.125
Exercised....................................................... (10) $ 4.375 to $ 9.375
Lapsed.......................................................... -- $ --
------------------
---
Outstanding, December 31, 1996.................................... 59 $ 3.75 to $16.125
=== ==================
</TABLE>
In July, 1991, the Company granted options to three non-employee directors
of the Company to acquire a total of 30,000 shares of the Company's Common Stock
at $5.00 per share (the fair market value at date of grant). At December 31,
1996, 20,000 options are exercisable and expire ten years from the grant date.
During 1994, the Chairman of the Board issued options for 440,000 of his
shares at fair market value of $5.74 to the newly appointed Chief Executive
Officer. At December 31, 1996, 340,000 options are exercisable and expire three
years from the grant date.
NOTE 10. OTHER ASSETS
A summary of other long-term assets follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Investment in assets subject to leveraged leases........... $14,766 $ 7,566
Information systems development projects................... 3,124 5,601
Investment in long-term securities......................... 4,989 4,872
Intangible assets.......................................... 3,660 3,475
Deposits and other......................................... 8,529 5,978
------- -------
$35,068 $27,492
(Less) Accumulated amortization............................ 4,628 5,638
------- -------
$30,440 $21,854
======= =======
</TABLE>
Long-term securities consist primarily of government backed securities held
by the Company's wholly owned captive insurance company and are carried at
market value, which is not significantly different than cost. The carrying value
of the long-term securities approximates fair value.
On December 30, 1996, the Company acquired beneficial ownership of a
Grantor Trust. The Trust assets consist of a McDonnell Douglas DC-10 aircraft
and three engines. In connection with the acquisition, KCI paid cash equity of
$7.2 million and assumed non-recourse debt of $47.0 million. The DC-10 aircraft
is on lease to the Federal Express Corporation through June 2012. Federal
Express pays monthly rent to a third
F-19
<PAGE> 145
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
party who, in turn, pays this entire amount to the holders of the non-recourse
certificated indebtedness, which is secured by the aircraft. Recourse to the
certificate holders is limited to the Trust assets only.
NOTE 11. COMMITMENTS AND CONTINGENCIES
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. 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. Novamedix seeks injunctive relief
and monetary damages. Initial 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 business, financial condition or results of operations.
On August 16, 1995, the Company filed a civil antitrust lawsuit against
Hillenbrand Industries, Inc. and one of its subsidiaries, Hill-Rom. The suit was
filed in the United States District Court for the Western District of Texas. The
suit alleges that Hill-Rom used its monopoly power in the standard hospital bed
business to gain an unfair advantage in the specialty hospital bed business.
Although discovery is just beginning and it is not possible to predict the
outcome of this litigation or the damages which might be awarded, the Company
believes that its claims are meritorious.
On October 31, 1996 the Company received a counterclaim which had been
filed by Hillenbrand Industries, Inc. in the antitrust lawsuit which the Company
filed in 1995. The counterclaim alleges that the Company's antitrust lawsuit and
other actions were designed to enable Kinetic Concepts to monopolize the bed
market. Although it is not possible to predict the outcome of this litigation,
the Company believes that the counterclaim is without merit.
On December 26, 1996, Hill-Rom, a subsidiary of Hillenbrand Industries,
Inc. filed a lawsuit against the Company alleging that the Company's
TriaDyne(TM) bed infringes a patent issued to Hill-Rom in December 1996. This
suit was filed in the United States District Court for the District of South
Carolina. Substantive discovery in the case has not begun. Based upon its
initial investigation, the Company does not believe that the TriaDyne(TM) bed
infringes the Hill-Rom patent or that this lawsuit will materially impact the
marketing of the TriaDyne(TM) bed.
The Company is party to several lawsuits generally incidental to its
business, including product claims 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 have a material effect on the Company's
business, financial condition or results of operations.
See discussion of self-insurance program at Note 1 and leases at Note 6.
NOTE 12. UNUSUAL ITEMS
During the third quarter of 1994, the Company recorded a gain from the
settlement of a patent infringement lawsuit brought against SSI. The settlement
was $84.75 million. Net of legal expenses, this transaction added $81.6 million
of pre-tax income to the 1994 results. In addition, a $10.1 million pre-tax gain
from the sale of Medical Services was recognized. The Company recorded certain
other unusual items, primarily planned dispositions of under-utilized rental
assets and over-stocked inventories of $6.8 million. These items together total
$84 million and are included in Unusual Items on the 1994 Statement of Earnings.
F-20
<PAGE> 146
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13. SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates primarily in one industry segment: the distribution of
specialty therapeutic beds and medical devices to select health care providers.
A summary of financial information by geographic area is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------
DOMESTIC FOREIGN ELIMINATIONS CONSOLIDATED
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Total revenue:
Unaffiliated customers...................... $201,116 $68,765 $ -- $269,881
Intercompany transfers...................... 7,272 -- (7,272) --
-------- ------- -------- --------
Total............................... $208,388 $68,765 $ (7,272) $269,881
======== ======= ======== ========
Operating earnings............................ $ 40,810 $15,197 $ (653) $ 55,354
======== ======= ======== ========
Total assets:
Identifiable assets......................... $156,273 $49,622 $(11,547) $194,348
======== ======= ========
Corporate assets............................ 59,045
--------
Total assets........................ $253,393
========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------
DOMESTIC FOREIGN ELIMINATIONS CONSOLIDATED
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Total revenue:
Unaffiliated customers...................... $182,754 $60,689 $ -- $243,443
Intercompany transfers...................... 6,991 -- (6,991) --
-------- ------- -------- --------
Total............................... $189,745 $60,689 $ (6,991) $243,443
======== ======= ======== ========
Operating earnings............................ $ 33,779 $10,845 $ (832) $ 43,792
======== ======= ======== ========
Total assets:
Identifiable assets......................... $157,615 $43,787 $(10,075) $191,327
======== ======= ========
Corporate assets............................ 52,399
--------
Total assets........................ $243,726
========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
------------------------------------------------------
DOMESTIC FOREIGN ELIMINATIONS CONSOLIDATED
-------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Total revenue:
Unaffiliated customers...................... $223,202 $46,444 $ -- $269,646
Intercompany transfers...................... 5,489 -- (5,489) --
-------- ------- -------- --------
Total............................... $228,691 $46,444 $ (5,489) $269,646
======== ======= ======== ========
Operating earnings............................ $117,368 $ 7,737 $ (1,027) $124,078
======== ======= ======== ========
Total assets:
Identifiable assets......................... $156,248 $41,756 $ (8,514) $189,490
======== ======= ========
Corporate assets............................ 43,241
--------
Total assets........................ $232,731
========
</TABLE>
F-21
<PAGE> 147
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Domestic intercompany transfers primarily represent shipments of equipment
and parts to international subsidiaries. These intercompany shipments are made
at transfer prices which approximate prices charged to unaffiliated customers
and have been eliminated from consolidated net revenues. Corporate assets
consist of cash and cash equivalents.
NOTE 14. QUARTERLY FINANCIAL DATA (UNAUDITED)
The unaudited consolidated results of operations by quarter are summarized
below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue............................................. $67,587 $64,272 $67,970 $70,052
Operating earnings.................................. $13,741 $12,721 $13,629 $15,263
Net earnings........................................ $ 8,814 $ 8,187 $ 8,858 $13,128
Earnings per common and common equivalent share..... $ 0.19 $ 0.18 $ 0.19 $ 0.30
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue............................................. $57,027 $59,790 $61,606 $65,020
Operating earnings.................................. $ 9,577 $ 8,717 $12,734 $12,764
Net earnings........................................ $ 6,098 $ 5,716 $ 8,535 $ 8,092
Earnings per common and common equivalent share..... $ 0.14 $ 0.13 $ 0.19 $ 0.18
</TABLE>
Earnings per share for the full year may differ from the total of the
quarterly earnings per share due to rounding differences.
F-22
<PAGE> 148
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15: SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(UNAUDITED)
Kinetic Concepts, Inc. has issued $200 million in subordinated debt
securities to finance a tender offer to purchase certain of its common shares
outstanding. In connection with the issuance of these securities, certain of its
subsidiaries (the guarantor subsidiaries) have jointly and severally guaranteed
such debt securities. Certain other subsidiaries (the nonguarantor subsidiaries)
will not guarantee such debt. Separate financial statements and other
disclosures concerning the subsidiary guarantors are not deemed material to
investors.
The following tables present the unaudited condensed consolidating balance
sheets of Kinetic Concepts, Inc. as a parent company, its guarantor subsidiaries
and its nonguarantor subsidiaries as of December 31, 1996 and 1995 and the
related unaudited condensed consolidating statements of earnings and cash flows
for each year in the three-year period ended December 31, 1996.
F-23
<PAGE> 149
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY BALANCE SHEET
DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KINETIC CONCEPTS, INC. RECLASSIFICATIONS
PARENT COMPANY GUARANTOR NON-GUARANTOR AND KINETIC CONCEPTS, INC.
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
---------------------- ------------ ------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents........ $ $ 50,286 $14,485 $ (5,726) $ 59,045
Accounts receivable, net.... 5,174 39,996 13,072 (1) 58,241
Inventories................. 13,944 334 10,605 (4,841) 20,042
Prepaid expenses and
other.................... 2,677 3,214 969 -- 6,860
-------- -------- ------- --------- --------
Total current
assets............ 21,795 93,830 39,131 (10,568) 144,188
Net property, plant and
equipment................ 12,965 76,143 9,571 (33,455) 65,224
Goodwill, net............... 3,375 3,829 6,337 -- 13,541
Other assets, net........... 10,848 21,470 325 (2,203) 30,440
Intercompany investments and
advances................. 279,773 200,399 -- (480,172) --
-------- -------- ------- --------- --------
Total Assets........ $328,756 $395,671 $55,364 $(526,398) $253,393
======== ======== ======= ========= ========
LIABILITIES AND CAPITAL
ACCOUNTS
Accounts payable............ $ 7,635 $ 509 $ 1,556 $ (5,726) $ 3,974
Intercompany payables....... 102,044 41,683 9,894 (153,621) --
Current installments of
capital lease
obligations.............. 118 -- -- -- 118
Accrued expenses............ 5,422 17,947 5,561 862 29,792
Income taxes payable........ 2,111 2,294 (1,435) 2,970
-------- -------- ------- --------- --------
Total current
liabilities....... 117,330 60,139 19,305 (159,920) 36,854
-------- -------- ------- --------- --------
Capital leases obligations,
excluding current
installment.............. 348 -- 48 -- 396
Deferred income taxes....... -- 12,120 -- (7,055) 5,065
-------- -------- ------- --------- --------
Total Liabilities... 117,678 72,259 19,353 (166,975) 42,315
-------- -------- ------- --------- --------
Stockholders' Equity........ 211,078 323,412 36,011 (359,423) 211,078
-------- -------- ------- --------- --------
Total Liabilities
and Equity........ $328,756 $395,671 $55,364 $(526,398) $253,393
======== ======== ======= ========= ========
</TABLE>
F-24
<PAGE> 150
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NONGUARANTOR AND
PARENT COMPANY BALANCE SHEET
DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KINETIC CONCEPTS, INC. RECLASSIFICATIONS
PARENT COMPANY GUARANTOR NON-GUARANTOR AND KINETIC CONCEPTS, INC.
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
---------------------- ------------ ------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents....... $ -- $ 41,142 $13,837 $ (2,580) $ 52,399
Accounts receivable, net... 4,216 40,379 11,437 -- 56,032
Inventories................ 14,884 3,993 5,290 (5,313) 18,854
Note receivable from
principal shareholder... -- 10,291 -- -- 10,291
Prepaid expenses and
other................... 1,591 2,656 647 (29) 4,865
-------- -------- ------- --------- --------
Total current
assets........... 20,691 98,461 31,211 (7,922) 142,441
Net property, plant and
equipment............... 7,314 88,888 7,879 (41,805) 62,276
Notes receivable........... -- 3,187 -- -- 3,187
Goodwill, net.............. 4,050 4,060 5,858 -- 13,968
Other assets, net.......... 10,970 13,303 -- (2,419) 21,854
Intercompany investments
and advances............ 228,758 -- -- (228,758) --
-------- -------- ------- --------- --------
Total Assets....... $271,783 $207,899 $44,948 $(280,904) $243,726
======== ======== ======= ========= ========
LIABILITIES AND CAPITAL
ACCOUNTS
Accounts payable........... $ 3,625 $ 185 $ 1,229 $ (2,527) $ 2,512
Intercompany payables...... 52,172 71,938 4,530 (128,640) --
Accrued expenses........... 5,662 14,636 6,686 (494) 26,490
Income taxes payable....... -- 886 2,736 404 4,026
-------- -------- ------- --------- --------
Total current
liabilities...... 61,459 87,645 15,181 (131,257) 33,028
-------- -------- ------- --------- --------
Capital leases obligations,
excluding current
installment................ -- -- 55 (55) --
Deferred income taxes........ -- 5,258 -- (4,884) 374
-------- -------- ------- --------- --------
Total
liabilities...... 61,459 92,903 15,236 (136,196) 33,402
-------- -------- ------- --------- --------
Stockholders' Equity......... 210,324 114,996 29,712 (144,708) 210,324
-------- -------- ------- --------- --------
Total Liabilities
and Equity....... $271,783 $207,899 $44,948 $(280,904) $243,726
======== ======== ======= ========= ========
</TABLE>
F-25
<PAGE> 151
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KINETIC CONCEPTS, INC. RECLASSIFICATIONS HISTORICAL
PARENT COMPANY GUARANTOR NON-GUARANTOR AND KINETIC CONCEPTS, INC.
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
---------------------- ------------ ------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Service and rental.......... $ -- $176,135 $49,315 $ -- $225,450
Sales and other............. 54,716 10,989 18,768 (40,042) 44,431
------- -------- ------- -------- --------
Total revenue....... 54,716 187,124 68,083 (40,042) 269,881
Rental expenses............... -- 110,198 45,851 (9,844) 146,205
Cost of goods sold............ 33,774 -- 9,027 (26,486) 16,315
------- -------- ------- -------- --------
33,774 110,198 54,878 (36,330) 162,520
------- -------- ------- -------- --------
Gross profit............. 20,942 76,926 13,205 (3,712) 107,361
Selling, general and
administrative expenses..... 22,615 38,218 3,101 (11,927) 52,007
------- -------- ------- -------- --------
Operating income......... (1,673) 38,708 10,104 8,215 55,354
Interest income (expense),
net......................... (713) 8,703 334 763 9,087
------- -------- ------- -------- --------
Earnings before income
taxes.................. (2,386) 47,411 10,438 8,978 64,441
Income tax.................... (788) 19,059 3,862 3,321 25,454
------- -------- ------- -------- --------
Earnings before equity in
earnings of
subsidiaries........... (1,598) 28,352 6,576 5,657 38,987
Equity in earnings of
subsidiaries........... 40,585 6,576 -- (47,161) --
------- -------- ------- -------- --------
Net earnings............. $ 38,987 $ 34,928 $ 6,576 $ (41,504) $ 38,987
======= ======== ======= ======== ========
</TABLE>
F-26
<PAGE> 152
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NONGUARANTOR AND
PARENT COMPANY STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KINETIC CONCEPTS, INC. RECLASSIFICATIONS HISTORICAL
PARENT COMPANY GUARANTOR NON-GUARANTOR AND KINETIC CONCEPTS, INC.
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
---------------------- ------------ ------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Service and rental.......... $ -- $160,214 $46,439 $ -- $206,653
Sales and other............. 91,737 12,244 13,393 (80,584) 36,790
-------- -------- ------- -------- --------
Total revenue....... 91,737 172,458 59,832 (80,584) 243,443
Rental expenses............... 134,137 40,453 (37,170) 137,420
Cost of goods sold............ 47,258 2,869 6,517 (42,915) 13,729
-------- -------- ------- -------- --------
47,258 137,006 46,970 (80,085) 151,149
-------- -------- ------- -------- --------
Gross profit............. 44,479 35,452 12,862 (499) 92,294
Selling, general and
administrative expenses..... 11,115 12,219 3,647 21,521 48,502
-------- -------- ------- -------- --------
Operating income......... 33,364 23,233 9,215 (22,020) 43,792
Interest income (expense),
net......................... (4,040) 6,195 287 2,112 4,554
-------- -------- ------- -------- --------
Earnings before income
taxes.................. 29,324 29,428 9,502 (19,908) 48,346
Income tax.................... 11,436 11,477 4,751 (7,759) 19,905
-------- -------- ------- -------- --------
Earnings before equity in
earnings of
subsidiaries........... 17,888 17,951 4,751 (12,149) 28,441
Equity in earnings of
subsidiaries........... 10,554 4,751 -- (15,305) --
-------- -------- ------- -------- --------
Net earnings............. $ 28,442 $ 22,702 $ 4,751 $ (27,454) $ 28,441
======== ======== ======= ======== ========
</TABLE>
F-27
<PAGE> 153
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NONGUARANTOR AND
PARENT COMPANY STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KINETIC CONCEPTS, INC. RECLASSIFICATIONS HISTORICAL
PARENT COMPANY GUARANTOR NON-GUARANTOR AND KINETIC CONCEPTS, INC.
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
---------------------- ------------ ------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Service and rental.......... $ -- $192,612 $36,220 $ -- $228,832
Sales and other............. 43,763 23,438 9,143 (35,530) 40,814
-------- -------- ------- -------- --------
Total revenue....... 43,763 216,050 45,363 (35,530) 269,646
Rental expenses............... 171,563 34,342 (46,670) 159,235
Cost of goods sold............ 28,784 11,635 3,611 (24,642) 19,388
-------- -------- ------- -------- --------
28,784 183,198 37,953 (71,312) 178,623
-------- -------- ------- -------- --------
Gross profit............. 14,979 32,852 7,410 35,782 91,023
Selling, general and
administrative expenses..... 11,272 21,588 2,365 16,588 51,813
Unusual items................. (81,596) (8,872) 5,600 (84,868)
-------- -------- ------- -------- --------
Operating income......... 85,303 20,136 5,045 13,594 124,078
Interest income (expense),
net......................... (5,225) (8,958) 4,256 5,399 (4,528)
-------- -------- ------- -------- --------
Earnings before income
taxes.................. 80,078 11,178 9,301 18,993 119,550
Income tax.................... 36,369 5,048 5,116 9,416 55,949
Minority interest............. -- 40 -- -- 40
Cumulative effect of
accounting change........... 742 -- -- -- 742
-------- -------- ------- -------- --------
Earnings before equity in
earnings of
subsidiaries........... 44,451 6,170 4,185 9,577 64,383
Equity in earnings of
subsidiaries........... 19,932 4,186 -- (24,118) --
-------- -------- ------- -------- --------
Net earnings............. $ 64,383 $ 10,356 $ 4,185 $ (14,541) $ 64,383
======== ======== ======= ======== ========
</TABLE>
F-28
<PAGE> 154
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NONGUARANTOR AND
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KINETIC CONCEPTS, INC. RECLASSIFICATIONS
PARENT COMPANY GUARANTOR NON- GUARANTOR AND KINETIC CONCEPTS, INC.
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
---------------------- ------------ ------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings.................. $ 38,987 $ 34,928 $ 6,576 $ (41,504) $ 38,987
Adjustments to reconcile net
earnings to net cash
provided by operating
activities:................. (32,912) 30,697 (5,031) 30,426 23,180
-------- -------- -------- -------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES.................. 6,075 65,625 1,545 (11,078) 62,167
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property, plant
and equipment............ (8,474) (13,261) (10,017) 3,969 (27,783)
Decrease in inventory to be
converted into equipment
for short-term rental.... 700 -- -- -- 700
Dispositions of property,
plant and equipment...... -- 132 5,268 -- 5,400
Businesses acquired in
purchase transactions,
net of cash acquired..... -- (1,146) -- -- (1,146)
Excess principal repayment
on discounted notes
receivable............... -- 5,180 -- -- 5,180
Note repaid from principal
shareholder.............. -- 10,000 -- -- 10,000
Decrease (increase) in other
assets................... 23 (6,796) (1,227) (1,960) (9,960)
-------- -------- -------- -------- --------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES........ (7,751) (5,891) (5,976) 2,009 (17,609)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings (repayments) of
capital lease
obligations.............. 466 -- (6) (3) 457
Proceeds from the exercise
of stock options......... 4,264 -- -- -- 4,264
Proceeds (payments) on
intercompany investments
and advances............. 39,442 (51,565) 5,565 6,558 --
Purchase and retirement of
treasury stock........... (35,241) -- -- -- (35,241)
Cash dividends paid to
shareholders............. (6,607) -- -- -- (6,607)
Other....................... (648) 975 (480) 3 (150)
-------- -------- -------- -------- --------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES........ 1,676 (50,590) 5,079 6,558 (37,277)
Effect of exchange rate
changes on cash and cash
equivalents................. -- -- -- (635) (635)
-------- -------- -------- -------- --------
Net increase in cash and cash
equivalents................. -- 9,144 648 (3,146) 6,646
Cash and cash equivalents,
beginning of year........... -- 41,142 13,837 (2,580) 52,399
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END
OF YEAR..................... $ -- $ 50,286 $ 14,485 $ (5,726) $ 59,045
======== ======== ======== ======== ========
</TABLE>
F-29
<PAGE> 155
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NONGUARANTOR AND
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KINETIC CONCEPTS, INC. RECLASSIFICATIONS
PARENT COMPANY GUARANTOR NON-GUARANTOR AND KINETIC CONCEPTS, INC.
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
---------------------- ------------ ------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings.................. $ 28,442 $ 22,702 $ 4,751 $ (27,454) $ 28,441
Adjustments to reconcile net
earnings to net cash
provided by operating
activities.................. (16,632) 44,747 6,740 (6,514) 28,341
-------- -------- ------- -------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES.................. 11,810 67,449 11,491 (33,968) 56,782
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property, plant
and equipment............... 225 (65,148) (7,632) 36,451 (36,104)
Increase in inventory to be
converted into equipment for
short-term rental........... (1,000) -- -- -- (1,000)
Dispositions of property,
plant and equipment......... 209 669 2,353 -- 3,231
Proceeds from sale of
divisions................... -- 7,182 -- -- 7,182
Decrease in finance lease
receivable, net............. -- -- -- 339 339
Decrease (increase) in other
assets...................... (5,012) (9,002) 117 (2,634) (16,531)
-------- -------- ------- -------- --------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES........ (5,578) (66,299) (5,162) 34,156 (42,883)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings (repayments) of
notes payable and long-term
obligations................. (95) (7,805) (68) 7,168 (800)
Borrowings (repayments) of
capital lease obligations... -- -- 55 (119) (64)
Proceeds from the exercise of
stock options............... 4,919 -- -- -- 4,919
Proceeds (payments) on
intercompany investments and
advances.................... (2,596) 16,121 (4,620) (8,905) --
Purchase and retirement of
treasury stock.............. (2,849) -- -- -- (2,849)
Cash dividends paid to
shareholders................ (6,631) -- -- -- (6,631)
Other......................... 1,020 (2,855) 1,203 447 (185)
-------- -------- ------- -------- --------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES........ (6,232) 5,461 (3,430) (1,409) (5,610)
Effect of exchange rate
changes on cash and cash
equivalents................. -- -- -- 869 869
-------- -------- ------- -------- --------
Net increase in cash and cash
equivalents................. -- 6,611 2,899 (352) 9,158
Cash and cash equivalents,
beginning of year........... -- 34,531 10,938 (2,228) 43,241
-------- -------- ------- -------- --------
CASH AND CASH EQUIVALENTS, END
OF YEAR..................... $ -- $ 41,142 $13,837 $ (2,580) $ 52,399
======== ======== ======= ======== ========
</TABLE>
F-30
<PAGE> 156
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NONGUARANTOR AND
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KINETIC CONCEPTS, INC. RECLASSIFICATIONS
PARENT COMPANY GUARANTOR NON- GUARANTOR AND KINETIC CONCEPTS, INC.
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
---------------------- ------------ ------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings................. $ 64,383 $ 10,356 $ 4,185 $ (14,541) $ 64,383
Adjustments to reconcile net
earnings to net cash
provided by operating
activities: (6,206) 38,343 276 (345) 32,068
-------- --------- -------- -------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES....... 58,177 48,699 4,461 (14,886) 96,451
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property, plant
and equipment.............. (4,832) (25,413) (4,801) 21,232 (13,814)
Decrease in inventory to be
converted into equipment
for short-term rental...... 4,250 -- -- -- 4,250
Dispositions of property,
plant and equipment........ 497 2,372 -- -- 2,869
Proceeds from sale of
divisions.................. -- 65,300 -- -- 65,300
Increase in finance lease
receivable, net............ -- (1,561) -- -- (1,561)
Decrease (increase) in other
assets..................... (1,505) 9,690 111 (17,526) (9,230)
-------- --------- -------- -------- ---------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES....... (1,590) 50,388 (4,690) 3,706 47,814
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings (repayments) of
notes payable and long-term
obligations................ 95 (103,399) 68 611 (102,625)
Borrowings (repayments) of
capital lease
obligations................ (176) (4,778) (61) 2,633 (2,382)
Proceeds from the exercise of
stock options.............. 915 -- -- -- 915
Proceeds (payments) on
intercompany investments
and advances............... (51,838) 38,690 472 12,676 --
Purchase and retirement of
treasury stock............. (1,157) -- -- -- (1,157)
Cash dividends paid to
shareholders............... (6,588) -- -- -- (6,588)
Other........................ 2,162 2,841 1,440 (7,234) (791)
-------- --------- -------- -------- ---------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES....... (56,587) (66,646) 1,919 8,686 (112,628)
Effect of exchange rate
changes on cash and cash
equivalents................ -- -- -- 1,324 1,324
-------- --------- -------- -------- ---------
Net increase in cash and cash
equivalents................ -- 32,441 1,690 (1,170) 32,961
Cash and cash equivalents,
beginning of year.......... -- 2,090 9,248 (1,058) 10,280
-------- --------- -------- -------- ---------
CASH AND CASH EQUIVALENTS,
END OF YEAR................ $ -- $ 34,531 $ 10,938 $ (2,228) $ 43,241
======== ========= ======== ======== =========
</TABLE>
F-31
<PAGE> 157
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 45,535 $ 59,045
Accounts and notes receivable, net............................... 74,875 58,241
Inventories...................................................... 21,068 20,042
Prepaid expenses and other....................................... 10,653 6,860
-------- --------
Total current assets..................................... 152,131 144,188
-------- --------
Net property, plant and equipment.................................. 72,535 65,224
Notes receivable................................................... 3,100 --
Goodwill, less accumulated amortization of $13,202 in 1997 and
$12,021 in 1996.................................................. 27,649 13,541
Other assets, less accumulated amortization of $2,942 in 1997 and
$2,837 in 1996................................................... 30,608 30,440
-------- --------
$ 286,023 $253,393
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 5,423 $ 3,974
Current installments of capital lease obligations................ 137 118
Accrued expenses................................................. 33,631 29,792
Income taxes payable............................................. 1,776 2,970
-------- --------
Total current liabilities................................ 40,967 36,854
-------- --------
Capital lease obligations, net of current installments............. 340 396
Deferred income taxes, net......................................... 13,462 5,065
Other.............................................................. 208 --
-------- --------
54,977 42,315
-------- --------
Minority interest.................................................. 220 --
Shareholders' equity:
Common stock; issued and outstanding 42,486 in 1997 and 42,355 in
1996 ......................................................... 42 42
Retained earnings................................................ 235,579 210,816
Cumulative foreign currency translation adjustment............... (4,721) 555
Notes receivable from officers................................... (74) (335)
-------- --------
230,826 211,078
-------- --------
$ 286,023 $253,393
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-32
<PAGE> 158
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ---------------------
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Rental and service.............................. $61,605 $56,638 $184,730 $167,523
Sales and other................................. 14,694 11,332 39,781 32,306
------- ------- -------- --------
Total revenue................................ 76,299 67,970 224,511 199,829
Rental expenses................................... 39,017 36,405 115,633 109,263
Cost of goods sold................................ 6,065 3,856 16,077 11,685
------- ------- -------- --------
45,082 40,261 131,710 120,948
------- ------- -------- --------
Gross profit................................. 31,217 27,709 92,801 78,881
Selling, general and administrative expenses...... 15,052 14,080 44,196 38,791
------- ------- -------- --------
Operating earnings........................... 16,165 13,629 48,605 40,090
Net interest income............................... 442 1,063 1,295 2,937
------- ------- -------- --------
Earnings before income taxes and minority
interest................................... 16,607 14,692 49,900 43,027
Income taxes...................................... 6,643 5,834 19,960 17,168
Minority interest................................. 16 -- 37 --
------- ------- -------- --------
Net earnings................................. $ 9,948 $ 8,858 $ 29,903 $ 25,859
======= ======= ======== ========
Earnings per common and common equivalent
share...................................... $ 0.23 $ 0.19 $ 0.68 $ 0.56
======= ======= ======== ========
Shares used in earnings per share
computations............................... 44,091 45,553 43,772 45,923
======= ======= ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-33
<PAGE> 159
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings........................................................... $29,903 $25,859
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization....................................... 17,144 16,487
Provision for uncollectible accounts receivable..................... 2,533 2,327
Change in assets and liabilities:
Increase in accounts receivable................................... (17,599) (3,159)
Increase in inventories........................................... (598) (2,174)
Increase in prepaid and other assets.............................. (3,693) (4,696)
Increase in accounts payable...................................... 77 1,460
Increase in accrued expenses...................................... 2,145 2,604
Increase (decrease) in income taxes payable....................... (1,194) 968
Increase in deferred income taxes................................. 8,397 613
------- -------
Net cash provided by operating activities...................... 37,115 40,289
------- -------
Cash flows from investing activities:
Additions to property, plant, and equipment............................ (19,794) (18,287)
Increase in inventory to be converted into equipment for short-term
rental.............................................................. (4,210) (850)
Dispositions of property, plant, and equipment......................... 1,809 1,400
Business acquired in purchase transactions, net of cash acquired....... (16,903) --
Decrease (increase) in note receivable from principal shareholder...... (3,000) 10,000
Increase in other assets............................................... (1,115) (961)
------- -------
Net cash used by investing activities.......................... (43,213) (8,698)
------- -------
Cash flows from financing activities:
Proceeds (repayments) of capital lease obligations..................... (307) 488
Proceeds from the exercise of stock options............................ 3,864 4,694
Purchase and retirement of treasury stock.............................. (4,133) (16,599)
Cash dividends paid to shareholders.................................... (4,789) (4,988)
Other.................................................................. 607 (147)
------- -------
Net cash used by financing activities.......................... (4,758) (16,552)
------- -------
Effect of exchange rate changes on cash and cash equivalents............. (2,654) (457)
------- -------
Net increase (decrease) in cash and cash equivalents..................... (13,510) 14,582
Cash and cash equivalents, beginning of year............................. 59,045 52,399
------- -------
Cash and cash equivalents, end of period................................. $45,535 $66,981
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the first nine months for:
Interest............................................................ 111 112
Income taxes........................................................ 9,380 10,544
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-34
<PAGE> 160
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 condensed consolidated
financial statements appearing in this quarterly report on Form 10-Q should be
read in conjunction with the financial statements and notes thereto included in
the Company's latest annual report. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. 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.
(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>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Finished goods..................................... $ 8,414 $ 5,586
Work in progress................................... 3,333 1,893
Raw materials, supplies and parts.................. 18,081 17,113
------- -------
29,828 24,592
Less amounts expected to be converted into
equipment for short-term rental.................. 8,760 4,550
------- -------
Total inventories........................ $21,068 $ 20,042
======= =======
</TABLE>
(3) NOTES RECEIVABLE
Notes receivable includes a $3.0 million note received from James R.
Leininger, M.D., the principal shareholder and chairman of the Company's Board
of Directors, the proceeds of which were used to finance a construction project
for Home Dome, L.L.C., a third party affiliated with Dr. Leininger. The note
carries a variable interest rate which will fluctuate between 6.25% and 10.25%
per annum, and requires quarterly interest payments beginning May 3, 1997.
Monthly principal payments commence March 3, 1998 based on a 20-year note
amortization. The note has a final maturity date of February 3, 2002, at which
time the entire amount of unpaid principal and interest shall be due. The note
is secured by 300,000 shares of the Company's Common Stock and a mortgage on the
property under construction.
(4) ACQUISITIONS/DISPOSITIONS
On July 31, 1997, the Company acquired the outstanding capital stock of
Equi-Tron Mfg., Inc. located in Ontario, Canada, for approximately $3.2 million
in cash plus other consideration. Equi-Tron Mfg., Inc. manufactures a line of
products for bariatric patients used primarily in the home care market.
On April 18, 1997, the Company acquired 80% of the outstanding capital
stock of Ethos Medical Group, Ltd. located in Athlone, Ireland, for
approximately $2.3 million in cash plus other consideration. Ethos manufactures
the Keene Roto Rest(R) trauma bed and other medical devices and rents specialty
support surfaces to caregivers throughout Ireland. Ethos Medical's operating
results are not expected to have a material impact on the Company's results of
operations for 1997. The operating results of Equi-Tron Mfg., Inc. are not
expected to have a material impact on the Company's results of operations for
1997.
F-35
<PAGE> 161
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On February 1, 1997, the Company acquired the assets of H.F. Systems, Inc.
of Los Angeles. H.F. Systems offers a complete line of therapeutic specialty
support surfaces primarily to the California extended care marketplace. The
Company acquired the assets of H.F. Systems in a single transaction for
approximately $8.0 million in cash plus other consideration. H.F. Systems will
be integrated into Kinetic Concepts' extensive distribution system and, as a
result, the Company expects to benefit from the elimination of certain redundant
expenses. H.F. Systems recorded revenue of approximately $7.0 million for 1996
and is not expected to have a material impact on the Company's results of
operations for 1997.
On January 3, 1997 the Company purchased from Trac Medical, Inc., a North
Carolina corporation, all assets and technology rights to the "Access" patient
care device, an environmental control system arm which is mountable on hospital
beds. The Company purchase price of the Access device was approximately $2.0
million in cash plus other consideration.
(5) 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- -----------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Average outstanding common shares....................... 42,447 43,966 42,318 44,209
Average common equivalent shares-dilutive effect of
option shares......................................... 1,644 1,587 1,454 1,714
------- ------- ------- -------
Shares used in earnings per share computations.......... 44,091 45,553 43,772 45,923
======= ======= ======= =======
</TABLE>
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.
(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 have a material effect on the Company's financial statements.
(7) NEW PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary ("basic") earnings per share, the
dilutive effect of stock options will be excluded. The impact is expected to
result in an increase in basic earnings per share for the nine month periods
ended September 30, 1997 and September 30, 1996 of $0.01 and $0.01 per share,
respectively. The impact of Statement 128 on the calculation of fully diluted
earnings per share for these periods is not expected to be material.
F-36
<PAGE> 162
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130, "Reporting Comprehensive Income" which is effective for
fiscal years beginning after December 15, 1997. This new pronouncement
establishes standards for the reporting and display of comprehensive income and
its components in a full set of general purpose financial statements. Under the
provisions of Statement No. 130, all revenue, expenses, gains and losses
recognized during the period are included in income, regardless of whether they
are considered to be results of operations of the period. Items required by
accounting standards to be reported as direct adjustments to paid-in-capital,
retained earnings or other non-income equity accounts are not to be included as
components of comprehensive income. The Company plans to adopt the provisions of
Statement No. 130 effective with the fiscal year beginning January 1, 1998, and
estimates that any impact on the Company's results of operations or financial
position will not be material.
Also, effective for periods beginning after December 15, 1997, the FASB
issued Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information". This statement establishes standards for the way that
public companies report information about operating segments in annual financial
statements as well as interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. Operating segments are components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. The Company plans to adopt the provisions of Statement
No. 131 effective with the fiscal year beginning January 1, 1998 and estimates
that adoption of these provisions will not have a material adverse impact on the
Company's financial position or results of operations.
(8) SUBSEQUENT EVENTS
Subsequent to September 30, 1997, the Company consummated the acquisition
of substantially all of the assets of RIK Medical, L.L.C. ("RIK"), a Delaware
limited liability company. The Company paid approximately $23.3 million for the
acquisition plus an earn-out of up to $2.0 million. RIK is a manufacturer of
non-powered therapeutic support surfaces based in Boulder, Colorado. The RIK
products incorporate several unique and patented components and features.
Subsequent to September 30, 1997, the Company and Fremont Partners, L.P.
and Richard C. Blum & Associates, L.P. (the "Investors") entered into a
Transaction Agreement (the "Transaction Agreement") pursuant to which the
Investors will participate in the recapitalization (the "Recapitalization") of
the Company. The Transaction Agreement provides, among other things, that the
Investors would purchase in the aggregate 8,083,712 newly-issued shares of the
Company's common stock, $.001 par value per share, at a per Share price equal to
$19.25 (the "Stock Purchase"). The proceeds of the Stock Purchase, together with
approximately $540.2 million of aggregate proceeds from certain financings, will
be used by the Company to (i) purchase all of the Shares tendered to the Company
pursuant to the terms of that certain Offer to Purchase dated October 8, 1997
(the "Tender Offer") at a price of $19.25 per Share, net to seller in cash and
(ii) pay all related fees and expenses.
The Transaction Agreement provides that, among other things, as soon as
practicable after the consummation of the Stock Purchase, the purchase of Shares
pursuant to the Tender Offer, the satisfaction of the other conditions set forth
in the Transaction Agreement, and in accordance with the requirements of the
Delaware General Corporation Law and the Revised Uniform Limited Partnership Act
of the State of Delaware (together, "Delaware Law") and the Texas Business
Corporation Act ("Texas Law"), the Investors will be merged with and into the
Company (the "Merger") with the Company as the surviving corporation of the
Merger. The consummation of the Merger is subject to the satisfaction or waiver
of certain conditions including the approval of the Transaction Agreement and
the Merger by the requisite vote of the shareholders of the Company. Under the
Company's articles of incorporation and Texas Law, the affirmative vote of the
holders of two-thirds of the outstanding Shares is required to approve the
Transaction Agreement and the Merger. If the Tender Offer is consummated, the
Investors and Dr. James Leininger will be able to effect the Merger without the
affirmative vote of any other shareholder.
F-37
<PAGE> 163
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
(9) SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL
STATEMENTS (UNAUDITED)
Kinetic Concepts, Inc. has issued $200 million in subordinated debt
securities to finance a tender offer to purchase certain of its common shares
outstanding. In connection with the issuance of these securities, certain of its
subsidiaries (the guarantor subsidiaries) have jointly and severally guaranteed
such debt securities. Certain other subsidiaries (the nonguarantor subsidiaries)
will not guarantee such debt. Separate financial statements and other
disclosures concerning the subsidiary guarantors are not deemed material to
Investors.
The following tables present the unaudited condensed consolidating balance
sheets of Kinetic Concepts, Inc. as a parent company, its guarantor subsidiaries
and its nonguarantor subsidiaries as of September 30, 1997 and 1996 and the
related unaudited condensed consolidating statements of earnings and cash flows
for the nine-month periods ended September 30, 1997 and 1996.
F-38
<PAGE> 164
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KINETIC KINETIC
CONCEPTS, INC. RECLASSIFICATIONS CONCEPTS, INC.
PARENT COMPANY GUARANTOR NON-GUARANTOR AND AND
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
-------------- ------------ ------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... 1,615 22,876 21,044 45,535
Accounts receivable and note receivable,
net...................................... 268 60,763 13,844 74,875
Inventories................................. 18,157 2,292 9,658 (9,039) 21,068
Prepaid expenses and other.................. 6,076 2,807 1,770 10,653
-------- ------- --------- --------
Total current assets................ 262,116 88,738 46,316 (9,039) 152,131
Net property, plant and equipment........... 13,918 73,882 8,625 (23,890) 72,535
Notes receivable............................ 3,000 100 3,100
Goodwill, net............................... 2,869 18,831 5,949 27,649
Other assets, net........................... 9,915 22,080 121 (1,508) 30,608
Intercompany investments and advances....... 242,282 267,443 5,060 (514,785)
-------- ------- --------- --------
Total Assets........................ $298,100 $471,074 $66,071 $(549,222) $286,023
======== ======= ========= ========
LIABILITIES AND CAPITAL ACCOUNTS
Accounts payable.............................. 2,828 604 1,991 5,423
Intercompany payables......................... 59,906 122,107 11,359 (193,372)
Current installments of capital lease
obligations................................. 137 137
Accrued expenses.............................. 4,115 24,321 5,694 (499) 33,631
Income taxes payable.......................... 889 3,404 (2,517) 1,776
-------- ------- --------- --------
Total current liabilities........... 66,986 147,921 22,448 (196,388) 40,967
-------- ------- --------- --------
Capital leases obligations, net of current
installments................................ 289 51 340
Deferred income taxes, net.................... 18,924 (5,462) 13,462
Other......................................... 208 208
-------- ------- --------- --------
Total Liabilities................... 67,275 166,845 22,707 (201,850) 54,977
-------- ------- --------- --------
Minority interest............................. 220 220
Stockholders' Equity.......................... 230,825 304,229 43,144 (347,372) 230,826
-------- ------- --------- --------
Total Liabilities and Equity........ $298,100 $471,074 $66,071 $(549,222) $286,023
======== ======= ========= ========
</TABLE>
F-39
<PAGE> 165
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KINETIC
CONCEPTS, INC. RECLASSIFICATIONS KINETIC
PARENT COMPANY GUARANTOR NON-GUARANTOR AND CONCEPTS, INC.
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
-------------- ------------ ------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $ $ 55,230 $13,215 $ (1,464) $ 66,981
Accounts receivable, net............ 5,246 38,942 12,751 56,939
Inventories......................... 15,488 162 11,940 (6,490) 21,100
Prepaid expenses and other.......... 5,257 2,876 1,429 9,562
-------- -------- ------- --------- --------
Total current assets........ 25,991 97,210 39,335 (7,954) 154,582
Net property, plant and equipment... 12,389 77,445 9,452 (33,898) 65,388
Notes receivable.................... 3,187 3,187
Goodwill, net....................... 3,544 3,836 6,464 13,844
Other assets, net................... 9,574 12,847 (993) 21,428
Intercompany investments and
advances......................... 291,835 (291,835)
-------- -------- ------- --------- --------
Total Assets................ $343,333 $194,525 $55,251 $(334,680) $258,429
======== ======== ======= ========= ========
LIABILITIES AND CAPITAL ACCOUNTS
Accounts payable.................... $ 3,640 $ 386 $ 1,336 $ (1,464) $ 3,898
Intercompany payables............... 114,325 19,307 12,062 (145,694)
Accrued expenses.................... 5,924 17,864 5,844 (574) 29,058
Income taxes payable................ 5,256 2,006 (2,671) 4,591
-------- -------- ------- --------- --------
Total current liabilities... 123,889 42,813 21,248 (150,403) 37,547
-------- -------- ------- --------- --------
Capital leases obligations.......... 494 49 543
Deferred income taxes, net.......... 7,819 (6,430) 1,389
Other...............................
-------- -------- ------- --------- --------
Total Liabilities........... 124,383 50,632 21,297 (156,833) 39,479
-------- -------- ------- --------- --------
Stockholders' Equity................ 216,950 143,893 33,954 (177,847) 218,950
-------- -------- ------- --------- --------
Total Liabilities and
Equity.................... $341,333 $194,525 $55,251 $(334,680) $258,429
======== ======== ======= ========= ========
</TABLE>
F-40
<PAGE> 166
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KINETIC HISTORICAL
CONCEPTS, INC. RECLASSIFICATIONS KINETIC
PARENT COMPANY GUARANTOR NON-GUARANTOR AND CONCEPTS, INC.
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
-------------- ------------ ------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental and Service......... 150,699 34,031 184,730
Sales and other............ 32,018 23,991 15,065 (31,293) 39,781
------- -------- ------- -------- --------
Total revenue...... 32,018 174,690 49,096 (31,293) 224,511
Rental expenses.............. 91,263 30,453 (6,083) 115,633
Cost of goods sold........... 20,633 6,014 8,785 (19,355) 16,077
------- -------- ------- -------- --------
20,633 97,277 39,238 (25,438) 131,710
------- -------- ------- -------- --------
Gross profit............ 11,385 77,413 9,858 (5,855) 92,801
Selling, general and
administrative expenses.... 4,593 36,925 2,678 44,196
------- -------- ------- -------- --------
Operating earnings...... 6,792 40,488 7,180 (5,855) 48,605
Net interest income.......... 173 349 216 557 1,295
------- -------- ------- -------- --------
Earnings before income
taxes and minority
interest................ 6,965 40,837 7,396 (5,298) 49,900
Income tax................... 2,747 15,787 3,285 (1,859) 19,960
Minority interest............ (37) (37)
------- -------- ------- -------- --------
Earnings before equity in
earnings of
subsidiaries............ 4,219 25,049 4,074 (3,439) 29,123
Equity in earnings of
subsidiaries............ 25,684 4,074 (29,758)
------- -------- ------- -------- --------
Net earnings................. $ 29,903 $ 29,123 $ 4,074 $ (33,197) $ 29,903
======= ======== ======= ======== ========
</TABLE>
F-41
<PAGE> 167
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KINETIC HISTORICAL
CONCEPTS, INC. RECLASSIFICATIONS KINETIC
PARENT COMPANY GUARANTOR NON-GUARANTOR AND CONCEPTS, INC.
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
-------------- ------------ ------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental and service.............. 130,554 36,969 167,523
Sales and other................. 31,149 8,273 14,035 (21,151) 32,306
------- ------- ------ ------- -------
Total revenue........... 31,149 138,827 51,004 (21,151) 199,829
Rental expenses................... 82,091 34,788 (7,616) 109,263
Cost of goods sold................ 24,598 554 6,494 (19,961) 11,685
------- ------- ------ ------- -------
24,598 82,645 41,282 (27,577) 120,948
------- ------- ------ ------- -------
Gross profit................. 6,551 56,182 9,722 6,426 78,881
Selling, general and
administrative expenses......... 16,280 20,318 2,193 38,791
Operating earnings.............. (9,729) 35,864 7,529 6,426 40,090
Interest income (expense), net.... (4,407) 6,607 170 567 2,937
------- ------- ------ ------- -------
Earnings before income taxes.... (14,136) 42,471 7,699 6,993 43,027
Income tax........................ (5,513) 16,351 3,465 2,865 17,168
------- ------- ------ ------- -------
Earnings before equity in
earnings of subsidiaries..... (8,623) 26,120 4,234 4,128 25,859
Equity in earnings of
subsidiaries................. 34,482 4,234 (38,716)
------- ------- ------ ------- -------
Net earnings.................... 25,859 30,354 4,234 (34,588) 25,859
======= ======= ====== ======= =======
</TABLE>
F-42
<PAGE> 168
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(THOUSANDS)
<TABLE>
<CAPTION>
KINETIC
CONCEPTS, INC. RECLASSIFICATIONS KINETIC
PARENT COMPANY GUARANTOR NON-GUARANTOR AND CONCEPTS, INC.
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
-------------- ------------ ------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.......................... 29,903 29,123 4,074 (33,197) 29,903
Adjustments to reconcile net earnings
to net cash provided by operating
activities.......................... (33,650) 5,337 4,363 31,162 7,212
------- ------- ------ ------- -------
Net cash provided by operating
activities.......................... (3,747) 34,460 8,437 (2,035) 37,115
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and
equipment........................ 923 (14,910) (3,445) (2,362) (19,794)
Increase in inventory to be
converted into equipment for
short-term rental................ (4,210) (4,210)
Dispositions of property, plant and
equipment........................ 264 1,545 1,809
Businesses acquired in purchase
transactions, net of cash
acquired......................... (16,903) (16,903)
Decrease in note receivable from
principal shareholder............ (3,000) (3,000)
Decrease (increase) in other
assets........................... 808 534 125 (2,582) (1,115)
------- ------- ------ ------- -------
Net cash used in investing
activities.......................... (5,479) (31,015) (1,775) (4,944) (43,213)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (repayments) of capital
lease obligations................ (248) 3 (62) (307)
Proceeds from the exercise of stock
options.......................... 3,864 3,864
Proceeds (payments) on intercompany
investments and advances......... 21,036 (28,257) 4,748 2,473
Purchase and retirement of treasury
stock............................ (4,133) (4,133)
Cash dividends paid to
shareholders..................... (4,789) (4,789)
Other............................... (4,889) (2,598) (4,854) 12,948 607
------- ------- ------ ------- -------
Net cash provided (used) by financing
activities.......................... 10,841 (30,855) (103) 15,359 (4,758)
Effect of exchange rate changes on
cash and cash equivalents........... (2,654) (2,654)
------- ------- ------ ------- -------
Net increase in cash and cash
equivalents......................... 1,615 (27,410) 6,559 5,726 (13,510)
Effect of Unusual Items
Cash and cash equivalents, beginning
of period........................... 50,286 14,485 (5,726) 59,045
------- ------- ------ ------- -------
Cash and cash equivalents, end of
period.............................. 1,615 22,876 21,044 45,535
======= ======= ====== ======= =======
</TABLE>
F-43
<PAGE> 169
KINETIC CONCEPTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING GUARANTOR, NONGUARANTOR AND
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
KINETIC
CONCEPTS, INC. RECLASSIFICATIONS KINETIC
PARENT COMPANY GUARANTOR NON-GUARANTOR AND CONCEPTS, INC.
BORROWER SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
-------------- ------------ ------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.......................... 25,859 30,354 4,234 (34,588) 25,859
Adjustments to reconcile net earnings
to net cash provided by operating
activities.......................... (37,368) 31,682 (7,856) 27,972 14,430
------- ------- ------ ------- -------
Net cash (used in) provided by
operating activities................ (11,509) 62,036 (3,622) (6,616) 40,289
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and
equipment........................ (5,750) (8,841) (4,962) 1,266 (18,287)
Increase in inventory to be
converted into equipment for
short-term rental................ (850) (850)
Dispositions of property, plant and
equipment........................ 1,400 1,400
Decrease (increase) in note
receivable from principal
shareholder...................... 10,000 10,000
Decrease (increase) in other
assets........................... 1,289 746 (970) (2,026) (961)
------- ------- ------ ------- -------
Net cash (used in) provided by
investing activities................ (5,311) 1,905 (4,532) (760) (8,698)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (repayments) of capital
lease obligations................ 494 (6) 488
Proceeds from the exercise of stock
options.......................... 4,694 4,694
Proceeds (payments) on intercompany
investments and advances......... 33,558 (48,230) 7,730 6,942
Purchase and retirement of treasury
stock............................ (16,599) (16,599)
Cash dividends paid to
shareholders..................... (4,988) (4,988)
Other............................... (339) (1,623) (192) 2,007 (147)
------- ------- ------ ------- -------
Net cash provided (used) by financing
activities.......................... 16,820 (49,953) 7,532 8,949 (16,552)
Effect of exchange rate changes on
cash and cash equivalents........... (457) (457)
------- ------- ------ ------- -------
Net increase in cash and cash
equivalents......................... 14,088 (622) 1,116 14,582
Cash and cash equivalents, beginning
of period........................... 41,142 13,837 (2,580) 52,399
------- ------- ------ ------- -------
Cash and cash equivalents, end of
period.............................. 55,230 13,215 (1,464) 66,981
======= ======= ====== ======= =======
</TABLE>
F-44
<PAGE> 170
======================================================
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFER MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
IN CONNECTION WITH THE OFFERING MADE HEREBY AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES IN ANY JURISDICTION IN
WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER
OF TRANSMITTAL OR BOTH TOGETHER NOR ANY EXCHANGE OF SECURITIES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY INFERENCE THAT THERE HAS NOT BEEN ANY
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 5
Risk Factors.......................... 18
Purpose of the Exchange Offer......... 27
Resale of the Exchange Notes.......... 28
Plan of Distribution.................. 28
The Exchange Offer.................... 29
Exchange Agent........................ 35
Use of Proceeds....................... 36
Capitalization........................ 37
Unaudited Pro Forma Condensed
Consolidated Financial Statements... 38
Selected Historical Consolidated
Financial Data...................... 48
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 50
Business.............................. 60
Management............................ 75
Executive Compensation................ 76
Principal Shareholders................ 83
Description of Notes.................. 88
Certain Tax Considerations............ 117
Book-Entry; Delivery and Form......... 120
Available Information................. 121
Legal Matters......................... 122
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
KINETIC CONCEPTS, INC.
OFFER TO EXCHANGE
9 5/8% SENIOR SUBORDINATED NOTES
DUE 2007, SERIES B
FOR ANY AND ALL OUTSTANDING
9 5/8% SENIOR SUBORDINATED NOTES
DUE 2007, SERIES A
[LOGO]
------------------------
PROSPECTUS
------------------------
, 1998
======================================================
<PAGE> 171
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 2.02-1 of the Texas Business Corporation Act (the "Act") empowers a
Texas corporation to indemnify any person who was, is, or is threatened to be
made, a named defendant or respondent to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such action, suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding, because the person is or was a director of such corporation, and any
person who, while serving as a director of such corporation, was serving at the
request of such corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another
corporation or enterprise. This indemnity may include judgments, penalties
(including excise and similar taxes), fines, settlements and reasonable expenses
actually incurred by such person in connection with such action, suit or
proceeding, provided that he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Indemnification of a director is not permitted
if the person is found liable for willful and intentional misconduct in the
performance of his duty to the corporation, is found to be liable on the basis
of the receipt of an improper benefit or is found liable to the corporation. A
Texas corporation is also permitted to indemnify and advance expenses to
officers, employees and agents who are not directors to such extent as may be
provided by its articles of incorporation, bylaws, action of board of directors,
a contract or required by common law. No indemnification shall be permitted if
the person shall have been found liable for willful or intentional misconduct in
the performance of his duty to the corporation. A Texas corporation is required
to indemnify a director or officer against reasonable expenses incurred by him
in connection with a proceeding in which he is named as a defendant or
respondent because he is or was a director or officer if he has been wholly
successful, on the merits or otherwise, in defense of the proceeding.
Article VIII of the Bylaws of the Company provides for indemnification of
the directors and officers of the Company to the fullest extent permitted by
law, as now in effect or later amended. Article VIII, Section I of the Bylaws
provides that expenses incurred by a director or officer in defending a suit or
other similar proceeding will be paid by the Company upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it is ultimately determined that such director or officer is not entitled to be
indemnified by the Company.
The Company also has provided liability insurance for each director and
officer for certain losses arising from claims or charges made against them
while acting in their capacities as directors or officers of the Company.
Additionally, Article Seven of the Company's Restated Articles of
Incorporation limits the liability of the Company's directors under certain
circumstances. Article Seven states:
A Director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for an act or
omission in the Director's capacity as a director, except for liability
for (a) a breach of the Director's duty of loyalty to the Corporation or
its shareholders, (b) an act or omission not in good faith or that
involves intentional misconduct or a knowing violation of the law, (c) a
transaction from which the Director received an improper benefit,
whether or not the benefit resulted from an action taken within the
scope of the Director's office, (d) an act or omission for which the
liability of the Director is expressly provided for by statute, or (e)
an act related to an unlawful stock repurchase or payment of a dividend.
If the Act hereafter is amended to authorize further elimination of the
liability of directors, then the liability of a director of the
Corporation, in addition to the limitation on the personal liability
provided herein, shall be limited to the fullest extent permitted by the
Act as amended. Any repeal or modification of this Article Seven by the
shareholders of the Corporation shall be prospective
II-1
<PAGE> 172
only, and shall not adversely affect any limitation on the personal
liability of a Director at the time of such repeal or modification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<C> <S>
**3.1 Restated Articles of Incorporation of KCI (filed as Exhibit 3.2 to KCI's
Registration Statement on Form S-1 (Registration No. 33-21353), as amended, and
incorporated herein by reference).
**3.2 Restated By-Laws of KCI (filed as Exhibit 3.3 to KCI's Registration Statement on
Form S-1 (Registration No. 33-21353), as amended, and incorporated herein by
reference).
*3.3 Articles of Organization of KCI Properties Limited.
*3.4 Regulations of KCI Properties Limited.
*3.5 Articles of Organization of KCI Real Property Limited.
*3.6 Regulations of KCI Real Property Limited.
*3.7 Certificate of Incorporation of KCI Holding Company, Inc.
*3.8 By-Laws of KCI Holding Company, Inc.
*3.9 Certificate of Incorporation of KCI-RIK Acquisition Corp.
*3.10 By-Laws of KCI-RIK Acquisition Corp.
*3.11 Certificate of Incorporation of KCI International, Inc.
*3.12 By-Laws of KCI International, Inc.
*3.13 Certificate of Incorporation of KCI Air, Inc.
*3.14 By-Laws of KCI Air, Inc.
*3.15 Certificate of Incorporation of Plexus Enterprises, Inc.
*3.16 By-Laws of Plexus Enterprises, Inc.
*3.17 Certificate of Incorporation of Medical Retro Design, Inc.
*3.18 By-Laws of Medical Retro Design, Inc.
*3.19 Certificate of Incorporation of KCI Therapeutic Services, Inc.
*3.20 By-Laws of KCI Therapeutic Services, Inc.
*3.21 Certificate of Incorporation of KCI New Technologies, Inc.
*3.22 By-Laws of KCI New Technologies, Inc.
*4.1 Indenture dated November 5, 1997 by and among KCI, the Guarantors and Marine
Midland Bank .
*4.2 Registration Rights Agreement dated as of November 5, 1997, by and among KCI, the
Guarantors and the Initial Purchasers.
*4.3 Form of Note (included as Exhibit B to the Indenture filed as Exhibit 4.1 to this
Registration Statement).
*4.4 Form of Letter of Transmittal.
***5.1 Opinion of Cox & Smith Incorporated.
**10.1 Agreement dated September 29, 1987, by and between KCI and Hill-Rom Company, Inc.
(filed as Exhibit 10.7 to KCI's Registration Statement on Form S-1, as amended
(Registration No. 33-21353), and incorporated herein by reference).
**10.2 Employment and Non-Competition Agreement dated December 26, 1986, by and between
KCI and James R. Leininger, M.D. (filed as Exhibit 10.10 to KCI's Registration
Statement on Form S-1, as amended (Registration No. 33-21353), and incorporated
herein by reference).
**10.3 Contract dated September 30, 1985, by and between Ryder Truck Rental, Inc. and KCI
regarding the rental of delivery trucks (filed as Exhibit 10.23 to KCI's
Registration Statement on Form S-1, as amended (Registration No. 33-21353), and
incorporated herein by reference).
**10.4 1988 Kinetic Concepts, Inc. Directors Stock Option Plan (filed as Exhibit 10.26 to
KCI's Registration Statement on Form S-1, as amended (Registration No. 33-21353),
and incorporated herein by reference).
**10.5 Kinetic Concepts, Inc. Employee Stock Ownership Plan and Trust dated January 1,
1989 (filed as Exhibit 10.6 to KCI's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1989, and incorporated herein by reference).
</TABLE>
II-2
<PAGE> 173
<TABLE>
<C> <S>
**10.6 1987 Key Contributor Stock Option Plan, as amended, dated October 27, 1989 (filed
as Exhibit 10.9 to KCI's Annual Report on Form 10-K for the year ended December
31, 1989, and incorporated herein by reference).
**10.7 Amendment No. 1 to Asset Purchase Agreement dated September 30, 1994 by and among
KCI, KCI Therapeutic Services, Inc., a Delaware corporation, MEDIQ Incorporated, a
Delaware corporation, PRN Holdings, Inc., a Delaware corporation and MEDIQ/PRN
Life Support Services-I, Inc., a Delaware corporation (filed as Exhibit 2.2 to
KCI's Form 8-K dated October 17, 1994, and incorporated herein by reference).
**10.8 Credit Agreement dated as of May 8, 1995 by and among KCI and Bank of America
National Trust and Savings Association, as Agent (filed as Exhibit 10 to KCI's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, and
incorporated herein by reference).
**10.9 Purchasing Agreement, dated February 1, 1994, between KCI, KCI Therapeutic
Services, Inc. and Voluntary Hospitals of America, Inc.
**10.10 Rental/Purchasing Agreement, dated April 1, 1993 between KCI, KCI Therapeutic
Services, Inc. and AmHS Purchasing Partners, L.P.
**10.11 KCI Management 1994 Incentive Program
**10.12 KCI Employee Benefits Trust Agreement
**10.13 Letter, dated September 19, 1994, from KCI to Raymond R. Hannigan outlining the
terms of his employment.
**10.14 Letter, dated November 22, 1994, from KCI to Christopher M. Fashek outlining the
terms of his employment.
**10.15 Option Agreement, dated November 21, 1994, between Dr. James R. Leininger, Cecilia
Leininger and Raymond R. Hannigan.
**10.16 Option Agreement, dated August 23, 1995, between Dr. James R. Leininger, Cecilia
Leininger and Bianca A. Rhodes.
**10.17 Stock Purchase Agreement dated June 15, 1995 among KCI Financial Services, Inc.,
KCI, Cura Capital Corporation, MG Acquisition Corporation and the Principal
Shareholders of Cura Capital Corporation (filed as Exhibit 10 to KCI's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995, and incorporated herein
by reference).
**10.18 Promissory Note dated August 21, 1995 in the principal amount of $10,000,000
payable to James R. Leininger, M.D. to the order of Kinetic Concepts, Inc., a
Texas corporation (filed as Exhibit 2.2 to KCI's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995, and incorporated herein by reference).
**10.19 Stock Pledge Agreement dated August 21, 1995 by and between James R. Leininger,
M.D. and KCI (filed as Exhibit 2.3 to KCI's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, and incorporated herein by reference).
**10.20 Executive Committee Stock Ownership Plan (filed as Exhibit 10 to KCI's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995, and incorporated herein
by reference).
**10.21 Deferred Compensation Plan (filed as Exhibit 99.2 to KCI's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by
reference).
**10.22 Kinetic Concepts, Inc. Senior Executive Stock Option Plan.
**10.23 Form of Option Instrument with respect to Senior Executive Stock Option Plan.
*10.24 Transaction Agreement dated as of October 2, 1997, by and among KCI, Fremont
Purchaser II, Inc. and RCBA Purchaser I, L.P.
*10.25 Letter Agreement dated as November 5, 1997, by and among KCI, Fremont Purchaser
II, Inc. and RCBA Purchaser I, L.P.
*10.26 Agreement Among Shareholders dated as of November 5, 1997, by and among KCI,
Fremont Partners, L.P., Richard C. Blum & Associates, L.P., James R. Leininger,
M.D., The Common Fund for Non-Profit Organizations, Stinson Capital Partners II,
L.P., RCBA-KCI Capital Partners, L.P., RCBA Purchaser I, L.P., Fremont Acquisition
Company, II, L.L.C., Fremont Acquisition Company, IIA, L.L.C., Fremont Offshore
Partners, L.P., Fremont Partners Side-By-Side, L.P., Fremont-KCI Co-Investment
Company, L.L.C., and Fremont Purchaser II, Inc.
*10.27 Credit Agreement dated as of November 3, 1997, by and among KCI, Bank of America
National Trust and Savings Association, as Administrative Agent, and Bankers Trust
Company as Syndication Agent, and certain other institutions party thereto.
*10.28 Purchase Agreement dated as of November 5, 1997, by and among KCI, the Guarantors
and the Initial Purchasers.
</TABLE>
II-3
<PAGE> 174
<TABLE>
<C> <S>
*12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges.
*21.1 Subsidiaries of KCI.
*23.1 Consent of KPMG Peat Marwick LLP.
*25.1 Form T-1 Statement of Eligibility and Qualification of Marine Midland Bank, as
Trustee.
</TABLE>
- ---------------
* Filed herewith.
** Incorporated by reference to the filing indicated.
*** To be filed by amendment.
ITEM 22. UNDERTAKINGS
A. Each of the undersigned registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
B. Each of the undersigned registrants hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of each
of the registrants pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants of expenses
incurred or paid by a director, officer or controlling person in the successful
defense of any action, suit or proceedings) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by any of
them is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
D. Each of the undersigned registrants hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE> 175
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Antonio, Texas, on December 18, 1997.
KINETIC CONCEPTS, INC.
By: /s/ RAYMOND R. HANNIGAN
------------------------------------
Raymond R. Hannigan,
Chief Executive Officer and
President
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers,
directors and/or managers of each of the registrants hereby constitutes and
appoints Raymond R. Hannigan and Dennis E. Noll, or either of them, as his true
and lawful attorneys-in-fact and agents, with full power of substitution, for
him and in his name, place and stead, in any and all capacities, to sign the
Registration Statement filed herewith and any and all amendments to said
Registration Statement filed herewith and any and all amendments to said
Registration Statement (including post-effective amendments and registration
statements filed pursuant to Rule 462 and otherwise), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- ---------------------------------------- -------------------------------- ------------------
<C> <S> <C>
/s/ RAYMOND R. HANNIGAN Chief Executive Officer, December 18, 1997
- ---------------------------------------- President (Principal Executive
Raymond R. Hannigan Officer) and Director
/s/ MARTIN J. LANDON Vice President-Accounting, December 18, 1997
- ---------------------------------------- (Principal Financial and
Martin J. Landon Accounting Officer)
/s/ JAMES T. FARRELL Director December 18, 1997
- ----------------------------------------
James T. Farrell
Director
- ----------------------------------------
James R. Leininger, M.D.
/s/ ROBERT JAUNICH II Director December 18, 1997
- ----------------------------------------
Robert Jaunich II
/s/ N. COLIN LIND Director December 18, 1997
- ----------------------------------------
N. Colin Lind
/s/ JEFFREY W. UBBEN Director December 18, 1997
- ----------------------------------------
Jeffrey W. Ubben
</TABLE>
II-5
<PAGE> 176
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Antonio, Texas, on December 18, 1997.
KCI PROPERTIES LIMITED
By: /s/ FRANKLIN B. STAGG
------------------------------------
Franklin B. Stagg,
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- ---------------------------------------- -------------------------------- ------------------
<C> <S> <C>
/s/ FRANKLIN B. STAGG President (Principal Executive December 18, 1997
- ---------------------------------------- Officer)
Franklin B. Stagg
/s/ MARTIN J. LANDON Vice President and Treasurer December 18, 1997
- ---------------------------------------- (Principal Financial and
Martin J. Landon Accounting Officer)
Manager
- ----------------------------------------
James R. Leininger, M.D.
/s/ PETER R. LEININGER, M.D. Manager December 18, 1997
- ----------------------------------------
Peter R. Leininger, M.D.
/s/ DENNIS E. NOLL Manager December 18, 1997
- ----------------------------------------
Dennis E. Noll
</TABLE>
II-6
<PAGE> 177
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Antonio, Texas, on December 18, 1997.
KCI REAL PROPERTY LIMITED
By: /s/ FRANKLIN B. STAGG
------------------------------------
Franklin B. Stagg,
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- ---------------------------------------- -------------------------------- ------------------
<C> <S> <C>
/s/ FRANKLIN B. STAGG President (Principal Executive December 18, 1997
- ---------------------------------------- Officer)
Franklin B. Stagg
/s/ MARTIN J. LANDON Vice President and Treasurer December 18, 1997
- ---------------------------------------- (Principal Financial and
Martin J. Landon Accounting Officer)
Manager
- ----------------------------------------
James R. Leininger, M.D.
/s/ PETER A. LEININGER, M.D. Manager December 18, 1997
- ----------------------------------------
Peter A. Leininger, M.D.
/s/ DENNIS E. NOLL Manager December 18, 1997
- ----------------------------------------
Dennis E. Noll
</TABLE>
II-7
<PAGE> 178
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Antonio, Texas, on December 18, 1997.
KCI HOLDING COMPANY, INC.
By: /s/ RAYMOND R. HANNIGAN
------------------------------------
Raymond R. Hannigan,
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- ---------------------------------------- -------------------------------- ------------------
<C> <S> <C>
/s/ RAYMOND R. HANNIGAN President (Principal Executive December 18, 1997
- ---------------------------------------- Officer) and Director
Raymond R. Hannigan
/s/ MARTIN J. LANDON Vice President-Accounting, December 18, 1997
- ---------------------------------------- (Principal Financial and
Martin J. Landon Accounting Officer)
/s/ PETER A. LEININGER, M.D. Director December 18, 1997
- ----------------------------------------
Peter A. Leininger, M.D.
/s/ DENNIS E. NOLL Director December 18, 1997
- ----------------------------------------
Dennis E. Noll
</TABLE>
II-8
<PAGE> 179
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Antonio, Texas, on December 18, 1997.
KCI-RIK ACQUISITION CORP.
By: /s/ RAYMOND R. HANNIGAN
------------------------------------
Raymond R. Hannigan,
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- ------------------------------------------ ------------------------------ ------------------
<C> <S> <C>
/s/ RAYMOND R. HANNIGAN President (Principal Executive December 18, 1997
- ------------------------------------------ Officer) and Director
Raymond R. Hannigan
/s/ MARTIN J. LANDON Treasurer (Principal Financial December 18, 1997
- ------------------------------------------ and Accounting Officer) and
Martin J. Landon Director
/s/ DENNIS E. NOLL Director December 18, 1997
- ------------------------------------------
Dennis E. Noll
</TABLE>
II-9
<PAGE> 180
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Antonio, Texas, on December 18, 1997.
KCI INTERNATIONAL, INC.
By: /s/ FRANK DILAZZARO
------------------------------------
Frank DiLazzaro,
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- ------------------------------------------ ------------------------------ ------------------
<C> <S> <C>
/s/ FRANK DILAZZARO President (Principal Executive December 18, 1997
- ------------------------------------------ Officer) and Director
Frank DiLazzaro
/s/ MARTIN J. LANDON Vice President and Treasurer December 18, 1997
- ------------------------------------------ (Principal Financial and
Martin J. Landon Accounting Officer)
Director
- ------------------------------------------
James R. Leininger, M.D.
/s/ PETER A. LEININGER, M.D. Director December 18, 1997
- ------------------------------------------
Peter A. Leininger, M.D.
/s/ RAYMOND R. HANNIGAN Director December 18, 1997
- ------------------------------------------
Raymond R. Hannigan
</TABLE>
II-10
<PAGE> 181
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Antonio, Texas, on December 18, 1997.
KCI AIR, INC.
By: /s/ FRANKLIN B. STAGG
------------------------------------
Franklin B. Stagg,
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- ------------------------------------------ ------------------------------ ------------------
<C> <S> <C>
/s/ FRANKLIN B. STAGG President (Principal Executive December 18, 1997
- ------------------------------------------ Officer)
Franklin B. Stagg
/s/ MARTIN J. LANDON Vice President and Treasurer December 18, 1997
- ------------------------------------------ (Principal Financial and
Martin J. Landon Accounting Officer)
Director
- ------------------------------------------
James R. Leininger, M.D.
/s/ PETER A. LEININGER, M.D. Director December 18, 1997
- ------------------------------------------
Peter A. Leininger, M.D.
/s/ RAYMOND R. HANNIGAN Director December 18, 1997
- ------------------------------------------
Raymond R. Hannigan
</TABLE>
II-11
<PAGE> 182
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Antonio, Texas, on December 18, 1997.
PLEXUS ENTERPRISES, INC.
By: /s/ RAYMOND R. HANNIGAN
------------------------------------
Raymond R. Hannigan,
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- ------------------------------------------ ------------------------------ ------------------
<C> <S> <C>
/s/ RAYMOND R. HANNIGAN President (Principal Executive December 18, 1997
- ------------------------------------------ Officer) and Director
Raymond R. Hannigan
/s/ MARTIN J. LANDON Vice President and Treasurer December 18, 1997
- ------------------------------------------ (Principal Financial and
Martin J. Landon Accounting Officer)
/s/ PETER A. LEININGER, M.D. Director December 18, 1997
- ------------------------------------------
Peter A. Leininger, M.D.
/s/ DENNIS E. NOLL Director December 18, 1997
- ------------------------------------------
Dennis E. Noll
</TABLE>
II-12
<PAGE> 183
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Antonio, Texas, on December 18, 1997.
MEDICAL RETRO DESIGN, INC.
By: /s/ RAYMOND R. HANNIGAN
------------------------------------
Raymond R. Hannigan,
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- ------------------------------------------ ------------------------------ ------------------
<C> <S> <C>
/s/ RAYMOND R. HANNIGAN President (Principal Executive December 18, 1997
- ------------------------------------------ Officer)
Raymond R. Hannigan
/s/ MARTIN J. LANDON Treasurer (Principal Financial December 18, 1997
- ------------------------------------------ and Accounting Officer)
Martin J. Landon
- ------------------------------------------ Director
James R. Leininger, M.D.
/s/ PETER A. LEININGER, M.D. Director December 18, 1997
- ------------------------------------------
Peter A. Leininger, M.D.
/s/ DENNIS E. NOLL Director December 18, 1997
- ------------------------------------------
Dennis E. Noll
</TABLE>
II-13
<PAGE> 184
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Antonio, Texas, on December 18, 1997.
KCI THERAPEUTIC SERVICES, INC.
By: /s/ CHRISTOPHER M. FASHEK
------------------------------------
Christopher M. Fashek,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- ------------------------------------------ ------------------------------ ------------------
<C> <S> <C>
/s/ CHRISTOPHER M. FASHEK President and Chief Executive December 18, 1997
- ------------------------------------------ Officer (Principal Executive
Christopher M. Fashek Officer)
/s/ MARTIN J. LANDON Treasurer (Principal Financial December 18, 1997
- ------------------------------------------ and Accounting Officer)
Martin J. Landon
Director
- ------------------------------------------
James R. Leininger, M.D.
/s/ PETER A. LEININGER, M.D. Director December 18, 1997
- ------------------------------------------
Peter A. Leininger, M.D.
/s/ DENNIS E. NOLL Director December 18, 1997
- ------------------------------------------
Dennis E. Noll
</TABLE>
II-14
<PAGE> 185
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Antonio, Texas, on December 18, 1997.
KCI NEW TECHNOLOGIES, INC.
By: /s/ RAYMOND R. HANNIGAN
------------------------------------
Raymond R. Hannigan,
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- ------------------------------------------ ------------------------------ ------------------
<C> <S> <C>
/s/ RAYMOND R. HANNIGAN President (Principal Executive December 18, 1997
- ------------------------------------------ Officer) and Director
Raymond R. Hannigan
/s/ MARTIN J. LANDON Vice President and Treasurer December 18, 1997
- ------------------------------------------ (Principal Financial and
Martin J. Landon Accounting Officer)
/s/ FRANK DILAZZARO Director December 18, 1997
- ------------------------------------------
Frank DiLazzaro
/s/ DENNIS E. NOLL Director December 18, 1997
- ------------------------------------------
Dennis E. Noll
</TABLE>
II-15
<PAGE> 186
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER: EXHIBIT NUMBER
- ------- ---------------------------------------------------------------------------- ------
<C> <S> <C>
**3.1 Restated Articles of Incorporation of KCI (filed as Exhibit 3.2 to KCI's
Registration Statement on Form S-1 (Registration No. 33-21353), as amended,
and incorporated herein by reference).......................................
**3.2 Restated By-Laws of KCI (filed as Exhibit 3.3 to KCI's Registration
Statement on Form S-1 (Registration No. 33-21353), as amended, and
incorporated herein by reference)...........................................
*3.3 Articles of Organization of KCI Properties Limited..........................
*3.4 Regulations of KCI Properties Limited.......................................
*3.5 Articles of Organization of KCI Real Property Limited.......................
*3.6 Regulations of KCI Real Property Limited....................................
*3.7 Certificate of Incorporation of KCI Holding Company, Inc. ..................
*3.8 By-Laws of KCI Holding Company, Inc. .......................................
*3.9 Certificate of Incorporation of KCI-RIK Acquisition Corp. ..................
*3.10 By-Laws of KCI-RIK Acquisition Corp. .......................................
*3.11 Certificate of Incorporation of KCI International, Inc. ....................
*3.12 By-Laws of KCI International, Inc. .........................................
*3.13 Certificate of Incorporation of KCI Air, Inc. ..............................
*3.14 By-Laws of KCI Air, Inc. ...................................................
*3.15 Certificate of Incorporation of Plexus Enterprises, Inc. ...................
*3.16 By-Laws of Plexus Enterprises, Inc. ........................................
*3.17 Certificate of Incorporation of Medical Retro Design, Inc. .................
*3.18 By-Laws of Medical Retro Design, Inc. ......................................
*3.19 Certificate of Incorporation of KCI Therapeutic Services, Inc. .............
*3.20 By-Laws of KCI Therapeutic Services, Inc. ..................................
*3.21 Certificate of Incorporation of KCI New Technologies, Inc. .................
*3.22 By-Laws of KCI New Technologies, Inc. ......................................
*4.1 Indenture dated November 5, 1997 by and among KCI, the Guarantors and Marine
Midland Bank................................................................
*4.2 Registration Rights Agreement dated as of November 5, 1997, by and among
KCI, the Guarantors and the Initial Purchasers..............................
*4.3 Form of Note (included as Exhibit B to the Indenture filed as Exhibit 4.1 to
this Registration Statement)................................................
*4.4 Form of Letter of Transmittal...............................................
***5.1 Opinion of Cox & Smith Incorporated.........................................
**10.1 Agreement dated September 29, 1987, by and between KCI and Hill-Rom Company,
Inc. (filed as Exhibit 10.7 to KCI's Registration Statement on Form S-1, as
amended (Registration No. 33-21353), and incorporated herein by
reference)..................................................................
**10.2 Employment and Non-Competition Agreement dated December 26, 1986, by and
between KCI and James R. Leininger, M.D. (filed as Exhibit 10.10 to KCI's
Registration Statement on Form S-1, as amended (Registration No. 33-21353),
and incorporated herein by reference).......................................
**10.3 Contract dated September 30, 1985, by and between Ryder Truck Rental, Inc.
and KCI regarding the rental of delivery trucks (filed as Exhibit 10.23 to
KCI's Registration Statement on Form S-1, as amended (Registration No.
33-21353), and incorporated herein by reference)............................
**10.4 1988 Kinetic Concepts, Inc. Directors Stock Option Plan (filed as Exhibit
10.26 to KCI's Registration Statement on Form S-1, as amended (Registration
No. 33-21353), and incorporated herein by reference)........................
</TABLE>
<PAGE> 187
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER: EXHIBIT NUMBER
- ------- ---------------------------------------------------------------------------- ------
<C> <S> <C>
**10.5 Kinetic Concepts, Inc. Employee Stock Ownership Plan and Trust dated January
1, 1989 (filed as Exhibit 10.6 to KCI's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1989, and incorporated herein by reference)......
**10.6 1987 Key Contributor Stock Option Plan, as amended, dated October 27, 1989
(filed as Exhibit 10.9 to KCI's Annual Report on Form 10-K for the year
ended December 31, 1989, and incorporated herein by reference)..............
**10.7 Amendment No. 1 to Asset Purchase Agreement dated September 30, 1994 by and
among KCI, KCI Therapeutic Services, Inc., a Delaware corporation, MEDIQ
Incorporated, a Delaware corporation, PRN Holdings, Inc., a Delaware
corporation and MEDIQ/PRN Life Support Services-I, Inc., a Delaware
corporation (filed as Exhibit 2.2 to KCI's Form 8-K dated October 17, 1994,
and incorporated herein by reference).......................................
**10.8 Credit Agreement dated as of May 8, 1995 by and among KCI and Bank of
America National Trust and Savings Association, as Agent (filed as Exhibit
10 to KCI's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995, and incorporated herein by reference).................................
**10.9 Purchasing Agreement, dated February 1, 1994, between KCI, KCI Therapeutic
Services, Inc. and Voluntary Hospitals of America, Inc. ....................
**10.10 Rental/Purchasing Agreement, dated April 1, 1993 between KCI, KCI
Therapeutic Services, Inc. and AmHS Purchasing Partners, L.P. ..............
**10.11 KCI Management 1994 Incentive Program.......................................
**10.12 KCI Employee Benefits Trust Agreement.......................................
**10.13 Letter, dated September 19, 1994, from KCI to Raymond R. Hannigan outlining
the terms of his employment.................................................
**10.14 Letter, dated November 22, 1994, from KCI to Christopher M. Fashek outlining
the terms of his employment.................................................
**10.15 Option Agreement, dated November 21, 1994, between Dr. James R. Leininger,
Cecilia Leininger and Raymond R. Hannigan...................................
**10.16 Option Agreement, dated August 23, 1995, between Dr. James R. Leininger,
Cecilia Leininger and Bianca A. Rhodes......................................
**10.17 Stock Purchase Agreement dated June 15, 1995 among KCI Financial Services,
Inc., KCI, Cura Capital Corporation, MG Acquisition Corporation and the
Principal Shareholders of Cura Capital Corporation (filed as Exhibit 10 to
KCI's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, and
incorporated herein by reference)...........................................
**10.18 Promissory Note dated August 21, 1995 in the principal amount of $10,000,000
payable to James R. Leininger, M.D. to the order of Kinetic Concepts, Inc.,
a Texas corporation (filed as Exhibit 2.2 to KCI's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995, and incorporated herein by
reference)..................................................................
**10.19 Stock Pledge Agreement dated August 21, 1995 by and between James R.
Leininger, M.D. and KCI (filed as Exhibit 2.3 to KCI's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995, and incorporated herein
by reference)...............................................................
**10.20 Executive Committee Stock Ownership Plan (filed as Exhibit 10 to KCI's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, and
incorporated herein by reference)...........................................
**10.21 Deferred Compensation Plan (filed as Exhibit 99.2 to KCI's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995 and incorporated
herein by reference)........................................................
**10.22 Kinetic Concepts, Inc. Senior Executive Stock Option Plan...................
**10.23 Form of Option Instrument with respect to Senior Executive Stock Option
Plan........................................................................
*10.24 Transaction Agreement dated as of October 2, 1997, by and among KCI, Fremont
Purchaser II, Inc. and RCBA Purchaser I, L.P. ..............................
*10.25 Letter Agreement dated as November 5, 1997, by and among KCI, Fremont
Purchaser II, Inc. and RCBA Purchaser I, L.P. ..............................
</TABLE>
<PAGE> 188
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER: EXHIBIT NUMBER
- ------- ---------------------------------------------------------------------------- ------
<C> <S> <C>
*10.26 Agreement Among Shareholders dated as of November 5, 1997, by and among KCI,
Fremont Partners, L.P., Richard C. Blum & Associates, L.P., James R.
Leininger, M.D., The Common Fund for Non-Profit Organizations, Stinson
Capital Partners II, L.P., RCBA-KCI Capital Partners, L.P., RCBA Purchaser
I, L.P., Fremont Acquisition Company, II, L.L.C., Fremont Acquisition
Company, IIA, L.L.C., Fremont Offshore Partners, L.P., Fremont Partners
Side-By-Side, L.P., Fremont-KCI Co-Investment Company, L.L.C., and Fremont
Purchaser II, Inc. .........................................................
*10.27 Credit Agreement dated as of November 3, 1997, by and among KCI, Bank of
America National Trust and Savings Association, as Administrative Agent, and
Bankers Trust Company as Syndication Agent, and certain other institutions
party thereto...............................................................
*10.28 Purchase Agreement dated as of November 5, 1997, by and among KCI, the
Guarantors and the Initial Purchasers.......................................
*12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed Charges.................................
*21.1 Subsidiaries of KCI.........................................................
*23.1 Consent of KPMG Peat Marwick LLP............................................
*25.1 Form T-1 Statement of Eligibility and Qualification of Marine Midland Bank,
as Trustee..................................................................
</TABLE>
- ---------------
* Filed herewith.
** Incorporated by reference to the filing indicated.
*** To be filed by amendment.
<PAGE> 1
EXHIBIT 3.3
ARTICLES OF ORGANIZATION
OF
KCI PROPERTIES LIMITED
Pursuant to the provisions of Article 3.01 of the Texas Limited
Liability Company Act, the undersigned, acting as organizer, being a natural
person of eighteen (18) years of age or more, files these Articles of
Organization with the Secretary of State of the State of Texas.
1. The name of the Limited Liability Company shall be:
KCI Properties Limited
2. The period of duration of the Limited Liability Company shall be
thirty (30) years from the date of the date of filing these Articles of
Organization.
3. The purpose of the Limited Liability Company shall be the
transaction of any or all lawful business for which limited liability companies
may be organized under the Texas Limited Liability Company Act.
4. The address of the principal place of business of the Limited
Liability Company shall be:
3440 East Houston Street
San Antonio, Texas 78219
5. The name of the initial registered agent and the address of the
initial registered office of the Limited Liability Company shall be:
Robert E. Wehrmeyer, Jr.
3440 East Houston Street
San Antonio, Texas 78219
6. The Limited Liability Company is to be managed by managers. The name
and address of the manager/names and addresses of the managers who are to serve
as managers until the first annual meeting of the members of the Limited
Liability Company or until their successors are duly elected are:
<TABLE>
<CAPTION>
<S> <C>
James R. Leininger, M. D. 3440 East Houston St.
San Antonio, TX 78219
Peter A. Leininger, M. D. 3440 East Houston St.
San Antonio, TX 78219
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C>
Robert A. Wehrmeyer, Jr. 3440 East Houston St.
San Antonio, TX 78219
</TABLE>
7. The Limited Liability Company shall indemnify its managers, officers
and employees to the fullest extent a corporation may indemnify its directors,
officers, employees and agents under the Texas Business Corporation Act, as now
in effect or as hereafter amended.
8. The member and managers of the Limited Liability Company shall not
be liable to the debts, obligations or liabilities of the Limited Liability
Company including under a judgment decree or order of a court. No amendment to
or repeal of this Paragraph 8 shall apply to or have any affect upon the
liability or alleged liability of any manager of the Limited Liability Company
for or with respect to any act or omission of such manager occurring prior to
such amendment or repeal.
EXECUTED this 20th day of December, 1991.
/s/ Dennis E. Noll
-----------------------------------
Dennis E. Noll, Organizer
Address: 112 E. Pecan Street
Suite 2000
San Antonio, Texas 78205
2
<PAGE> 3
STATEMENT OF CHANGE OF REGISTERED OFFICE OR
REGISTERED AGENT OR BOTH BY A CORPORATION,
LIMITED LIABILITY COMPANY OR LIMITED PARTNERSHIP
1. The name of the entity is KCI PROPERTIES LIMITED. The entity's
charter/certificate of authority/file number is 7000228.
2. The registered office address as PRESENTLY as shown in the records of
the Texas Secretary of State is: 3440 East Houston Street, San Antonio,
Texas 78219.
3. A. _x_ The address of the NEW registered office is: 8023 Vantage Drive,
San Antonio, Texas 78230.
OR B. ___ The registered office address will not change.
4. The name of the registered agent as PRESENTLY shown in the records of
the Texas Secretary of State is Robert A. Wehrmeyer, Jr.
5. A. _x_ The name of the NEW registered agent is Dennis E. Noll.
OR B. ___ The registered agent will not change.
6. Following the changes shown above, the address of the registered office
and the address of the office of the registered agent will continue to
be identical, as required by law.
7. The changes shown above were authorized by:
Business Corporations may select A or B
Non-Profit Corporations may select A, B or C
Limited Liability Companies may select D or E
Limited Partnership select F
A.___ The board of directors
B.___ An officer of the corporation so authorized by the board of
directors
C.___ The members of the corporation in whom management of the
corporation is vested pursuant to article 2.14C of the Texas
Non-Profit Corporation Act.
D.___ Its members
E. x Its managers
F.___ The limited partnership
/s/ Dennis E. Noll
--------------------------------------------
(Authorized Officer of Corporation)
(Authorized Member or Manager of LLC)
(General Partner of Limited Partnership)
<PAGE> 1
EXHIBIT 3.4
REGULATIONS OF
KCI PROPERTIES LIMITED
Organized under the Texas Limited Liability Company Act
ARTICLE I
Name and Location
Section 1.1. Name. The name of this limited liability company is KCI
Properties Limited (the "Company").
Section 1.2. Principal Office. The principal office of the Company
shall be located in the City of San Antonio, County of Bexar, State of Texas.
Section 1.3. The address of the registered office of the Company is:
3440 East Houston Street
San Antonio, Texas 78219
Section 1.4. The name and address of the registered agent of the
Company, as set forth in the Articles of Organization of the Company, shall be:
Robert A. Wehrmeyer, Jr.
3440 East Houston Street
San Antonio, Texas 78219
Section 1.5. Other Offices. Other offices and other facilities for the
transaction of business shall be located at such places as the Managers may from
time to time determine.
ARTICLE II
MEMBERSHIP
Section 2.1. Members' Interests. The sole members of the Company are
Kinetic Concepts, Inc. and KCI Therapeutic Services, Inc., which own 90% and 10%
of the "Percentage Interest" of the Company, respectively.
<PAGE> 2
Section 2.2. Admission to Membership. The admission of new Members
shall be only by the unanimous vote of the Members. If new members are admitted,
the Regulations shall be amended to reflect each Member's revised Percentage
Interest.
Section 2.3. Property Rights. No Member shall have any right, title, or
interest in any of the property or assets of the Company.
Section 2.4. Liability of Members. No Member of the Company shall be
personally liable for any debts, liabilities, or obligations of the Company,
including under a judgment decree, or order of court.
Section 2.5. Transferability of Membership. Membership in the Company
is transferable only with the unanimous written consent of all Members. If such
unanimous written consent is not obtained, the transferee shall be entitled to
receive only the share of profits or other compensation by way of income and the
return of contributions to which the transferor Member otherwise would be
entitled.
Section 2.6. Resignation of Member. A Member may not withdraw from the
Company except on the unanimous consent of the remaining Members. The terms of a
Member's withdrawal shall be determined by agreement between the remaining
Members and the withdrawing Member.
ARTICLE III
MEMBERS' MEETINGS
Section 3.1. Time and Place of Meeting. All meetings of the Members
shall be held at such time and at such place within or without the State of
Texas as shall be determined by the Managers.
Section 3.2. Annual Meetings. In the absence of an earlier meeting at
such time and place as the Managers shall specify, annual meetings of the
Members shall be held at the principal office of the Company on the date which
is thirty (30) days after the end of the Company's fiscal year if not a legal
holiday, and if a legal holiday, then on the next full business day following,
at 10:00 a.m., at which the Members may transact such business as may properly
be brought before the meeting.
Section 3.3. Special Meetings. Special meetings of the Members may be
called at any time by any Member. Business transacted at special meetings shall
be confined to the purposes stated in the notice of the meeting.
Section 3.4. Notice. Written or printed notice stating the place, day
and hour of any Members' meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty
2
<PAGE> 3
(60) days before the date of the meeting, either personally or by mail, by or at
the direction of the person calling the meeting, to each Member entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, to the Member at his
address as it appears on the records of the Company at the time of mailing.
Section 3.5. Quorum. Members present in person or represented by proxy,
holding a majority of the total votes which may be cast at any meeting shall
constitute a quorum at all meetings of the Members for the transaction of
business. If, however, such quorum shall not be present or represented at any
meeting of the Members, the Members entitled to vote, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. When any adjourned meeting is reconvened and a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally noticed. Once a quorum is
constituted, the Members present or represented by proxy at a meeting may
continue to transact business until adjournment, notwithstanding the subsequent
withdrawal therefrom of such number of Members as to leave less than a quorum.
Section 3.6. Voting. When a quorum is present at any meeting, the vote
of the Members, whether present or represented by proxy at such meeting, holding
a majority of the total votes which may be cast at any meeting shall be the act
of the Members, unless the vote of a different percentage is required by the
Texas Limited Liability Company Act (the "Act"), the Articles of Organization or
these Regulations. Each Member shall be entitled to one vote for each percentage
point represented by their Percentage Interest. Fractional percentage interests
shall be entitled to a corresponding fractional vote.
Section 3.7. Proxy. Every proxy must be executed in writing by the
Member or by his duly authorized attorney-in-fact, and shall be filed with the
Secretary of the Company prior to or at the time of the meeting. No proxy shall
be valid after eleven (11) months from the date of its execution unless
otherwise provided therein. Each proxy shall be revocable unless expressly
provided therein to be irrevocable and unless otherwise made irrevocable by law.
Section 3.8. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Members may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the Members entitled to vote with respect to the subject matter
thereof, and such consent shall have the same force and effect as a unanimous
vote of Members.
Section 3.9. Meetings by Conference Telephone. Members may participate
in and hold meetings of Members by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in such a meeting shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to
3
<PAGE> 4
the transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV
MEMBERSHIP CAPITAL CONTRIBUTIONS
Section 4.1. Capital Contributions. The initial capital contribution of
each Member shall be set forth on Exhibit A attached hereto.
Section 4.2. Additional Contributions. No additional capital
contributions shall be required of any Member.
Section 4.3. Loans from Members. Upon the approval of the Managers, any
Member may (but shall not be obligated to) advance funds in the form of a loan
to the Company.
ARTICLE V
DISTRIBUTION TO MEMBERS
The Managers shall determine, in their sole discretion, the amount and
timing of all distributions from the Company. Distributions shall be divided
among the Members in accordance with their Percentage Interests. Distributions
in kind shall be made on the basis of agreed value as determined by the Members.
Notwithstanding the foregoing, the Company may not make a distribution to its
Members to the extent that, immediately after giving effect to the distribution,
the liabilities of the Company, other than liabilities to Members with respect
to their interests and liabilities for which the recourse of creditors is
limited to specified property of the Company, exceed the fair value of the
Company assets, except that the fair value of property that is subject to
liability for which recourse of creditors is limited, shall be included in the
Company assets only to the extent that the fair value of the property exceeds
that liability.
ARTICLE VI
ALLOCATION OF NET PROFITS AND LOSSES FOR TAX PURPOSES
For accounting and income tax purposes, all items of income, gain,
loss, deduction, and credit of the Company for any taxable year shall be
allocated among the Members in accordance with their respective Percentage
Interests, except as may be otherwise required by Section 704(c) of the Internal
Revenue Code of 1986, as amended.
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<PAGE> 5
ARTICLE VII
DISSOLUTION AND WINDING UP
Section 7.1. Dissolution. The Company shall be dissolved upon the first
of the following to occur:
(a) Thirty (30) years from the date of filing the Articles of
Organization of the Company;
(b) Written consent of all Members to dissolution;
(c) The bankruptcy, retirement, resignation, expulsion or
dissolution of a Member, unless there is at least one remaining Member
and such Member or Members unanimously agree to continue the Company
and its business.
Section 7.2. Winding Up. Unless the Company is continued pursuant to
Section 1(c) of this Article VII, in the event of dissolution of the Company,
the Managers shall wind up the Company's affairs as soon as reasonably
practicable. On the winding up of the Company, the Managers shall pay and/or
transfer the assets of the Company in the following order:
(a) In discharging liabilities (including loans from Members)
and the expenses of concluding the Company's affairs;
(b) The balance, if any, shall be divided between the Members
in accordance with the Members' Percentage Interests.
ARTICLE VIII
MANAGERS
Section 8.1. Selection of Managers. The Managers of the Company shall
be appointed by the Members. Each Manager shall serve as a Manager until removed
pursuant to Section 2 or 3 of this Article VIII. Managers need not be residents
of the State of Texas.
Section 8.2. Resignations. Each Manager shall have the right to resign
at any time upon written notice of such resignation to the President or
Secretary of the Company. Unless otherwise specified in such written notice, the
resignation shall be effective upon the receipt by the Company.
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<PAGE> 6
Section 8.3. Removal of Manager. Any Manager may be removed, for or
without cause, though his term may not have expired, by the vote of a majority
of the Percentage Interests of the Members at a special meeting called for that
purpose.
Section 8.4. General Powers. The business of the Company shall be
managed by its Managers, which may exercise any and all powers of the Company
and do any and all such lawful acts and things as are not reserved under the
Act, the Articles of Organization or by these Regulations directly to the
Members.
Section 8.5. Place of Meetings. The Managers of the Company may hold
their meetings, both regular and special, either within or without the State of
Texas.
Section 8.6. Annual Meetings. The annual meeting of the Managers shall
be held without further notice immediately following the annual meeting of the
Members, and at the same place, unless such time or place shall be changed by
unanimous consent of the Managers.
Section 8.7. Regular Meetings. Regular meetings of the Managers may be
held without notice at such time and place as shall from time to time be
determined by the Managers.
Section 8.8. Special Meetings. Special meetings of the Managers may be
called by any Manager on two (2) days notice to each Manager, with such notice
to be given personally, by mail or by telex, telegraph or mailgram.
Section 8.9. Quorum and Voting. At all meetings of the Managers the
presence of at least a majority of the number of Managers shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the
affirmative vote of at least a majority of the Managers present at any meeting
at which there is a quorum shall be the act of the Managers, except as may be
otherwise specifically provided by the Act, the Articles of Organization or
these Regulations. If a quorum shall not be present at any meeting of Managers,
the Managers present may adjourn the meeting from time to time without notice
other than announcement at the meeting, until a quorum shall be present.
Section 8.10. Committees. The Managers may, by resolution passed by a
majority of the Managers, designate committees, each of which shall consist of
one or more Managers and shall have such power and authority and shall perform
such functions as may be provided in such resolution. Such committee or
committees shall have such name or names as may be designated by the Managers
and shall keep regular minutes of their proceedings and report the same to the
Managers when required.
Section 8.11. Compensation of Managers. The Members shall have the
authority to fix the compensation of Managers and to provide for the
reimbursement of reasonable expenses incurred by the Managers on behalf of the
Company.
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<PAGE> 7
Section 8.12. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Managers or of any committee
designated by the Managers may be taken without a meeting if a written consent,
setting forth the action so taken, is signed by all the Managers or of such
committee. Such consent shall have the same force and effect as a unanimous vote
at a meeting.
Section 8.13. Meetings by Conference Telephone. Managers or members of
any committee designated by the Managers may participate in and hold a meeting
of the Managers or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in such a meeting shall constitute
presence in person at such meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
Section 8.14. Liability of Managers. No Manager of the Company shall be
personally liable for any debts, liabilities, or obligations of the Company,
including under a judgment decree, or order of court.
ARTICLE IX
NOTICES
Section 9.1. Form of Notice. Whenever under the provisions of the Act,
the Articles of Organization or these Regulations notice is required to be given
to any Manager or Member, and no provision is made as to how such notice shall
be given, notice shall not be construed to mean personal notice. Any such notice
may be given in writing, by mail, postage prepaid, addressed to such Manager or
Member at such address as appears on the books of the Company, or by telex,
telegraph or mailgram. Any notice required or permitted to be given by mail
shall be deemed to be given at the time the same is deposited, postage prepaid,
in the United States mail as aforesaid.
Section 9.2. Waiver. Whenever any notice is required to be given to any
Manager or Member of the Company under the provisions of the Act, the Articles
of Organization or these Regulations, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether signed before or after the
time stated in such waiver, shall be deemed equivalent to the giving of such
notice.
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<PAGE> 8
ARTICLE X
OFFICERS
Section 10.1. In General. The officers of the Corporation shall be
elected by the Managers and shall be a Chairman, a President, a Secretary and a
Treasurer. The Managers may also elect Vice Presidents, one or more Assistant
Secretaries and one or more Assistant Treasurers, all of whom shall also be
officers. Two or more offices may be held by the same person. Managers may be
officers.
Section 10.2. Election. The Managers at their first meeting after each
annual meeting of the Members shall elect a Chairman, a President, a Secretary
and a Treasurer and may appoint such other officers and agents as it shall deem
necessary, and may determine the salaries of all officers and agents from time
to time. The officers shall hold office until their successors are duly elected
and qualified. Any officer elected or appointed by the Managers may be removed,
for or without cause, at any time by a majority vote of the Managers. Election
or appointment of an officer or agent shall not of itself create contract
rights.
Section 10.3. Chairman. The Chairman of the Managers, if there be a
Chairman, shall preside at all meetings of the Members and the Managers shall
have such other powers as may from time to time be assigned by the Managers.
Section 10.4. President. The President shall be the chief executive
officer of the Company, shall have authority and responsibility for the general
and active management of the business of the Company and shall see that all
orders and resolutions of the Managers are carried into effect. Subject to the
prior approval of the Managers, the President shall execute all contracts,
mortgages, conveyances or other legal instruments in the name of and on behalf
of the Company, but this provision shall not prohibit the delegation of such
powers by the Managers to some other officer, agent or attorney-in-fact of the
Company.
Section 10.5. Vice Presidents. The Vice President or, if there be more
than one, the Vice Presidents in the order of their seniority or in any other
order determined by the Managers, shall, in the absence or disability of the
President, perform the duties and exercise the powers of the President, and
shall generally assist the President and perform such other duties as the
Managers shall prescribe.
Section 10.6. Secretary. The Secretary shall attend all sessions of the
Managers and all meetings of the Members and shall record all votes and the
minutes of all such proceedings in a book to be kept for that purpose, and shall
perform like duties for any other committees of the Managers when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
Members and special meetings of the Managers, and shall perform such other
duties as may be prescribed by the Managers or President, under whose
supervision he shall be.
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<PAGE> 9
Section 10.7. Assistant Secretaries. Any Assistant Secretary shall, in
the absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Managers or the President.
Section 10.8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, shall keep full and accurate accounts of
receipts and disbursements of the Company, and shall deposit all moneys and
other valuable effects in the name of and to the credit of the Company in such
depositories as may be designated by the Managers. The Treasurer shall disburse
the funds of the Company as may be ordered by the Managers, taking proper
vouchers for such disbursements, shall render to the President and Managers, at
the regular meetings of the Managers or whenever they may otherwise require, an
account of all his transactions as Treasurer and of the financial condition of
the Company, and shall perform such other duties as may be prescribed by the
Managers or the President.
Section 10.9. Assistant Treasurers. Any Assistant Treasurer shall, in
the absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Managers or the President.
ARTICLE XI
INDEMNITY
Section 11.1. Indemnification. The Company shall indemnify its
Managers, officers, employees, agents and others as fully as, and to the same
extent a corporation may indemnify its directors, officers, employees and agents
under the Texas Business Corporation Act, now in effect or hereafter amended.
The Company shall have the power to purchase and maintain liability insurance
coverage for those persons as, and to the fullest extent, permitted by the Act,
as presently in effect and as may be hereafter amended.
Section 11.2. Indemnification Not Exclusive. The rights of
indemnification and reimbursement provided for in Section 1 of this Article XI
shall not be deemed exclusive of any other rights to which any such Manager,
officer, employee or agent may be entitled under the Articles of Organization,
any Regulations, agreement or vote of Members, or as a matter of law or
otherwise.
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<PAGE> 10
ARTICLE XII
MISCELLANEOUS
Section 12.1. Fiscal Year. The fiscal year of the Company shall end on
December 31st.
Section 12.2. Records. The Managers shall maintain records and accounts
of all operations of the Company. At a minimum, the Company shall keep at its
principal place of business the following records:
(a) A current list of the name and last known mailing address
of each Member;
(b) A current list of each Member's Percentage Interest;
(c) A copy of the Articles of Organization and Regulations of
the Company, and all amendments thereto, together with executed copies
of any powers of attorney;
(d) Copies of the Federal, state, and local income tax returns
and reports for the Company's six most recent tax years; and
(e) Correct and complete books and records of account of the
Company; and
(f) Minute books which accurately reflect the meetings of the
Members and Managers.
Section 12.3. Seal. The Company may by resolution of the Managers adopt
and have a seal, and said seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any manner reproduced. Any officer of the
Company shall have authority to affix the seal to any document requiring it.
Section 12.4. Checks. All checks, drafts or orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
Company shall be signed by such officer or officers, agent or agents of the
Company and in such manner as shall from time to time be determined by
resolution of the Managers. In the absence of such determination by the
Managers, such instruments shall be signed by the Treasurer or the Secretary and
countersigned by the President or a Vice President of the Company.
Section 12.5. Deposits. All funds of the Company shall be deposited
from time to time to the credit of the Company in such banks, trust companies or
other depositories as the Managers may select.
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Section 12.6. Annual Statement. The Managers shall present at each
annual meeting, and, when called for by vote of the Members, at any special
meeting of the Members, a full and clear statement of the business and condition
of the Company.
Section 12.7. Financial Statements. As soon as practicable after the
end of each fiscal year of the Company, a balance sheet as at the end of such
fiscal year, and a profit and loss statement for the period ended, shall be
distributed to the Members, along with such tax information (including all
information returns) as may be necessary for the preparation of each Member of
its Federal, state and local income tax returns. The balance sheet and profit
and loss statement referred to in the previous sentence may be as shown on the
Company's federal income tax return.
ARTICLE XIII
AMENDMENTS
Section 13.1. Amendments. These Regulations may be altered, amended or
repealed and new Regulations may be adopted by the vote of a majority of the
Percentage Interests of the Members, at any regular meeting or at any special
meeting called for that purpose.
Section 13.2. When Regulations Silent. It is expressly recognized that
when the Regulations are silent as to the manner of performing any Company
function, the provisions of the Act shall control.
CERTIFICATE
I, Robert A. Wehrmeyer, Jr., do hereby certify that I am the duly
elected and acting Secretary of KCI Properties Limited (the "Company") and that
the above and foregoing Regulations were adopted as the Regulations of the
Company by Action of the Managers of the Company dated December 30, 1991.
/s/ Robert A. Wehrmeyer, Jr.
--------------------------------------------
Robert A. Wehrmeyer, Jr., Secretary
11
<PAGE> 12
EXHIBIT A
<TABLE>
<CAPTION>
Initial Capital Percentage
Member Contribution Interest
- ------ ------------ --------
<S> <C> <C>
Kinetic Concepts, Inc. _ 90%
KCI Therapeutic Services, Inc. _______ 10%
</TABLE>
<PAGE> 1
EXHIBIT 3.5
ARTICLES OF ORGANIZATION
OF
KCI REAL PROPERTY LIMITED
Pursuant to the provisions of Article 3.01 of the Texas Limited
Liability Company Act, the undersigned, acting as organizer, being a natural
person of eighteen (18) years of age or more, files these Articles of
Organization with the Secretary of State of the State of Texas.
1. The name of the Limited Liability Company shall be:
KCI Real Property Limited
2. The period of duration of the Limited Liability Company shall be
thirty (30) years from the date of the date of filing these Articles of
Organization.
3. The purpose of the Limited Liability Company shall be the
transaction of any or all lawful business for which limited liability companies
may be organized under the Texas Limited Liability Company Act.
4. The address of the principal place of business of the Limited
Liability Company shall be:
3440 East Houston Street
San Antonio, Texas 78219
5. The name of the initial registered agent and the address of the
initial registered office of the Limited Liability Company shall be:
<PAGE> 2
Robert E. Wehrmeyer, Jr.
3440 East Houston Street
San Antonio, Texas 78219
6. The Limited Liability Company is to be managed by managers. The name
and address of the manager/names and addresses of the managers who are to serve
as managers until the first annual meeting of the members of the Limited
Liability Company or until their successors are duly elected are:
<TABLE>
<CAPTION>
<S> <C>
James R. Leininger, M. D. 3440 East Houston St.
San Antonio, TX 78219
Peter A. Leininger, M. D. 3440 East Houston St.
San Antonio, TX 78219
Robert A. Wehrmeyer, Jr. 3440 East Houston St.
San Antonio, TX 78219
</TABLE>
7. The Limited Liability Company shall indemnify its managers, officers
and employees to the fullest extent a corporation may indemnify its directors,
officers, employees and agents under the Texas Business Corporation Act, as now
in effect or as hereafter amended.
8. The member and managers of the Limited Liability Company shall not
be liable to the debts, obligations or liabilities of the Limited Liability
Company including under a judgment decree or order of a court. No amendment to
or repeal of this Paragraph 8 shall apply to or have any affect upon the
liability or alleged liability of any manager of the Limited Liability Company
for or with respect to any act or omission of such manager occurring prior to
such amendment or repeal.
EXECUTED this 12th day of June, 1992.
/s/ Dennis E. Noll
-----------------------------------
Dennis E. Noll, Organizer
Address: 3440 East Houston Street
San Antonio, Texas 78219
2
<PAGE> 3
STATEMENT OF CHANGE OF REGISTERED OFFICE OR
REGISTERED AGENT OR BOTH BY A CORPORATION,
LIMITED LIABILITY COMPANY OR LIMITED PARTNERSHIP
1. The name of the entity is KCI REAL PROPERTY LIMITED. The entity's
charter/certificate of authority/file number is 7000951.
2. The registered office address as PRESENTLY as shown in the records of
the Texas Secretary of State is: 3440 East Houston Street, San Antonio,
Texas 78219.
3. A. _x_ The address of the NEW registered office is: 8023 Vantage Drive,
San Antonio, Texas 78230.
OR B. ___ The registered office address will not change.
4. The name of the registered agent as PRESENTLY shown in the records of
the Texas Secretary of State is Robert A. Wehrmeyer, Jr.
5. A. _x_ The name of the NEW registered agent is Dennis E. Noll.
OR B. ___ The registered agent will not change.
6. Following the changes shown above, the address of the registered office
and the address of the office of the registered agent will continue to
be identical, as required by law.
7. The changes shown above were authorized by:
Business Corporations may select A or B
Non-Profit Corporations may select A, B or C
Limited Liability Companies may select D or E
Limited Partnership select F
A.___ The board of directors
B.___ An officer of the corporation so authorized by the board of
directors
C.___ The members of the corporation in whom management of the
corporation is vested pursuant to article 2.14C of the Texas
Non-Profit Corporation Act.
D.___ Its members
E. x Its managers
F.___ The limited partnership
/s/ Dennis E. Noll
--------------------------------------------
(Authorized Officer of Corporation)
(Authorized Member or Manager of LLC)
(General Partner of Limited Partnership)
<PAGE> 1
EXHIBIT 3.6
REGULATIONS OF
KCI REAL PROPERTY LIMITED
Organized under the Texas Limited Liability Company Act
ARTICLE I
Name and Location
Section 1.1. Name. The name of this limited liability company is KCI
Real Property Limited (the "Company").
Section 1.2. Principal Office. The principal office of the Company
shall be located in the City of San Antonio, County of Bexar, State of Texas.
Section 1.3. The address of the registered office of the Company is:
3440 East Houston Street
San Antonio, Texas 78219
Section 1.4. The name and address of the registered agent of the
Company, as set forth in the Articles of Organization of the Company, shall be:
Robert A. Wehrmeyer, Jr.
3440 East Houston Street
San Antonio, Texas 78219
Section 1.5. Other Offices. Other offices and other facilities for the
transaction of business shall be located at such places as the Managers may from
time to time determine.
ARTICLE II
MEMBERSHIP
Section 2.1. Members' Interests. The sole members of the Company are
Kinetic Concepts, Inc. and KCI Therapeutic Services, Inc., which own 90% and 10%
of the "Percentage Interest" of the Company, respectively.
<PAGE> 2
Section 2.2. Admission to Membership. The admission of new Members
shall be only by the unanimous vote of the Members. If new members are admitted,
the Regulations shall be amended to reflect each Member's revised Percentage
Interest.
Section 2.3. Property Rights. No Member shall have any right, title, or
interest in any of the property or assets of the Company.
Section 2.4. Liability of Members. No Member of the Company shall be
personally liable for any debts, liabilities, or obligations of the Company,
including under a judgment decree, or order of court.
Section 2.5. Transferability of Membership. Membership in the Company
is transferable only with the unanimous written consent of all Members. If such
unanimous written consent is not obtained, the transferee shall be entitled to
receive only the share of profits or other compensation by way of income and the
return of contributions to which the transferor Member otherwise would be
entitled.
Section 2.6. Resignation of Member. A Member may not withdraw from the
Company except on the unanimous consent of the remaining Members. The terms of a
Member's withdrawal shall be determined by agreement between the remaining
Members and the withdrawing Member.
ARTICLE III
MEMBERS' MEETINGS
Section 3.1. Time and Place of Meeting. All meetings of the Members
shall be held at such time and at such place within or without the State of
Texas as shall be determined by the Managers.
Section 3.2. Annual Meetings. In the absence of an earlier meeting at
such time and place as the Managers shall specify, annual meetings of the
Members shall be held at the principal office of the Company on the date which
is thirty (30) days after the end of the Company's fiscal year if not a legal
holiday, and if a legal holiday, then on the next full business day following,
at 10:00 a.m., at which the Members may transact such business as may properly
be brought before the meeting.
Section 3.3. Special Meetings. Special meetings of the Members may be
called at any time by any Member. Business transacted at special meetings shall
be confined to the purposes stated in the notice of the meeting.
Section 3.4. Notice. Written or printed notice stating the place, day
and hour of any Members' meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty
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<PAGE> 3
(60) days before the date of the meeting, either personally or by mail, by or at
the direction of the person calling the meeting, to each Member entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, to the Member at his
address as it appears on the records of the Company at the time of mailing.
Section 3.5. Quorum. Members present in person or represented by proxy,
holding a majority of the total votes which may be cast at any meeting shall
constitute a quorum at all meetings of the Members for the transaction of
business. If, however, such quorum shall not be present or represented at any
meeting of the Members, the Members entitled to vote, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. When any adjourned meeting is reconvened and a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally noticed. Once a quorum is
constituted, the Members present or represented by proxy at a meeting may
continue to transact business until adjournment, notwithstanding the subsequent
withdrawal therefrom of such number of Members as to leave less than a quorum.
Section 3.6. Voting. When a quorum is present at any meeting, the vote
of the Members, whether present or represented by proxy at such meeting, holding
a majority of the total votes which may be cast at any meeting shall be the act
of the Members, unless the vote of a different percentage is required by the
Texas Limited Liability Company Act (the "Act"), the Articles of Organization or
these Regulations. Each Member shall be entitled to one vote for each percentage
point represented by their Percentage Interest. Fractional percentage interests
shall be entitled to a corresponding fractional vote.
Section 3.7. Proxy. Every proxy must be executed in writing by the
Member or by his duly authorized attorney-in-fact, and shall be filed with the
Secretary of the Company prior to or at the time of the meeting. No proxy shall
be valid after eleven (11) months from the date of its execution unless
otherwise provided therein. Each proxy shall be revocable unless expressly
provided therein to be irrevocable and unless otherwise made irrevocable by law.
Section 3.8. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Members may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the Members entitled to vote with respect to the subject matter
thereof, and such consent shall have the same force and effect as a unanimous
vote of Members.
Section 3.9. Meetings by Conference Telephone. Members may participate
in and hold meetings of Members by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in such a meeting shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to
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<PAGE> 4
the transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV
MEMBERSHIP CAPITAL CONTRIBUTIONS
Section 4.1. Capital Contributions. The initial capital contribution of
each Member shall be set forth on Exhibit A attached hereto.
Section 4.2. Additional Contributions. No additional capital
contributions shall be required of any Member.
Section 4.3. Loans from Members. Upon the approval of the Managers, any
Member may (but shall not be obligated to) advance funds in the form of a loan
to the Company.
ARTICLE V
DISTRIBUTION TO MEMBERS
The Managers shall determine, in their sole discretion, the amount and
timing of all distributions from the Company. Distributions shall be divided
among the Members in accordance with their Percentage Interests. Distributions
in kind shall be made on the basis of agreed value as determined by the Members.
Notwithstanding the foregoing, the Company may not make a distribution to its
Members to the extent that, immediately after giving effect to the distribution,
the liabilities of the Company, other than liabilities to Members with respect
to their interests and liabilities for which the recourse of creditors is
limited to specified property of the Company, exceed the fair value of the
Company assets, except that the fair value of property that is subject to
liability for which recourse of creditors is limited, shall be included in the
Company assets only to the extent that the fair value of the property exceeds
that liability.
ARTICLE VI
ALLOCATION OF NET PROFITS AND LOSSES FOR TAX PURPOSES
For accounting and income tax purposes, all items of income, gain,
loss, deduction, and credit of the Company for any taxable year shall be
allocated among the Members in accordance with their respective Percentage
Interests, except as may be otherwise required by Section 704(c) of the Internal
Revenue Code of 1986, as amended.
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<PAGE> 5
ARTICLE VII
DISSOLUTION AND WINDING UP
Section 7.1. Dissolution. The Company shall be dissolved upon the first
of the following to occur:
(a) Thirty (30) years from the date of filing the Articles of
Organization of the Company;
(b) Written consent of all Members to dissolution;
(c) The bankruptcy, retirement, resignation, expulsion or
dissolution of a Member, unless there is at least one remaining Member
and such Member or Members unanimously agree to continue the Company
and its business.
Section 7.2. Winding Up. Unless the Company is continued pursuant to
Section 1(c) of this Article VII, in the event of dissolution of the Company,
the Managers shall wind up the Company's affairs as soon as reasonably
practicable. On the winding up of the Company, the Managers shall pay and/or
transfer the assets of the Company in the following order:
(a) In discharging liabilities (including loans from Members)
and the expenses of concluding the Company's affairs;
(b) The balance, if any, shall be divided between the Members
in accordance with the Members' Percentage Interests.
ARTICLE VIII
MANAGERS
Section 8.1. Selection of Managers. The Managers of the Company shall
be appointed by the Members. Each Manager shall serve as a Manager until removed
pursuant to Section 2 or 3 of this Article VIII. Managers need not be residents
of the State of Texas.
Section 8.2. Resignations. Each Manager shall have the right to resign
at any time upon written notice of such resignation to the President or
Secretary of the Company. Unless otherwise specified in such written notice, the
resignation shall be effective upon the receipt by the Company.
5
<PAGE> 6
Section 8.3. Removal of Manager. Any Manager may be removed, for or
without cause, though his term may not have expired, by the vote of a majority
of the Percentage Interests of the Members at a special meeting called for that
purpose.
Section 8.4. General Powers. The business of the Company shall be
managed by its Managers, which may exercise any and all powers of the Company
and do any and all such lawful acts and things as are not reserved under the
Act, the Articles of Organization or by these Regulations directly to the
Members.
Section 8.5. Place of Meetings. The Managers of the Company may hold
their meetings, both regular and special, either within or without the State of
Texas.
Section 8.6. Annual Meetings. The annual meeting of the Managers shall
be held without further notice immediately following the annual meeting of the
Members, and at the same place, unless such time or place shall be changed by
unanimous consent of the Managers.
Section 8.7. Regular Meetings. Regular meetings of the Managers may be
held without notice at such time and place as shall from time to time be
determined by the Managers.
Section 8.8. Special Meetings. Special meetings of the Managers may be
called by any Manager on two (2) days notice to each Manager, with such notice
to be given personally, by mail or by telex, telegraph or mailgram.
Section 8.9. Quorum and Voting. At all meetings of the Managers the
presence of at least a majority of the number of Managers shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the
affirmative vote of at least a majority of the Managers present at any meeting
at which there is a quorum shall be the act of the Managers, except as may be
otherwise specifically provided by the Act, the Articles of Organization or
these Regulations. If a quorum shall not be present at any meeting of Managers,
the Managers present may adjourn the meeting from time to time without notice
other than announcement at the meeting, until a quorum shall be present.
Section 8.10. Committees. The Managers may, by resolution passed by a
majority of the Managers, designate committees, each of which shall consist of
one or more Managers and shall have such power and authority and shall perform
such functions as may be provided in such resolution. Such committee or
committees shall have such name or names as may be designated by the Managers
and shall keep regular minutes of their proceedings and report the same to the
Managers when required.
Section 8.11. Compensation of Managers. The Members shall have the
authority to fix the compensation of Managers and to provide for the
reimbursement of reasonable expenses incurred by the Managers on behalf of the
Company.
6
<PAGE> 7
Section 8.12. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Managers or of any committee
designated by the Managers may be taken without a meeting if a written consent,
setting forth the action so taken, is signed by all the Managers or of such
committee. Such consent shall have the same force and effect as a unanimous vote
at a meeting.
Section 8.13. Meetings by Conference Telephone. Managers or members of
any committee designated by the Managers may participate in and hold a meeting
of the Managers or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in such a meeting shall constitute
presence in person at such meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
Section 8.14. Liability of Managers. No Manager of the Company shall be
personally liable for any debts, liabilities, or obligations of the Company,
including under a judgment decree, or order of court.
ARTICLE IX
NOTICES
Section 9.1. Form of Notice. Whenever under the provisions of the Act,
the Articles of Organization or these Regulations notice is required to be given
to any Manager or Member, and no provision is made as to how such notice shall
be given, notice shall not be construed to mean personal notice. Any such notice
may be given in writing, by mail, postage prepaid, addressed to such Manager or
Member at such address as appears on the books of the Company, or by telex,
telegraph or mailgram. Any notice required or permitted to be given by mail
shall be deemed to be given at the time the same is deposited, postage prepaid,
in the United States mail as aforesaid.
Section 9.2. Waiver. Whenever any notice is required to be given to any
Manager or Member of the Company under the provisions of the Act, the Articles
of Organization or these Regulations, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether signed before or after the
time stated in such waiver, shall be deemed equivalent to the giving of such
notice.
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<PAGE> 8
ARTICLE X
OFFICERS
Section 10.1. In General. The officers of the Corporation shall be
elected by the Managers and shall be a Chairman, a President, a Secretary and a
Treasurer. The Managers may also elect Vice Presidents, one or more Assistant
Secretaries and one or more Assistant Treasurers, all of whom shall also be
officers. Two or more offices may be held by the same person. Managers may be
officers.
Section 10.2. Election. The Managers at their first meeting after each
annual meeting of the Members shall elect a Chairman, a President, a Secretary
and a Treasurer and may appoint such other officers and agents as it shall deem
necessary, and may determine the salaries of all officers and agents from time
to time. The officers shall hold office until their successors are duly elected
and qualified. Any officer elected or appointed by the Managers may be removed,
for or without cause, at any time by a majority vote of the Managers. Election
or appointment of an officer or agent shall not of itself create contract
rights.
Section 10.3. Chairman. The Chairman of the Managers, if there be a
Chairman, shall preside at all meetings of the Members and the Managers shall
have such other powers as may from time to time be assigned by the Managers.
Section 10.4. President. The President shall be the chief executive
officer of the Company, shall have authority and responsibility for the general
and active management of the business of the Company and shall see that all
orders and resolutions of the Managers are carried into effect. Subject to the
prior approval of the Managers, the President shall execute all contracts,
mortgages, conveyances or other legal instruments in the name of and on behalf
of the Company, but this provision shall not prohibit the delegation of such
powers by the Managers to some other officer, agent or attorney-in-fact of the
Company.
Section 10.5. Vice Presidents. The Vice President or, if there be more
than one, the Vice Presidents in the order of their seniority or in any other
order determined by the Managers, shall, in the absence or disability of the
President, perform the duties and exercise the powers of the President, and
shall generally assist the President and perform such other duties as the
Managers shall prescribe.
Section 10.6. Secretary. The Secretary shall attend all sessions of the
Managers and all meetings of the Members and shall record all votes and the
minutes of all such proceedings in a book to be kept for that purpose, and shall
perform like duties for any other committees of the Managers when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
Members and special meetings of the Managers, and shall perform such other
duties as may be prescribed by the Managers or President, under whose
supervision he shall be.
8
<PAGE> 9
Section 10.7. Assistant Secretaries. Any Assistant Secretary shall, in
the absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Managers or the President.
Section 10.8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, shall keep full and accurate accounts of
receipts and disbursements of the Company, and shall deposit all moneys and
other valuable effects in the name of and to the credit of the Company in such
depositories as may be designated by the Managers. The Treasurer shall disburse
the funds of the Company as may be ordered by the Managers, taking proper
vouchers for such disbursements, shall render to the President and Managers, at
the regular meetings of the Managers or whenever they may otherwise require, an
account of all his transactions as Treasurer and of the financial condition of
the Company, and shall perform such other duties as may be prescribed by the
Managers or the President.
Section 10.9. Assistant Treasurers. Any Assistant Treasurer shall, in
the absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Managers or the President.
ARTICLE XI
INDEMNITY
Section 11.1. Indemnification. The Company shall indemnify its
Managers, officers, employees, agents and others as fully as, and to the same
extent a corporation may indemnify its directors, officers, employees and agents
under the Texas Business Corporation Act, now in effect or hereafter amended.
The Company shall have the power to purchase and maintain liability insurance
coverage for those persons as, and to the fullest extent, permitted by the Act,
as presently in effect and as may be hereafter amended.
Section 11.2. Indemnification Not Exclusive. The rights of
indemnification and reimbursement provided for in Section 1 of this Article XI
shall not be deemed exclusive of any other rights to which any such Manager,
officer, employee or agent may be entitled under the Articles of Organization,
any Regulations, agreement or vote of Members, or as a matter of law or
otherwise.
9
<PAGE> 10
ARTICLE XII
MISCELLANEOUS
Section 12.1. Fiscal Year. The fiscal year of the Company shall end on
December 31st.
Section 12.2. Records. The Managers shall maintain records and accounts
of all operations of the Company. At a minimum, the Company shall keep at its
principal place of business the following records:
(a) A current list of the name and last known mailing address
of each Member;
(b) A current list of each Member's Percentage Interest;
(c) A copy of the Articles of Organization and Regulations of
the Company, and all amendments thereto, together with executed copies
of any powers of attorney;
(d) Copies of the Federal, state, and local income tax returns
and reports for the Company's six most recent tax years; and
(e) Correct and complete books and records of account of the
Company; and
(f) Minute books which accurately reflect the meetings of the
Members and Managers.
Section 12.3. Seal. The Company may by resolution of the Managers adopt
and have a seal, and said seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any manner reproduced. Any officer of the
Company shall have authority to affix the seal to any document requiring it.
Section 12.4. Checks. All checks, drafts or orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
Company shall be signed by such officer or officers, agent or agents of the
Company and in such manner as shall from time to time be determined by
resolution of the Managers. In the absence of such determination by the
Managers, such instruments shall be signed by the Treasurer or the Secretary and
countersigned by the President or a Vice President of the Company.
Section 12.5. Deposits. All funds of the Company shall be deposited
from time to time to the credit of the Company in such banks, trust companies or
other depositories as the Managers may select.
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<PAGE> 11
Section 12.6. Annual Statement. The Managers shall present at each
annual meeting, and, when called for by vote of the Members, at any special
meeting of the Members, a full and clear statement of the business and condition
of the Company.
Section 12.7. Financial Statements. As soon as practicable after the
end of each fiscal year of the Company, a balance sheet as at the end of such
fiscal year, and a profit and loss statement for the period ended, shall be
distributed to the Members, along with such tax information (including all
information returns) as may be necessary for the preparation of each Member of
its Federal, state and local income tax returns. The balance sheet and profit
and loss statement referred to in the previous sentence may be as shown on the
Company's federal income tax return.
ARTICLE XIII
AMENDMENTS
Section 13.1. Amendments. These Regulations may be altered, amended or
repealed and new Regulations may be adopted by the vote of a majority of the
Percentage Interests of the Members, at any regular meeting or at any special
meeting called for that purpose.
Section 13.2. When Regulations Silent. It is expressly recognized that
when the Regulations are silent as to the manner of performing any Company
function, the provisions of the Act shall control.
CERTIFICATE
I, Robert A. Wehrmeyer, Jr., do hereby certify that I am the duly
elected and acting Secretary of KCI Real Property Limited (the "Company") and
that the above and foregoing Regulations were adopted as the Regulations of the
Company by Action of the Managers of the Company dated June 16, 1992.
/s/ Robert A. Wehrmeyer, Jr.
------------------------------------------
Robert A. Wehrmeyer, Jr., Secretary
11
<PAGE> 12
EXHIBIT A
<TABLE>
<CAPTION>
Initial Capital Percentage
Member Contribution Interest
- ------ ------------ --------
<S> <C> <C>
Kinetic Concepts, Inc. -- 90%
KCI Therapeutic Services, Inc. -- 10%
</TABLE>
<PAGE> 1
EXHIBIT 3.7
CERTIFICATE OF INCORPORATION
OF
KCI HOLDING COMPANY, INC.
FIRST: The name of the corporation is KCI Holding Company, Inc.
SECOND: The address of the registered office of the corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent of the
corporation at such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is three thousand (3,000) shares of Common Stock, par
value $.01 per share.
FIFTH: The business and affairs of the corporation shall be managed by
or under the direction of the Board of Directors and the directors need not be
elected by ballot unless required by the by-laws of the Corporation.
SIXTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized to make, alter, adopt, amend, change or repeal the by-laws of the
corporation.
SEVENTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of Delaware. All
rights herein conferred are granted subject to this reservation.
EIGHTH: The corporation shall indemnify to the fullest extent permitted
by, and in the manner permissible under, the laws of the State of Delaware any
person (and heirs, executors, administrators and estate of such person) made, or
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was a director or officer of the corporation,
or served another corporation, partnership, joint venture, trust or other
enterprise as a director, advisory director, officer, employee or agent at the
request of the corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by
<PAGE> 2
such person in connection with such action, suit or proceeding. The foregoing
rights of indemnification shall not be deemed exclusive of any other rights to
which any such person may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise. The Board of Directors in
its discretion shall have the power on behalf of the corporation to indemnify
similarly any person, other than a director or officer, made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he is or was an advisory director, employee or agent of the
corporation. The provisions of this Article Ninth shall be applicable to persons
who have ceased to be directors, advisory directors, officers, employees or
agents of the corporation and shall inure to the benefit of their heirs,
executors and administrators.
Pursuant to section 102(b)(7) (or any successor statute) of the General
Corporation Law of the State of Delaware, the personal liability of a director
to the corporation or the stockholders of the corporation for monetary damages
for breach of fiduciary duty is hereby eliminated. The terms of the preceding
sentence, however, shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or the
stockholders of the corporation, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (or a successor statute) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment or repeal of this paragraph shall apply
to or have effect on the liability of any director of the corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
NINTH: The incorporator is Dennis E. Noll, whose mailing address is
8023 Vantage Drive, San Antonio, Texas 78230.
The undersigned, being the incorporator named above, for the purposes
of organizing a corporation pursuant to the General Corporation Law of the State
of Delaware, does make this certificate, hereby declaring and certifying that
this is his act and deed and the facts herein stated are true, and accordingly
has hereunto set his hand this 11th day of December, 1996.
/s/ Dennis E. Noll
---------------------------------------
Dennis E. Noll, Incorporator
2
<PAGE> 1
EXHIBIT 3.8
BY-LAWS
OF
KCI HOLDING COMPANY, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The principal office of the Corporation
outside the State of Delaware shall be in the City of San Antonio, State of
Texas. The Corporation may also have offices at such other places both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meeting. All meetings of the stockholders
shall be held at such time and at such place within or without the State of
Delaware as shall be determined by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of the stockholders shall
be held on the first Wednesday in May each year, if not a legal holiday, and if
a legal holiday, then on the next full business day following, at 10:00 a.m., at
which the stockholders shall elect by a plurality vote a board of directors and
transact such other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for
any proper purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, may be called at any time by
the President or the Board of Directors, and shall be called by the President or
Secretary at the request in writing of the holders of shares of the Corporation
then issued, outstanding and entitled to vote at the meeting which represent not
less than 25% of the votes entitled to be cast at the meeting. Such request
shall state the purpose or
<PAGE> 2
purposes of the proposed meeting. Business transacted at special meetings shall
be confined to the purpose or purposes stated in the notice of the meeting.
Section 4. Notice. Written or printed notice stating the place, date
and hour of any meeting of stockholders, and in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (6O) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, a Vice
President, the Secretary, an Assistant Secretary or the person calling the
meeting, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his address as it
appears on the stock ledger of the Corporation.
Section 5. List of Shareholders. The officer or agent of the
Corporation having charge of the stock ledger of the Corporation shall make, at
least ten (10) days before each meeting of the stockholders, a complete list of
the stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list, for
a period of ten (10) days prior to such meeting, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting or, if
not so specified, at the place where the meeting is to be held. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole time of the
meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine such list or stock ledger, or to vote at any
meetings of stockholders.
Section 6. Quorum. The holders of issued and outstanding shares which
represent not less than a majority of the votes entitled to be cast thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation (all references to
the Certificate of Incorporation in these By-Laws includes any Certificate of
Designation respecting a resolution of the Board of Directors providing for the
issue of a series of preferred stock of the Corporation and which has been filed
in the office of the Secretary of State of the State of Delaware). If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority in interest of the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time until a quorum shall be present or represented
without notice of the adjourned meeting other than announcement of the time and
place thereof at the meeting at which the adjournment is taken. When any
adjourned meeting is reconvened and a quorum shall be present or represented,
any business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty (3O) days, or if after the
adjournment a new record
2
<PAGE> 3
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
Section 7. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares present or represented by proxy at such
meeting and entitled to vote shall decide any question brought before such
meeting, unless the vote of a different number is expressly required by statute,
the Certificate of Incorporation or these By-Laws. The voting for election of
directors may be by written ballot or other means.
Section 8. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share having voting power
held by such stockholder. Every proxy must be executed in writing (which shall
include telegraphing or cabling) by the stockholder or by his duly authorized
attorney-in-fact, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period.
Section 9. Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares of the Corporation having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The number of directors of the
Corporation shall be three (3). Directors shall be elected at the annual meeting
of the stockholders, except as provided in Section 2 of this Article, and each
director shall hold office until his successor is elected and qualified.
Directors need not be stockholders of the Corporation.
Section 2. Vacancies and Additional Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify.
3
<PAGE> 4
Section 3. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute, or by
the Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
Section 4. Place of Meetings. The directors of the Corporation may hold
their meetings, both regular and special, either within or without the State of
Delaware.
Section 5. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held without further notice immediately following
the annual meeting of the stockholders, and at the same place, unless by
unanimous consent of the directors then elected and serving such time or place
shall be changed.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by either the Chairman of the Board or the President on two
business days' notice to each director, either personally or by mail or by
telegram, and in the case of notice by mail, such notice shall be deemed to have
been given on the third day following the date on which such notice is deposited
in the United States mail, postage prepaid, properly addressed to such director.
Special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of any two directors.
Section 8. Quorum. At all meetings of the Board of Directors the
presence of a majority of the number of directors constituting the whole Board
shall be necessary and sufficient to constitute a quorum for the transaction of
business, and the affirmative vote of at least a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute, by
the Certificate of Incorporation or by these By-Laws. If a quorum shall not be
present at any meeting of directors, the directors present thereat may adjourn
the meeting from time to time without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees in addition
to the executive committee provided for in Section 10 of this Article III, each
committee to consist of one or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the
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<PAGE> 5
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
By-Laws of the Corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Directors when required.
Section 10. Executive Committee. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate an executive
committee which shall consist of two or more members. The Chairman of the Board
and the President shall be members of the executive committee. The executive
committee shall have, except as otherwise provided by law or by resolution of
the Board of Directors, all the authority of the Board of Directors during the
intervals between the meetings of the Board of Directors.
Section 11. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors,
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the committees of the Board of Directors may,
by resolution of the Board of Directors, be allowed like compensation for
attending meetings of such committees.
Section 12. Action Without a Meeting. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee designated by the Board of Directors may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or Committee.
Section 13. Meetings by Conference Call, Etc. Unless otherwise
restricted by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
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Section 14. Removal of Directors. Unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
shares entitled to vote at an election of directors.
Section 15. Reliance Upon Books. Directors and members of any committee
designated by the Board of Directors shall, in the performance of their duties,
be fully protected in relying in good faith upon the books of accounts or
reports made to the Corporation by any of its officers, or by an independent
certified public accountant, or by an appraiser selected with reasonable care by
the Board of Directors or by any such committee, or in relying in good faith
upon other records of the Corporation.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the
statutes, the Certificate of Incorporation or these By-Laws, notice is required
to be given to any director or stockholder, and no provision is made as to how
such notice shall be given, it shall not be construed to mean personal notice,
but any such notice may be given in writing, by mail, postage prepaid, addressed
to such director or stockholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail shall be
deemed to be given at the time when the same be thus deposited in the United
States mail as aforesaid.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the statutes,
the Certificate of Incorporation or these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated in such notice, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the attendance is for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. In General. The officers of the Corporation shall be elected
by the Board of Directors and shall be a President, a Vice President, a
Secretary and a Treasurer. The Board of Directors may also, if it chooses to do
so, elect a Chairman of the Board, additional Vice Presidents, one or more
Assistant Secretaries and one or
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more Assistant Treasurers, all of whom shall also be officers. Two or more
offices may be held by the same person, unless the Certificate of Incorporation
or these By-Laws otherwise provide.
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of the stockholders shall elect a President, who shall be a
member of the Board, and shall elect one or more vice presidents, a secretary
and a treasurer who need not be members of the Board. The Board of Directors
also may appoint a Chairman of the Board, who shall be a member of the Board,
and such other officers and agents as it shall deem necessary and may determine
the salaries of all officers and agents from time to time. The officers shall
hold office until their successors are chosen and qualified. Any officer elected
or appointed by the Board of Directors may be removed, for or without cause, at
any time by a majority vote of the whole Board. Election or appointment of an
officer or agent shall not of itself create contract rights.
Section 3. Chairman of the Board. The Chairman of the Board, if there
be one, shall preside at all meetings of the stockholders and of the Board of
Directors, and shall be responsible for developing the general over-all policies
and programs of the Corporation and shall have such other powers and duties as
may be assigned to or vested in him from time to time by the Board of Directors.
Section 4. President. The President shall have general responsibility
for carrying out the business and affairs of the Corporation, and shall have
general supervision and direction of all other officers of the Corporation,
except the Chairman of the Board, if there be one. In the absence of the
Chairman of the Board or if a Chairman of the Board has not been elected, he
shall preside at all meetings of the stockholders and of the Board of Directors.
The President shall have such other powers and duties as may be assigned to or
vested in him from time to time by the Board of Directors.
Section 5. Vice Presidents. The Vice President or, if there be more
than one, the Vice Presidents in the order of their seniority or in any other
order determined by the Board of Directors, shall, in the absence or disability
of the Chairman of the Board, if there be one, or the President, perform the
duties and exercise the powers of such offices, respectively, and shall
generally assist the Chairman of the Board, if there be one, and President and
perform such other duties as the Board of Directors shall prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for committees of the Board when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or President, under whose supervision he
shall be. He shall keep in safe custody the seal
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of the Corporation and he, or an assistant secretary, shall have authority to
affix the same to any instrument requiring it and when so affixed it may be
attested by his signature or by the signature of such assistant secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his signature.
Section 7. Assistant Secretaries. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation in such manner as may be authorized by the Board of
Directors from time to time, making proper vouchers for such disbursements, and
shall render to the President and directors, at the regular meetings of the
Board or whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation, and shall perform
such other duties as may be prescribed by the Board of Directors or the
President.
Section 9. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 10. Bonding. If required by the Board of Directors, all or
certain of the officers shall give the Corporation a bond in such form, in such
sum and with such surety or sureties as shall be satisfactory to the Board, for
the faithful performance of the duties of their office and for the restoration
to the Corporation, in case of their death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in their possession or under their control belonging to the
Corporation.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of certificates. The Corporation shall deliver
certificates representing all shares to which stockholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the
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Corporation as they are issued. Each certificate shall state on the face thereof
the holder's name, the number, class of shares, and the par value of the shares
or a statement that the shares are without par value. They shall be signed by
the Chairman of the Board of Directors, or the President or a Vice President,
and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer, and may be sealed with the seal of the Corporation or a facsimile
thereof if the Corporation shall then have a seal. If any certificate is
countersigned by a transfer agent or registered by a registrar, either of which
is other than the Corporation or an employee of the Corporation, the signatures
of the Corporation's officers may be facsimiles. In case any officer, transfer
agent or registrar who has signed, or whose facsimile signature has been placed
on such certificate, shall cease to be such officer, transfer agent or
registrar, whether because of death, resignation or otherwise, before such
certificate has been delivered by the Corporation or its agents, such
certificate may nevertheless be issued and delivered with the same effect as if
he were such officer, transfer agent or registrar at the date of issue.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Lost Certificates. The Board of Directors may direct that a
new certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. When authorizing the issue of a new certificate, the Board
of Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost, stolen or destroyed certificate, or
his legal representative, to advertise the same in such manner as it shall
require and/or give the Corporation a bond in such form, in such sum, and with
such surety or sureties as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney and, upon surrender to the Corporation or to the
transfer agent of the
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Corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation or the transfer agent of the Corporation to issue a
new certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 4. Registered Stockholders. The Corporation shall be entitled
to recognize the holder of record of any share or shares of stock as the holder
in fact thereof and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the statutes and of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and payments
of dividends shall be in strict compliance with all applicable laws and the
Certificate of Incorporation.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 3. Seal. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 4. Annual Statement. The Board of Directors shall present at
each annual meeting and when called for by vote of the stockholders at any
special meeting
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of the stockholders, a full and clear statement of the business and condition of
the Corporation.
ARTICLE VIII
BY-LAWS
Section 1. Amendments. These By-Laws may be altered, amended or
repealed and new By-Laws may be adopted by the stockholders or by the Board of
Directors, when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the stockholders or of
the Board of Directors or at any special meeting of the stockholders or of the
Board of Directors if notice of such alteration, amendment, repeal or adoption
of new By-Laws be contained in the notice of such special meeting. If the power
to adopt, amend or repeal by-laws is conferred upon the Board of Directors by
the Certificate of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws. Any action of the Board of
Directors to effect any alteration, amendment, repeal or adoption of new By-Laws
may be taken only by the affirmative vote of a majority of the whole Board.
Section 2. When By-Laws Silent. It is expressly recognized that when
the By-Laws are silent as to the manner of performing any corporate function,
the provisions of the statutes shall control.
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EXHIBIT 3.9
CERTIFICATE OF INCORPORATION
OF
KCI-RIK ACQUISITION CORP.
FIRST: The name of the corporation is KCI-RIK Acquisition Corp.
SECOND: The address of the registered office of the corporation in the
State of Delaware is 1209 Orange Street, Wilmington, Delaware 19801. The name of
the registered agent of the corporation at such address is The Corporation Trust
Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is one thousand (1,000) shares of Common Stock, par
value $.01 per share.
FIFTH: The period of duration of the corporation is perpetual.
SIXTH: The business and affairs of the corporation shall be managed by
or under the direction of the Board of Directors. The directors may be removed,
for cause or without cause, in accordance with the by-laws of the corporation.
SEVENTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is expressly
authorized to make, alter, adopt, amend, change or repeal the by-laws of the
corporation.
EIGHTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of Delaware. All
rights herein conferred are granted subject to this reservation.
NINTH: The corporation shall indemnify to the fullest extent permitted
by, and in the manner permissible under, the laws of the State of Delaware any
person (and the heirs, executors, administrators and estate of such person)
made, or threatened to be made, a party to an action, suit or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he is or was a director, advisory director or officer of the corporation,
or served another corporation, partnership, joint venture, trust or other
enterprise as a director, advisory director, officer, employee or agent at the
request of the corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person
<PAGE> 2
in connection with such action, suit or proceeding. The Board of Directors in
its discretion shall have the power on behalf of the corporation to indemnify
similarly any person, other than a director, advisory director or officer, made
a party to any action, suit or proceeding by reason of the fact that he is or
was an employee or agent of the corporation. The provisions of this Article
Ninth shall be applicable to persons who have ceased to be directors, advisory
directors, officers, employees or agents of the corporation and shall inure to
the benefit of their heirs, executors and administrators.
Pursuant to section 102(b)(7) (or any successor statute) of the General
Corporation Law of the State of Delaware, the personal liability of a director
to the corporation or the stockholders of the corporation for monetary damages
for breach of fiduciary duty is hereby eliminated. The terms of the preceding
sentence, however, shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or the
stockholders of the corporation, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (or a successor statute) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
TENTH: The incorporator is Steven R. Jacobs, whose mailing address is
Cox & Smith Incorporated, 112 East Pecan Street, Suite 1800, San Antonio, Texas
78205.The undersigned, being the incorporator named above, for the purposes of
organizing a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this certificate, hereby declaring and certifying that this
is his act and deed and the facts herein stated are true, and accordingly has
hereunto set his hand this 29th day of September, 1997.
/s/ Steven R. Jacobs
---------------------------------------
Steven R. Jacobs, Incorporator
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EXHIBIT 3.10
BY-LAWS
OF
KCI-RIK ACQUISITION CORP.
---------------------
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meeting. All meetings of the stockholders
shall be held at such time and at such place within or without the State of
Delaware as shall be designated by the Board of Directors and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. An annual meeting of the stockholders shall
be held each year on such date and at such time as shall be designated from time
to time by the Board of Directors, and stated in the notice of the meeting, at
which meeting the stockholders shall elect, in accordance with the Certificate
of Incorporation, a board of directors and transact such other business as may
properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for
any proper purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, may be called at any time by
the Board of Directors or the President pursuant to a resolution adopted by a
majority of the entire Board of Directors. Such request shall state the purpose
or purposes of the proposed meeting. Business transacted at special meetings
shall be confined to the purpose or purposes stated in the notice of the
meeting.
Section 4. Notice. Written or printed notice stating the place, date
and hour of any meeting of stockholders, and in the case of a special meeting,
the purpose or
<PAGE> 2
purposes for which the meeting is called, shall be delivered not less than ten
(10) nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the President, a Vice
President, the Secretary, an Assistant Secretary or the person calling the
meeting, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his address as it
appears on the stock ledger of the Corporation.
Section 5. List of Stockholders. The officer or agent of the
Corporation having charge of the stock ledger of the Corporation shall prepare
and make, at least ten (10) days before each meeting of the stockholders, a
complete list of the stockholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list, for a period of ten (10) days prior to such meeting,
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting or, if not so specified, at the place where the meeting is to be
held. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any stockholder during the
whole time of the meeting. The stock ledger shall be the only evidence as to who
are the stockholders entitled to examine such list or stock ledger, or to vote
at any meetings of stockholders.
Section 6. Quorum. The holders of a majority of the capital stock
issued and outstanding and entitled to be cast thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the Certificate of Incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time until a quorum
shall be present or represented without notice of the adjourned meeting other
than announcement of the time and place thereof at the meeting at which the
adjournment is taken. When any adjourned meeting is reconvened and a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 7. Voting. When a quorum is present at any meeting, the vote of
the holders of the shares present or represented by proxy at such meeting and
representing a majority of the votes entitled to be cast by each class of stock
shall decide any question brought before such meeting, unless the vote of a
different number is expressly required by statute, the Certificate of
Incorporation or these By-Laws. The Board of Directors, in its discretion, or
the officer of the Corporation presiding at a
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meeting of stockholders in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
Section 8. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share having voting power
held by such stockholder. Every proxy must be executed in writing (which shall
include telegraphing, facsimile transmission or cabling) by the stockholder or
by his duly authorized attorney-in-fact, but no proxy shall be voted on after
three years from its date, unless the proxy provides for a longer period.
Section 9. Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing (which shall include telegraphing, facsimile transmission or cabling),
setting forth the action so taken, shall be signed by the holders of outstanding
shares of the Corporation having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The number of directors of the
Corporation shall be three (3). The Director shall be elected at the Annual
Meeting of Stockholders, except as provided in Section 2 of this Article III,
and each director shall hold office until his successor is elected and
qualified. Directors need not be stockholders of the Corporation.
Section 2. Vacancies and Additional Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify. In the event a person serving on the Board of
Directors is removed (either for cause or without cause), resigns or fails or
refuses to act for any reason, then a majority of the remaining members of the
Board of Directors shall elect such person's successor to serve on the Board of
Directors.
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Section 3. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute, or by
the Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
Section 4. Place of Meetings. The Directors of the Corporation may hold
their meetings, both regular and special, either within or without the State of
Delaware.
Section 5. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman, if there be one, the President or any two directors. Notice
thereof stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before the date of
the meeting, by telephone, electronic facsimile or telegram on twenty-four (24)
hours notice, or on such shorter notice as the person or persons calling such
meeting may deem necessary or appropriate in the circumstances.
Section 6. Quorum; Voting. Unless otherwise provided by statute, the
Certificate of Incorporation or these By-Laws, at all meetings of the Board of
Directors, the presence of a majority of the number of directors constituting
the whole Board shall be necessary and sufficient to constitute a quorum for the
transaction of business, and the affirmative vote of a majority of the number of
Directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors.
If a quorum is not present at any meeting of the Directors, the
Directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present. Upon
attainment of representation by a quorum, subsequent to an adjournment of the
meeting, any business may be transacted which might have been transacted at the
meeting as originally notified.
Section 7. Committees. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the
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meeting in the place of any absent or disqualified member. Any committee, to the
extent allowed by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation.
Each committee shall keep regular minutes and report to the Board of Directors
when required.
Section 8. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors,
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the committees of the Board of Directors may,
by resolution of the Board of Directors, be allowed like compensation for
attending meetings of such committees.
Section 9. Action Without a Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
designated by the Board of Directors may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or Committee.
Section 10. Meetings by Conference Call, Etc. Unless otherwise
restricted by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 11. Reliance Upon Books. Directors and members of any committee
designated by the Board of Directors shall, in the performance of their duties,
be fully protected in relying in good faith upon the books of accounts or
reports made to the Corporation by any of its officers, or by an independent
certified public accountant, or by an appraiser selected with reasonable care by
the Board of Directors or by any such committee, or in relying in good faith
upon other records of the Corporation.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the
Certificate of Incorporation, these By-Laws or by statute, notice is required to
be given to any director or stockholder, and no provision is made as to how such
notice shall be given, it shall not be construed to mean personal notice, but
any such notice may be given in
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writing and personally delivered or sent by mail, postage prepaid, addressed to
such director or stockholder at such address as appears on the books of the
Corporation, and any such notice required or permitted to be given by mail shall
be deemed to be given at the time when the same be thus deposited in the United
States mail as aforesaid; such notice may also be given by some form of
electronic transmission, in which case it shall be so addressed as to be
received by such director or stockholder at the address of such director or
stockholder as it appears on the books of the Corporation or at a regular place
of such director's or stockholder's business, in which case such notice shall be
deemed to be given at the time when the recipient of such transmission
acknowledges its receipt.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the statutes,
the Certificate of Incorporation or these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated in such notice, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the attendance is for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. General. The officers of the Corporation shall be elected by
the Board of Directors and shall be a President and a Secretary. The Board of
Directors may, in its discretion, elect a Chairman of the Board of Directors
(who must also be a director), one or more Vice Presidents, one or more
Assistant Secretaries, a Treasurer and one or more Assistant Treasurers, all of
whom shall also be officers. Two or more offices may be held by the same person,
unless the Certificate of Incorporation or these By-Laws otherwise provide. The
officers of the Corporation need not be stockholders of the Corporation nor,
except in the case of the Chairman of the Board of Directors, need such officers
be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the
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Board of Directors. Any vacancy occurring in any office of the Corporation shall
be filled by the Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President and any
such officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and powers incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. Except where by law the signature of
the President is required, the Chairman of the Board of Directors shall possess
the same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him by these By-Laws or by the Board of Directors.
Section 5. President. The President shall, subject to the control of
the Board of Directors and, if there be one, the Chairman of the Board of
Directors, have general supervision of the business of the Corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. He shall execute all bonds, mortgages, contracts and other instruments
of the Corporation requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except that the other officers of the Corporation may sign and execute documents
when so authorized by these By-Laws, the Board of Directors or the President. In
the absence or disability of the Chairman of the Board of Directors, or if there
be none, the President shall preside at all meetings of the stockholders and the
Board of Directors. The President shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him by these
By-Laws or by the Board of Directors.
Section 6. Vice Presidents. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice President, if there be one, or the
Vice Presidents if there is more than one (in the order designated by the Board
of Directors) shall perform the duties of
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the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. Each Vice President shall perform
such other duties and have such other powers as the Board of Directors from time
to time may prescribe. If there be no Chairman of the Board of Directors and no
Vice President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the President or in the event of the
inability or refusal of the President to act, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. If the Secretary shall be unable
or shall refuse to cause to be given notice of all meetings of the stockholders
and special meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors or the President may choose
another officer to cause such notice to be given. The Secretary shall have
custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his signature. The Secretary
shall see that all books, reports, statements, certificates and other documents
and records required by law to be kept or filed are properly kept or filed, as
the case may be.
Section 8. Treasurer. The Treasurer, if there be one, shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. The Treasurer shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
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Section 9. Assistant Secretaries. Except as may be otherwise provided
in these By-Laws, Assistant Secretaries, if there be any, shall perform such
duties and have such powers as from time to time may be assigned to them by the
Board of Directors, the President, any Vice President, if there be one, or the
Secretary, and in the absence of the Secretary or in the event of his disability
or refusal to act, shall perform the duties of the Secretary, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of Certificates. The Corporation shall deliver
certificates representing all shares to which stockholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the holder's name, the number,
class of shares, and the par value of the shares or a statement that the shares
are without par value. They shall be signed by the President or a Vice
President, and by the Secretary or an Assistant Secretary, or the Treasurer or
an Assistant Treasurer, and may be sealed with the seal of the Corporation or a
facsimile thereof if the Corporation shall then have a seal. If any certificate
is countersigned by a transfer agent or registered by a registrar, either of
which is other than the Corporation or an employee of the Corporation, the
signatures of the Corporation's officers may be facsimiles. In case any officer,
transfer agent or registrar
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who has signed, or whose facsimile signature has been placed on such
certificate, shall cease to be such officer, transfer agent or registrar,
whether because of death, resignation or otherwise, before such certificate has
been delivered by the Corporation or its agents, such certificate may
nevertheless be issued and delivered with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Lost Certificates. The Board of Directors may direct that a
new certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. When authorizing the issue of a new certificate, the Board
of Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost, stolen or destroyed certificate, or
his legal representative, to advertise the same in such manner as it shall
require and/or give the Corporation a bond in such form, in such sum, and with
such surety or sureties as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 3. Transfer of Shares. Shares of stock of the Corporation shall
be transferable in the manner prescribed by law and in these By-Laws. Shares of
stock shall be transferable only on the books of the Corporation by the holder
thereof in person or by his duly authorized attorney and, upon surrender to the
Corporation or to the transfer agent of the Corporation of a certificate
representing shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation or the transfer agent of the Corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owners of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and
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assessments a person registered on its books as the owner of shares, and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the statutes and of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the capital stock of the Corporation, provided that all such
declarations and payments of dividends shall be in strict compliance with all
applicable laws and the Certificate of Incorporation.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 3. Seal. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 4. Annual Statement. The Board of Directors shall present at
each annual meeting and when called for by vote of the stockholders at any
special meeting of the stockholders, a full and clear statement of the business
and condition of the Corporation.
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ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other
Than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer, of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as
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authorized in the specific case upon a determination that indemnification of the
director or officer is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1 or Section 2 of this
Article VIII, as the case may be. Such determination shall be made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (ii) if such a quorum is
not obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders. To the extent, however, that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith, without
the necessity of authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 of this
Article VIII shall mean any other corporation or any partnership, joint venture,
trust, employee benefit plan or other enterprise of which such person is or was
serving at the request of the Corporation as a director, officer, employee or
agent. The provision of this Section 4 of this Article VIII shall not be deemed
to be exclusive or to limit in any way the circumstances in which a person may
be deemed to have met the applicable standard of conduct set forth in Section 1
or Section 2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VIII. The basis of such indemnification by a court shall
be a determination by such court that indemnification of the director or officer
is proper in the circumstances because he has met the applicable standards of
conduct set forth in Section 1 or Section 2 of this Article VIII, as the case
may be. Neither a contrary determination in the specific case under Section 3 of
this Article VIII nor the absence of any determination thereunder shall be a
defense to such application or create a presumption that the director or officer
seeking indemnification has not met any
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applicable standard of conduct. Notice of any application for indemnification
pursuant to this Section 5 of this Article VIII shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a director
or officer in defending or investigating a threatened or pending action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of any undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or granted
pursuant to his Article VIII shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, it
being the policy of the Corporation that indemnification of the persons
specified in Sections 1 and 2 of this Article VIII shall be made to the fullest
extent permitted by law. The provisions of this Article VIII shall not be deemed
to preclude the indemnification of any person who is not specified in Section 1
or Section 2 of this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power or the
obligation to indemnify him against such liability under the provisions of this
Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors and officers, so that any person who is or was a director or officer
of such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture,
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trust, employee benefit plan or other enterprise, shall stand in the same
position under the provisions of this Article VIII with respect to the resulting
or surviving corporation as such indemnification relates to his acts while
serving in any of the foregoing capacities, of such constituent corporation, as
he would have with respect to such constituent corporation if its separate
existence had continued. For purposes of this Article VIII, references to
"fines" shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director or officer of the
Corporation which imposes duties on, or involves services by, such director or
officer with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
VIII.
Section 10. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 of this
Article VIII), the Corporation shall not be obligated to indemnify any director
or officer in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. Except as otherwise provided in the Certificate
of Incorporation, these By-Laws may be altered, amended or repealed, in whole or
in part, or new By-Laws may be adopted by the stockholders or by the Board of
Directors, provided, however, that notice of such alteration, amendment, repeal
or adoption of new By-Laws shall be contained in the notice of such meeting of
stockholders or Board of Directors as the case may be. Except as otherwise
provided in the Certificate of Incorporation, all such amendments must be
approved by either the holders of a
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majority of the outstanding capital stock entitled to vote thereon or by a
majority of the entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX and in
these ByLaws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
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EXHIBIT 3.11
CERTIFICATE OF INCORPORATION
OF
KINETIC CONCEPTS INTERNATIONAL, INC.
FIRST: The name of the corporation is Kinetic Concepts International,
Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is one million (1,000,000) shares of Common Stock of the
par value of $.001 per share, amounting in the aggregate to one thousand dollars
($1,000).
FIFTH: The period of duration of the Corporation is perpetual.
SIXTH: The business and affairs of the Corporation shall be managed by
the Board of Directors, and the directors need not be elected by ballot unless
required by the by-laws of the Corporation.
SEVENTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is expressly
authorized to adopt, amend or repeal the by-laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of Delaware. All
rights herein conferred are granted subject to this reservation.
NINTH: The corporation shall indemnify to the fullest extent permitted
by, and in the manner permissible under, the laws of the State of Delaware any
person made, or threatened to be made, a party to an action, suit or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he is or was a director or officer of the Corporation, or served another
corporation, partnership, joint venture, trust or other enterprise as a
director, officer, employee or agent at the request of the Corporation, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding. The Board of Directors in its discretion shall
have the power on behalf of the Corporation to indemnify similarly any person,
<PAGE> 2
other than a director or officer, made a party to any action, suit or proceeding
by reason of the fact that he is or was an employee or agent of the Corporation.
The provisions of this Article Ninth shall be applicable to persons who have
ceased to be directors, officers, employees or agents of the Corporation and
shall inure to the benefit of their heirs, executors and administrators.
Pursuant to section 102(b)(7) (or any successor statute) of the General
Corporation Law of the State of Delaware, the personal liability of a director
to the Corporation or the stockholders of the Corporation for monetary damages
for breach of fiduciary duty is hereby eliminated. The terms of the preceding
sentence, however, shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the Corporation or the
stockholders of the Corporation, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (or a successor statute) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
TENTH: The incorporator is Robert A. Wehrmeyer, Jr., whose mailing
address is 3440 East Houston Street, San Antonio, Texas 78219.
The undersigned, being the incorporator hereinbefore named, for the
purposes of organizing a corporation pursuant to the General Corporation Law of
the State of Delaware, does make this certificate, hereby declaring and
certifying that this is his act and deed and the facts herein stated are true,
and accordingly has hereunto set his hand this 26th day of September, 1987.
/s/ Robert A. Wehrmeyer, Jr.
---------------------------------
Robert A. Wehrmeyer, Jr.
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EXHIBIT 3.12
BY-LAWS
OF
KINETIC CONCEPTS INTERNATIONAL, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The principal office of the Corporation
outside the State of Delaware shall be in the City of San Antonio, State of
Texas. The Corporation may also have offices at such other places both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meeting. All meetings of the stockholders
shall be held at such time and at such place within or without the State of
Delaware as shall be determined by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of the stockholders shall
be held on the 75th day after the expiration of the Corporation's fiscal year,
if not a legal holiday, and if a legal holiday, then on the next full business
day following, at 9:00 a.m., at which the stockholders shall elect by a
plurality vote a board of directors and transact such other business as may
properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for
any proper purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, may be called at any time by
the President or the Board of Directors, and shall be called by the President or
Secretary at the request in writing of the holders of shares of the Corporation
then issued, outstanding and entitled to vote at the meeting which represent not
less than 10% of the votes entitled to be cast at the meeting. Such request
shall state the purpose or
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purposes of the proposed meeting. Business transacted at special meetings shall
be confined to the purpose or purposes stated in the notice of the meeting.
Section 4. Notice. Written or printed notice stating the place, date
and hour of any meeting of stockholders, and in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (6O) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, a Vice
President, the Secretary, an Assistant Secretary or the person calling the
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, postage prepaid, addressed to the stockholder at his
address as it appears on the stock ledger of the Corporation.
Section 5. List of Shareholders. The officer or agent of the
Corporation having charge of the stock ledger of the Corporation shall make, at
least ten (10) days before each meeting of the stockholders, a complete list of
the stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list, for
a period of ten (10) days prior to such meeting, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting or, if
not so specified, at the place where the meeting is to be held. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole time of the
meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine such list or stock ledger, or to vote at any
meetings of stockholders.
Section 6. Quorum. The holders of issued and outstanding shares which
represent not less than a majority of the votes entitled to be cast thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation (all references to
the Certificate of Incorporation in these By-Laws includes any Certificate of
Designation respecting a resolution of the Board of Directors providing for the
issue of a series of preferred stock of the Corporation and which has been filed
in the office of the Secretary of State of the State of Delaware). If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority in interest of the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time until a quorum shall be present or represented
without notice of the adjourned meeting other than announcement of the time and
place thereof at the meeting at which the adjournment is taken. When any
adjourned meeting is reconvened and a quorum shall be present or represented,
any business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty (3O) days, or if after the
adjournment a new record
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date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
Section 7. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares present or represented by proxy at such
meeting and entitled to vote shall decide any question brought before such
meeting, unless the vote of a different number is expressly required by statute,
the Certificate of Incorporation or these By-Laws. The voting for election of
directors may be by written ballot or other means.
Section 8. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share having voting power
held by such stockholder. Every proxy must be executed in writing (which shall
include telegraphing or cabling) by the stockholder or by his duly authorized
attorney-in-fact, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period.
Section 9. Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares of the Corporation having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The number of directors of the
Corporation shall be three (3). Directors shall be elected at the annual meeting
of the stockholders, except as provided in Section 2 of this Article, and each
director shall hold office until his successor is elected and qualified.
Directors need not be stockholders of the Corporation.
Section 2. Vacancies and Additional Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify.
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Section 3. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute, or by
the Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
Section 4. Place of Meetings. The directors of the Corporation may hold
their meetings, both regular and special, either within or without the State of
Delaware.
Section 5. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held without further notice immediately following
the annual meeting of the stockholders, and at the same place, unless by
unanimous consent of the directors then elected and serving such time or place
shall be changed.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by either the Chairman of the Board or the President on two
business days' notice to each director, either personally or by mail or by
telegram, and in the case of notice by mail, such notice shall be deemed to have
been given on the third day following the date on which such notice is deposited
in the United States mail, postage prepaid, properly addressed to such director.
Special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of any two directors.
Section 8. Quorum. At all meetings of the Board of Directors the
presence of a majority of the number of directors constituting the whole Board
shall be necessary and sufficient to constitute a quorum for the transaction of
business, and the affirmative vote of at least a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute, by
the Certificate of Incorporation or by these By-Laws. If a quorum shall not be
present at any meeting of directors, the directors present thereat may adjourn
the meeting from time to time without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees in addition
to the executive committee provided for in Section 10 of this Article III, each
committee to consist of one or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the
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<PAGE> 5
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
By-Laws of the Corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Directors when required.
Section 10. Executive Committee. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate an executive
committee which shall consist of two or more members. The Chairman of the Board
and the President shall be members of the executive committee. The executive
committee shall have, except as otherwise provided by law or by resolution of
the Board of Directors, all the authority of the Board of Directors during the
intervals between the meetings of the Board of Directors.
Section 11. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors,
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the committees of the Board of Directors may,
by resolution of the Board of Directors, be allowed like compensation for
attending meetings of such committees.
Section 12. Action Without a Meeting. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee designated by the Board of Directors may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or Committee.
Section 13. Meetings by Conference Call, Etc. Unless otherwise
restricted by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
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Section 14. Removal of Directors. Unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
shares entitled to vote at an election of directors.
Section 15. Reliance Upon Books. Directors and members of any committee
designated by the Board of Directors shall, in the performance of their duties,
be fully protected in relying in good faith upon the books of accounts or
reports made to the Corporation by any of its officers, or by an independent
certified public accountant, or by an appraiser selected with reasonable care by
the Board of Directors or by any such committee, or in relying in good faith
upon other records of the Corporation.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the
statutes, the Certificate of Incorporation or these By-Laws, notice is required
to be given to any director or stockholder, and no provision is made as to how
such notice shall be given, it shall not be construed to mean personal notice,
but any such notice may be given in writing, by mail, postage prepaid, addressed
to such director or stockholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail shall be
deemed to be given at the time when the same be thus deposited in the United
States mail as aforesaid.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the statutes,
the Certificate of Incorporation or these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated in such notice, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the attendance is for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. In General. The officers of the Corporation shall be elected
by the Board of Directors and shall be a President, a Vice President, a
Secretary and a Treasurer. The Board of Directors may also, if it chooses to do
so, elect additional Vice Presidents, one or more Assistant Secretaries and one
or more Assistant Treasurers,
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all of whom shall also be officers. Two or more offices may be held by the same
person, unless the Certificate of Incorporation or these By-Laws otherwise
provide.
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of the stockholders shall elect a Chairman of the Board, and
a President, both of whom shall be members of the Board, and shall elect one or
more vice presidents, a secretary and a treasurer who need not be members of the
Board. The Board of Directors may appoint such other officers and agents as it
shall deem necessary and may determine the salaries of all officers and agents
from time to time. The officers shall hold office until their successors are
chosen and qualified. Any officer elected or appointed by the Board of Directors
may be removed, for or without cause, at any time by a majority vote of the
whole Board. Election or appointment of an officer or agent shall not of itself
create contract rights.
Section 3. Chairman. The Chairman of the Board shall be the Chief
Executive Officer of the Corporation and shall have such authority and perform
such duties as usually appertain to the Chief Executive Officer in business
corporations. He shall preside at all meetings of the stockholders and the Board
of Directors. Subject to the provisions of these By-laws and to the direction of
the Board of Directors, the Chairman of the Board of Directors shall have the
general and active management of the business of the Corporation, shall execute
all contracts requiring a seal and shall also execute any mortgages, conveyances
of other legal instruments in the name of and on behalf of the Corporation, but
this provision shall not prohibit the delegation of such powers by the Board of
Directors to some other officer, agent or attorney-in-fact of the Corporation.
Section 4. President. The President shall be the Chief Operating
Officer of the Corporation and shall have such authority and perform such duties
as usually appertain to the Chief Operating Officer in business corporations and
as are determined from time to time by the Board of Directors and the Chairman
of the Board. In the absence of the Chairman of the Board, the President shall
preside at all meetings of the stockholders and of the Board of Directors and
possess all the other authority of the Chairman of the Board.
Section 5. Vice Presidents. The Vice President or, if there be more
than one, the Vice Presidents in the order of their seniority or in any other
order determined by the Board of Directors, shall, in the absence or disability
of the Chairman of the Board or the President, perform the duties and exercise
the powers of such offices, respectively, and shall generally assist the
Chairman of the Board and President and perform such other duties as the Board
of Directors shall prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for committees of the Board when required. He shall give, or
cause to be given, notice of
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all meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation and he, or an assistant secretary,
shall have authority to affix the same to any instrument requiring it and when
so affixed it may be attested by his signature or by the signature of such
assistant secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing by
his signature.
Section 7. Assistant Secretaries. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation in such manner as may be authorized by the Board of
Directors from time to time, making proper vouchers for such disbursements, and
shall render to the President and directors, at the regular meetings of the
Board or whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation, and shall perform
such other duties as may be prescribed by the Board of Directors or the
President.
Section 9. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 10. Chief Executive Officer. The Chief Executive Officer of the
Company shall have the responsibility of the general and active management of
the business of the Company including the formulation of business plans, the
preparation of budgets, and the review of day-to-day operations. The Chief
Executive Officer shall see that all order and resolutions of the Board of
Directors or any committee thereof are carried into effect. The Chief Executive
Officer shall have authority to execute all contracts in the name of and on
behalf of the Company, but this grant of authority shall not prohibit the
delegation of such powers by the Board of Directors to some other officer,
agent, or attorney of the Company. The signature of the Chief Executive Officer
need not be attested by another officer of the Company.
Section 11. Chief Financial Officer. The Board of Directors may elect a
Chief Financial Officer who shall coordinate the financial planning for the
Corporation with the Chief Executive Officer and/or President. The Chief
Financial Officer shall be
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responsible for maintaining and reviewing all of the obligations of the Company
under any debt instruments the Corporation may, from time to time, execute.
Section 12. Senior Vice Presidents. The Senior Vice President or, if
there be more than one, the Senior Vice Presidents in the order of their
seniority or in any other order determined by the Board of Directors, shall, in
the absence of disability of the President, perform the duties and exercise the
powers of the President, and shall generally assist the President and perform
such other duties as the Board of Directors shall prescribe.
Section 13. Bonding. If required by the Board of Directors, all or
certain of the officers shall give the Corporation a bond in such form, in such
sum and with such surety or sureties as shall be satisfactory to the Board, for
the faithful performance of the duties of their office and for the restoration
to the Corporation, in case of their death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in their possession or under their control belonging to the
Corporation.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of certificates. The Corporation shall deliver
certificates representing all shares to which stockholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the holder's name, the number,
class of shares, and the par value of the shares or a statement that the shares
are without par value. They shall be signed by the Chairman of the Board of
Directors, or the President or a Vice President, and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof if the
Corporation shall then have a seal. If any certificate is countersigned by a
transfer agent or registered by a registrar, either of which is other than the
Corporation or an employee of the Corporation, the signatures of the
Corporation's officers may be facsimiles. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed on such
certificate, shall cease to be such officer, transfer agent or registrar,
whether because of death, resignation or otherwise, before such certificate has
been delivered by the Corporation or its agents, such certificate may
nevertheless be issued and delivered with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and
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the qualification, limitations or restrictions or such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock,
provided that, except as otherwise provided in section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, a statement that the
Corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 2. Lost Certificates. The Board of Directors may direct that a
new certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed. When authorizing the
issue of a new certificate, the Board of Directors, in its discretion and as a
condition precedent to the issuance thereof, may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to advertise the
same in such manner as it shall require and/or give the Corporation a bond in
such form, in such sum, and with such surety or sureties as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney and, upon surrender to the Corporation or to the
transfer agent of the Corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 4. Registered Stockholders. The Corporation shall be entitled
to recognize the holder of record of any share or shares of stock as the holder
in fact thereof and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other
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action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the statutes and of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and payments
of dividends shall be in strict compliance with all applicable laws and the
Certificate of Incorporation.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 3. Seal. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 4. Annual Statement. The Board of Directors shall present at
each annual meeting and when called for by vote of the stockholders at any
special meeting of the stockholders, a full and clear statement of the business
and condition of the Corporation.
ARTICLE VIII
BY-LAWS
Section 1. Amendments. These By-Laws may be altered, amended or
repealed and new By-Laws may be adopted by the stockholders or by the Board of
Directors, when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the stockholders or of
the Board of Directors or at any special meeting of the stockholders or of the
Board of Directors if notice of such alteration, amendment, repeal or adoption
of new By-Laws be contained in the notice of such special meeting. If the power
to adopt, amend or repeal by-laws is conferred upon the Board of Directors by
the Certificate of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws. Any action of the Board of
Directors to effect any alteration, amendment, repeal or adoption of new By-Laws
may be taken only by the affirmative vote of a majority of the whole Board.
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Section 2. When By-Laws Silent. It is expressly recognized that when
the By-Laws are silent as to the manner of performing any corporate function,
the provisions of the statutes shall control.
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EXHIBIT 3.13
CERTIFICATE OF INCORPORATION
OF
KCI AIR, INC.
FIRST: The name of the corporation is KCI Air, Inc.
SECOND: The address of the registered office of the corporation in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle. The name of the registered agent of the corporation at such address is
Corporation Service Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is one thousand (1,000) shares of Common Stock, par
value $.01 per share.
FIFTH: The period of duration of the corporation is perpetual.
SIXTH: The business and affairs of the corporation shall be managed by
or under the direction of the Board of Directors. The directors may be removed,
for cause or without cause, in accordance with the by-laws of the corporation.
SEVENTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is expressly
authorized to make, alter, adopt, amend, change or repeal the by-laws of the
corporation.
EIGHTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of Delaware. All
rights herein conferred are granted subject to this reservation.
NINTH: Each owner or holder of any shares of stock or other securities
of the corporation shall be entitled as such to the number of votes per share
<PAGE> 2
allocated in this Certificate of Incorporation and shall not have the right to
cumulate such votes in any election for directors.
TENTH: The corporation shall indemnify to the fullest extent permitted
by, and in the manner permissible under, the laws of the State of Delaware any
person (and heirs, executors, administrators and estate of such person) made, or
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was a director or officer of the corporation,
or served another corporation, partnership, joint venture, trust or other
enterprise as a director, advisory director, officer, employee or agent at the
request of the corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding. The Board of
Directors in its discretion shall have the power on behalf of the corporation to
indemnify similarly any person, other than a director or officer, made a party
to any threatened, pending or completed action, suit or proceeding by reason of
the fact that he is or was an advisory director, employee or agent of the
corporation. The provisions of this Article Tenth shall be applicable to persons
who have ceased to be directors, advisory directors, officers, employees or
agents of the corporation and shall inure to the benefit of their heirs,
executors and administrators.
Pursuant to section 102(b)(7) (or any successor statute) of the General
Corporation Law of the State of Delaware, the personal liability of a director
to the corporation or the stockholders of the corporation for monetary damages
for breach of fiduciary duty is hereby eliminated. The terms of the preceding
sentence, however, shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or the
stockholders of the corporation, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (or a successor statute) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
ELEVENTH: The incorporator is William J. McDonough, Jr., whose mailing
address is 112 East Pecan Street, Suite 1800, San Antonio, Texas 78205.
<PAGE> 3
The undersigned, being the incorporator named above, for the purposes
of organizing a corporation pursuant to the General Corporation Law of the State
of Delaware, does make this certificate, hereby declaring and certifying that
this is his act and deed and the facts herein stated are true, and accordingly
has hereunto set his hand this 16th day of May, 1995.
/s/ William J. McDonough, Jr.
----------------------------------------
William J. McDonough, Jr., Incorporator
<PAGE> 4
CERTIFICATE OF CORRECTION FILED TO CORRECT
A CERTAIN ERROR IN THE CERTIFICATE OF INCORPORATION
OF KCI AIR, INC. FILED IN THE OFFICE OF THE
SECRETARY OF STATE OF DELAWARE ON MAY 17, 1995
KCI AIR, INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of the corporation is KCI AIR, INC.
2. That a Certificate of Incorporation was filed with the Secretary of
State of Delaware on May 17, 1995 and that said Certificate requires correction
as permitted by Section 103 of the General Corporation Law of the State of
Delaware.
3. The inaccuracy or defect of said Certificate to be corrected is that
Article Second of the Certificate of Incorporation incorrectly states the
registered office and registered agent of the corporation.
4. Article Second of the Certificate is corrected to read as follows:
SECOND: The address of the registered office of the corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in
the City of Wilmington, County of New Castle. The name of the
registered agent of the corporation at such address is The Corporation
Trust Company.
IN WITNESS WHEREOF, KCI AIR, INC. has caused this Certificate to be
signed by William J. McDonough, Jr., its incorporator, this 26th day of July,
1995.
KCI AIR, INC.
By: /s/ William J. McDonough, Jr.
----------------------------------------------
William J. McDonough, Jr., Incorporator
<PAGE> 1
EXHIBIT 3.14
BY-LAWS
OF
KCI AIR, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The principal office of the Corporation
outside the State of Delaware shall be in the City of San Antonio, State of
Texas. The Corporation may also have offices at such other places both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meeting. All meetings of the stockholders
shall be held at such time and at such place within or without the State of
Delaware as shall be determined by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of the stockholders shall
be held on the first Wednesday in May each year, if not a legal holiday, and if
a legal holiday, then on the next full business day following, at 10:00 a.m., at
which the stockholders shall elect by a plurality vote a board of directors and
transact such other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for
any proper purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, may be called at any time by
the President or the Board of Directors, and shall be called by the President or
Secretary at the request in writing of the holders of shares of the Corporation
then issued, outstanding and entitled to vote at the meeting which represent not
less than 25% of the votes entitled to be cast at the meeting. Such request
shall state the purpose or purposes of the proposed meeting. Business transacted
at
<PAGE> 2
special meetings shall be confined to the purpose or purposes stated in the
notice of the meeting.
Section 4. Notice. Written or printed notice stating the place, date
and hour of any meeting of stockholders, and in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (6O) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, a Vice
President, the Secretary, an Assistant Secretary or the person calling the
meeting, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his address as it
appears on the stock ledger of the Corporation.
Section 5. List of Shareholders. The officer or agent of the
Corporation having charge of the stock ledger of the Corporation shall make, at
least ten (10) days before each meeting of the stockholders, a complete list of
the stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list, for
a period of ten (10) days prior to such meeting, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting or, if
not so specified, at the place where the meeting is to be held. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole time of the
meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine such list or stock ledger, or to vote at any
meetings of stockholders.
Section 6. Quorum. The holders of issued and outstanding shares which
represent not less than a majority of the votes entitled to be cast thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation (all references to
the Certificate of Incorporation in these By-Laws includes any Certificate of
Designation respecting a resolution of the Board of Directors providing for the
issue of a series of preferred stock of the Corporation and which has been filed
in the office of the Secretary of State of the State of Delaware). If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority in interest of the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time until a quorum shall be present or represented
without notice of the adjourned meeting other than announcement of the time and
place thereof at the
<PAGE> 3
meeting at which the adjournment is taken. When any adjourned meeting is
reconvened and a quorum shall be present or represented, any business may be
transacted which might have been transacted at the original meeting. If the
adjournment is for more than thirty (3O) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 7. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares present or represented by proxy at such
meeting and entitled to vote shall decide any question brought before such
meeting, unless the vote of a different number is expressly required by statute,
the Certificate of Incorporation or these By-Laws. The voting for election of
directors may be by written ballot or other means.
Section 8. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share having voting power
held by such stockholder. Every proxy must be executed in writing (which shall
include telegraphing or cabling) by the stockholder or by his duly authorized
attorney-in-fact, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period.
Section 9. Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares of the Corporation having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The number of directors of the
Corporation shall be three (3). Directors shall be elected at the annual meeting
of the stockholders, except as provided in Section 2 of this Article, and each
director shall hold office until his successor is elected and qualified.
Directors need not be stockholders of the Corporation.
<PAGE> 4
Section 2. Vacancies and Additional Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify.
Section 3. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute, or by
the Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
Section 4. Place of Meetings. The directors of the Corporation may hold
their meetings, both regular and special, either within or without the State of
Delaware.
Section 5. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held without further notice immediately following
the annual meeting of the stockholders, and at the same place, unless by
unanimous consent of the directors then elected and serving such time or place
shall be changed.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by either the Chairman of the Board or the President on two
business days' notice to each director, either personally or by mail or by
telegram, and in the case of notice by mail, such notice shall be deemed to have
been given on the third day following the date on which such notice is deposited
in the United States mail, postage prepaid, properly addressed to such director.
Special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of any two directors.
Section 8. Quorum. At all meetings of the Board of Directors the
presence of a majority of the number of directors constituting the whole Board
shall be necessary and sufficient to constitute a quorum for the transaction of
business, and the affirmative vote of at least a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute, by
the Certificate of Incorporation or by these By-Laws. If a quorum shall not be
present at any meeting of directors, the directors present thereat may adjourn
the meeting from
<PAGE> 5
time to time without notice other than announcement at the meeting, until a
quorum shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees in addition
to the executive committee provided for in Section 10 of this Article III, each
committee to consist of one or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation, adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the By-Laws of the Corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors when required.
Section 10. Executive Committee. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate an executive
committee which shall consist of two or more members. The Chairman of the Board
and the President shall be members of the executive committee. The executive
committee shall have, except as otherwise provided by law or by resolution of
the Board of Directors, all the authority of the Board of Directors during the
intervals between the meetings of the Board of Directors.
Section 11. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors,
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the committees of the Board of Directors may,
by resolution of the Board of Directors, be allowed like compensation for
attending meetings of such committees.
Section 12. Action Without a Meeting. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, any action required or
permitted to
<PAGE> 6
be taken at any meeting of the Board of Directors or of any committee designated
by the Board of Directors may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
Committee.
Section 13. Meetings by Conference Call, Etc. Unless otherwise
restricted by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 14. Removal of Directors. Unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
shares entitled to vote at an election of directors.
Section 15. Reliance Upon Books. Directors and members of any committee
designated by the Board of Directors shall, in the performance of their duties,
be fully protected in relying in good faith upon the books of accounts or
reports made to the Corporation by any of its officers, or by an independent
certified public accountant, or by an appraiser selected with reasonable care by
the Board of Directors or by any such committee, or in relying in good faith
upon other records of the Corporation.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the
statutes, the Certificate of Incorporation or these By-Laws, notice is required
to be given to any director or stockholder, and no provision is made as to how
such notice shall be given, it shall not be construed to mean personal notice,
but any such notice may be given in writing, by mail, postage prepaid, addressed
to such director or stockholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail shall be
deemed to be given at the time when the same be thus deposited in the United
States mail as aforesaid.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the statutes,
the Certificate of Incorporation or these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
<PAGE> 7
the time stated in such notice, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the attendance is for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. In General. The officers of the Corporation shall be elected
by the Board of Directors and shall be a President, a Vice President, a
Secretary and a Treasurer. The Board of Directors may also, if it chooses to do
so, elect a Chairman of the Board, additional Vice Presidents, one or more
Assistant Secretaries and one or more Assistant Treasurers, all of whom shall
also be officers. Two or more offices may be held by the same person, unless the
Certificate of Incorporation or these By-Laws otherwise provide.
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of the stockholders shall elect a President, who shall be a
member of the Board, and shall elect one or more vice presidents, a secretary
and a treasurer who need not be members of the Board. The Board of Directors
also may appoint a Chairman of the Board, who shall be a member of the Board,
and such other officers and agents as it shall deem necessary and may determine
the salaries of all officers and agents from time to time. The officers shall
hold office until their successors are chosen and qualified. Any officer elected
or appointed by the Board of Directors may be removed, for or without cause, at
any time by a majority vote of the whole Board. Election or appointment of an
officer or agent shall not of itself create contract rights.
Section 3. Chairman of the Board. The Chairman of the Board, if there
be one, shall preside at all meetings of the stockholders and of the Board of
Directors, and shall be responsible for developing the general over-all policies
and programs of the Corporation and shall have such other powers and duties as
may be assigned to or vested in him from time to time by the Board of Directors.
Section 4. President. The President shall have general responsibility
for carrying out the business and affairs of the Corporation, and shall have
general supervision and direction of all other officers of the Corporation,
except the Chairman of the Board, if there be one. In the absence of the
Chairman of the Board or if a Chairman of the Board has not been elected, he
shall preside at all
<PAGE> 8
meetings of the stockholders and of the Board of Directors. The President shall
have such other powers and duties as may be assigned to or vested in him from
time to time by the Board of Directors.
Section 5. Vice Presidents. The Vice President or, if there be more
than one, the Vice Presidents in the order of their seniority or in any other
order determined by the Board of Directors, shall, in the absence or disability
of the Chairman of the Board, if there be one, or the President, perform the
duties and exercise the powers of such offices, respectively, and shall
generally assist the Chairman of the Board, if there be one, and President and
perform such other duties as the Board of Directors shall prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for committees of the Board when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or President, under whose supervision he
shall be. He shall keep in safe custody the seal of the Corporation and he, or
an assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed it may be attested by his signature or by the
signature of such assistant secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature.
Section 7. Assistant Secretaries. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation in such manner as may be authorized by the Board of
Directors from time to time, making proper vouchers for such disbursements, and
shall render to the President and directors, at the regular meetings of the
Board or whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation, and shall perform
such other duties as may be prescribed by the Board of Directors or the
President.
<PAGE> 9
Section 9. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 10. Bonding. If required by the Board of Directors, all or
certain of the officers shall give the Corporation a bond in such form, in such
sum and with such surety or sureties as shall be satisfactory to the Board, for
the faithful performance of the duties of their office and for the restoration
to the Corporation, in case of their death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in their possession or under their control belonging to the
Corporation.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of certificates. The Corporation shall deliver
certificates representing all shares to which stockholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the holder's name, the number,
class of shares, and the par value of the shares or a statement that the shares
are without par value. They shall be signed by the Chairman of the Board of
Directors, or the President or a Vice President, and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof if the
Corporation shall then have a seal. If any certificate is countersigned by a
transfer agent or registered by a registrar, either of which is other than the
Corporation or an employee of the Corporation, the signatures of the
Corporation's officers may be facsimiles. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed on such
certificate, shall cease to be such officer, transfer agent or registrar,
whether because of death, resignation or otherwise, before such certificate has
been delivered by the Corporation or its agents, such certificate may
nevertheless be issued and delivered with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent
<PAGE> 10
such class or series of stock, provided that, except as otherwise provided in
section 202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 2. Lost Certificates. The Board of Directors may direct that a
new certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. When authorizing the issue of a new certificate, the Board
of Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost, stolen or destroyed certificate, or
his legal representative, to advertise the same in such manner as it shall
require and/or give the Corporation a bond in such form, in such sum, and with
such surety or sureties as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney and, upon surrender to the Corporation or to the
transfer agent of the Corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 4. Registered Stockholders. The Corporation shall be entitled
to recognize the holder of record of any share or shares of stock as the holder
in fact thereof and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful
<PAGE> 11
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the statutes and of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and payments
of dividends shall be in strict compliance with all applicable laws and the
Certificate of Incorporation.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 3. Seal. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 4. Annual Statement. The Board of Directors shall present at
each annual meeting and when called for by vote of the stockholders at any
special meeting of the stockholders, a full and clear statement of the business
and condition of the Corporation.
ARTICLE VIII
BY-LAWS
Section 1. Amendments. These By-Laws may be altered, amended or
repealed and new By-Laws may be adopted by the stockholders or by the Board of
Directors, when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the stockholders or of
the Board of Directors or at any special meeting of the stockholders or of the
Board of Directors if notice of such alteration, amendment, repeal or adoption
of new By-Laws be contained in the notice of such special meeting. If the power
to adopt, amend or repeal by-laws is conferred upon the Board of Directors by
the Certificate of Incorporation, it shall not divest or limit the power of the
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stockholders to adopt, amend or repeal by-laws. Any action of the Board of
Directors to effect any alteration, amendment, repeal or adoption of new By-Laws
may be taken only by the affirmative vote of a majority of the whole Board.
Section 2. When By-Laws Silent. It is expressly recognized that when
the By-Laws are silent as to the manner of performing any corporate function,
the provisions of the statutes shall control.
<PAGE> 1
EXHIBIT 3.15
CERTIFICATE OF INCORPORATION
OF
PLEXUS ENTERPRISES, INC.
FIRST: The name of the corporation is Plexus Enterprises, Inc.
SECOND: The address of the registered office of the corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is one thousand (1,000) shares of Common Stock, par
value $.01 per share.
FIFTH: The period of duration of the corporation is perpetual.
SIXTH: The business and affairs of the corporation shall be managed by
or under the direction of the Board of Directors. The directors may be
removed, for cause or without cause, in accordance with the by-laws of the
corporation.
SEVENTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized to make, alter, adopt, amend, change or repeal the by-laws of the
corporation.
EIGHTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of Delaware. All
rights herein conferred are granted subject to this reservation.
<PAGE> 2
NINTH: Each owner or holder of any shares of stock or other securities of
the corporation shall be entitled as such to the number of votes per share
allocated in this Certificate of Incorporation and shall not have the right to
cumulate such votes in any election for directors.
TENTH: The corporation shall indemnify to the fullest extent permitted by,
and in the manner permissible under, the laws of the State of Delaware any
person (and heirs, executors, administrators and estate of such person) made, or
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was a director or officer of the corporation,
or served another corporation, partnership, joint venture, trust or other
enterprise as a director, advisory director, officer, employee or agent at the
request of the corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding. The Board of
Directors in its discretion shall have the power on behalf of the corporation to
indemnify similarly any person, other than a director or officer, made a party
to any threatened, pending or completed action, suit or proceeding by reason of
the fact that he is or was an advisory director, employee or agent of the
corporation. The provisions of this Article Tenth shall be applicable to persons
who have ceased to be directors, advisory directors, officers, employees or
agents of the corporation and shall inure to the benefit of their heirs,
executors and administrators.
Pursuant to section 102(b)(7) (or any successor statute) of the General
Corporation Law of the State of Delaware, the personal liability of a director
to the corporation or the stockholders of the corporation for monetary damages
for breach of fiduciary duty is hereby eliminated. The terms of the preceding
sentence, however, shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or the
stockholders of the corporation, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (or a successor statute) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
ELEVENTH: The incorporator is K. A. Widdoes, whose mailing address is
c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware
19801.
The undersigned, being the incorporator named above, for the purposes of
organizing a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this certificate, hereby declaring and certifying that this
is her act and deed and the facts herein stated are true, and accordingly has
hereunto set his hand this 18th day of December, 1995.
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/s/ K. A. Widdoes
---------------------------------
K. A. Widdoes, Incorporator
3
<PAGE> 1
EXHIBIT 3.16
BY-LAWS
OF
PLEXUS ENTERPRISES, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The principal office of the Corporation outside
the State of Delaware shall be in the City of San Antonio, State of Texas. The
Corporation may also have offices at such other places both within and without
the State of Delaware as the Board of Directors may from time to time determine
or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meeting. All meetings of the stockholders
shall be held at such time and at such place within or without the State of
Delaware as shall be determined by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of the stockholders shall be
held on the first Wednesday in May each year, if not a legal holiday, and if a
legal holiday, then on the next full business day following, at 10:00 a.m., at
which the stockholders shall elect by a plurality vote a board of directors and
transact such other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for any
proper purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, may be called at any time by
the President or the Board of Directors, and shall be called by the President or
Secretary at the request in writing of the holders of shares of the Corporation
then issued, outstanding and entitled to vote at the meeting which represent not
less than 25% of the votes entitled to be cast at the meeting. Such request
shall state the purpose or
<PAGE> 2
purposes of the proposed meeting. Business transacted at special meetings shall
be confined to the purpose or purposes stated in the notice of the meeting.
Section 4. Notice. Written or printed notice stating the place, date and
hour of any meeting of stockholders, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (6O) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, a Vice
President, the Secretary, an Assistant Secretary or the person calling the
meeting, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his address as it
appears on the stock ledger of the Corporation.
Section 5. List of Shareholders. The officer or agent of the Corporation
having charge of the stock ledger of the Corporation shall make, at least ten
(10) days before each meeting of the stockholders, a complete list of the
stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list, for
a period of ten (10) days prior to such meeting, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting or, if
not so specified, at the place where the meeting is to be held. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole time of the
meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine such list or stock ledger, or to vote at any
meetings of stockholders.
Section 6. Quorum. The holders of issued and outstanding shares which
represent not less than a majority of the votes entitled to be cast thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation (all references to
the Certificate of Incorporation in these By-Laws includes any Certificate of
Designation respecting a resolution of the Board of Directors providing for the
issue of a series of preferred stock of the Corporation and which has been filed
in the office of the Secretary of State of the State of Delaware). If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority in interest of the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time until a quorum shall be present or represented
without notice of the adjourned meeting other than announcement of the time and
place thereof at the meeting at which the adjournment is taken. When any
adjourned meeting is reconvened and a quorum shall be present or represented,
any business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty (3O) days, or if after the
adjournment a new record
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<PAGE> 3
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
Section 7. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares present or represented by proxy at such
meeting and entitled to vote shall decide any question brought before such
meeting, unless the vote of a different number is expressly required by statute,
the Certificate of Incorporation or these By-Laws. The voting for election of
directors may be by written ballot or other means.
Section 8. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share having voting power
held by such stockholder. Every proxy must be executed in writing (which shall
include telegraphing or cabling) by the stockholder or by his duly authorized
attorney-in-fact, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period.
Section 9. Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares of the Corporation having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The number of directors of the Corporation
shall be three (3). Directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article, and each director
shall hold office until his successor is elected and qualified. Directors need
not be stockholders of the Corporation.
Section 2. Vacancies and Additional Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify.
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<PAGE> 4
Section 3. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute, or by
the Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
Section 4. Place of Meetings. The directors of the Corporation may hold
their meetings, both regular and special, either within or without the State
of Delaware.
Section 5. Annual Meetings. The first meeting of each newly elected Board
of Directors shall be held without further notice immediately following the
annual meeting of the stockholders, and at the same place, unless by unanimous
consent of the directors then elected and serving such time or place shall be
changed.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time
be determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by either the Chairman of the Board or the President on two
business days' notice to each director, either personally or by mail or by
telegram, and in the case of notice by mail, such notice shall be deemed to have
been given on the third day following the date on which such notice is deposited
in the United States mail, postage prepaid, properly addressed to such director.
Special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of any two directors.
Section 8. Quorum. At all meetings of the Board of Directors the presence
of a majority of the number of directors constituting the whole Board shall be
necessary and sufficient to constitute a quorum for the transaction of business,
and the affirmative vote of at least a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by statute, by the Certificate
of Incorporation or by these By-Laws. If a quorum shall not be present at any
meeting of directors, the directors present thereat may adjourn the meeting from
time to time without notice other than announcement at the meeting, until a
quorum shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate one or more committees in addition to
the executive committee provided for in Section 10 of this Article III, each
committee to consist of one or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the
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<PAGE> 5
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
By-Laws of the Corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Directors when required.
Section 10. Executive Committee. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate an executive committee which
shall consist of two or more members. The Chairman of the Board and the
President shall be members of the executive committee. The executive committee
shall have, except as otherwise provided by law or by resolution of the Board of
Directors, all the authority of the Board of Directors during the intervals
between the meetings of the Board of Directors.
Section 11. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors,
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the committees of the Board of Directors may,
by resolution of the Board of Directors, be allowed like compensation for
attending meetings of such committees.
Section 12. Action Without a Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
designated by the Board of Directors may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or Committee.
Section 13. Meetings by Conference Call, Etc. Unless otherwise restricted
by the Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
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<PAGE> 6
Section 14. Removal of Directors. Unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
shares entitled to vote at an election of directors.
Section 15. Reliance Upon Books. Directors and members of any committee
designated by the Board of Directors shall, in the performance of their duties,
be fully protected in relying in good faith upon the books of accounts or
reports made to the Corporation by any of its officers, or by an independent
certified public accountant, or by an appraiser selected with reasonable care by
the Board of Directors or by any such committee, or in relying in good faith
upon other records of the Corporation.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the statutes,
the Certificate of Incorporation or these By-Laws, notice is required to be
given to any director or stockholder, and no provision is made as to how such
notice shall be given, it shall not be construed to mean personal notice, but
any such notice may be given in writing, by mail, postage prepaid, addressed to
such director or stockholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail shall be
deemed to be given at the time when the same be thus deposited in the United
States mail as aforesaid.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the statutes,
the Certificate of Incorporation or these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated in such notice, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the attendance is for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. In General. The officers of the Corporation shall be elected by
the Board of Directors and shall be a President, a Vice President, a Secretary
and a Treasurer. The Board of Directors may also, if it chooses to do so, elect
a Chairman of the Board, additional Vice Presidents, one or more Assistant
Secretaries and one or
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more Assistant Treasurers, all of whom shall also be officers. Two or more
offices may be held by the same person, unless the Certificate of Incorporation
or these By-Laws otherwise provide.
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of the stockholders shall elect a President, who shall be a
member of the Board, and shall elect one or more vice presidents, a secretary
and a treasurer who need not be members of the Board. The Board of Directors
also may appoint a Chairman of the Board, who shall be a member of the Board,
and such other officers and agents as it shall deem necessary and may determine
the salaries of all officers and agents from time to time. The officers shall
hold office until their successors are chosen and qualified. Any officer elected
or appointed by the Board of Directors may be removed, for or without cause, at
any time by a majority vote of the whole Board. Election or appointment of an
officer or agent shall not of itself create contract rights.
Section 3. Chairman of the Board. The Chairman of the Board, if there be
one, shall preside at all meetings of the stockholders and of the Board of
Directors, and shall be responsible for developing the general over-all policies
and programs of the Corporation and shall have such other powers and duties as
may be assigned to or vested in him from time to time by the Board of Directors.
Section 4. President. The President shall have general responsibility for
carrying out the business and affairs of the Corporation, and shall have general
supervision and direction of all other officers of the Corporation, except the
Chairman of the Board, if there be one. In the absence of the Chairman of the
Board or if a Chairman of the Board has not been elected, he shall preside at
all meetings of the stockholders and of the Board of Directors. The President
shall have such other powers and duties as may be assigned to or vested in him
from time to time by the Board of Directors.
Section 5. Vice Presidents. The Vice President or, if there be more than
one, the Vice Presidents in the order of their seniority or in any other order
determined by the Board of Directors, shall, in the absence or disability of the
Chairman of the Board, if there be one, or the President, perform the duties and
exercise the powers of such offices, respectively, and shall generally assist
the Chairman of the Board, if there be one, and President and perform such other
duties as the Board of Directors shall prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for committees of the Board when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or President, under whose supervision he
shall be. He shall keep in safe custody the seal
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of the Corporation and he, or an assistant secretary, shall have authority to
affix the same to any instrument requiring it and when so affixed it may be
attested by his signature or by the signature of such assistant secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his signature.
Section 7. Assistant Secretaries. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation in such manner as may be authorized by the Board of
Directors from time to time, making proper vouchers for such disbursements, and
shall render to the President and directors, at the regular meetings of the
Board or whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation, and shall perform
such other duties as may be prescribed by the Board of Directors or the
President.
Section 9. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 10. Bonding. If required by the Board of Directors, all or certain
of the officers shall give the Corporation a bond in such form, in such sum and
with such surety or sureties as shall be satisfactory to the Board, for the
faithful performance of the duties of their office and for the restoration to
the Corporation, in case of their death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in their possession or under their control belonging to the Corporation.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of certificates. The Corporation shall deliver
certificates representing all shares to which stockholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the
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Corporation as they are issued. Each certificate shall state on the face thereof
the holder's name, the number, class of shares, and the par value of the shares
or a statement that the shares are without par value. They shall be signed by
the Chairman of the Board of Directors, or the President or a Vice President,
and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer, and may be sealed with the seal of the Corporation or a facsimile
thereof if the Corporation shall then have a seal. If any certificate is
countersigned by a transfer agent or registered by a registrar, either of which
is other than the Corporation or an employee of the Corporation, the signatures
of the Corporation's officers may be facsimiles. In case any officer, transfer
agent or registrar who has signed, or whose facsimile signature has been placed
on such certificate, shall cease to be such officer, transfer agent or
registrar, whether because of death, resignation or otherwise, before such
certificate has been delivered by the Corporation or its agents, such
certificate may nevertheless be issued and delivered with the same effect as if
he were such officer, transfer agent or registrar at the date of issue.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Lost Certificates. The Board of Directors may direct that a new
certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. When authorizing the issue of a new certificate, the Board
of Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost, stolen or destroyed certificate, or
his legal representative, to advertise the same in such manner as it shall
require and/or give the Corporation a bond in such form, in such sum, and with
such surety or sureties as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferable only
on the books of the Corporation by the holder thereof in person or by his duly
authorized attorney and, upon surrender to the Corporation or to the transfer
agent of the
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Corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation or the transfer agent of the Corporation to issue a
new certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 4. Registered Stockholders. The Corporation shall be entitled to
recognize the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the statutes and of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and payments
of dividends shall be in strict compliance with all applicable laws and the
Certificate of Incorporation.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 3. Seal. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 4. Annual Statement. The Board of Directors shall present at each
annual meeting and when called for by vote of the stockholders at any special
meeting
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of the stockholders, a full and clear statement of the business and
condition of the Corporation.
ARTICLE VIII
BY-LAWS
Section 1. Amendments. These By-Laws may be altered, amended or repealed
and new By-Laws may be adopted by the stockholders or by the Board of Directors,
when such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal by-laws is conferred upon the Board of Directors by the
Certificate of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws. Any action of the Board of
Directors to effect any alteration, amendment, repeal or adoption of new By-Laws
may be taken only by the affirmative vote of a majority of the whole Board.
Section 2. When By-Laws Silent. It is expressly recognized that when
the By-Laws are silent as to the manner of performing any corporate function,
the provisions of the statutes shall control.
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EXHIBIT 3.17
CERTIFICATE OF INCORPORATION
OF
MEDICAL RETRO DESIGN, INC.
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FIRST: The name of the corporation is Medical Retro Design, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is one million (1,000,000) shares of Common Stock of the
par value of $.001 per share, amounting in the aggregate to one thousand dollars
($1,000).
FIFTH: The period of duration of the Corporation is perpetual.
SIXTH: The business and affairs of the Corporation shall be managed by the
Board of Directors, and the directors need not be elected by ballot unless
required by the By-Laws of the Corporation.
SEVENTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized to adopt, amend or repeal the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of Delaware. All
rights herein conferred are granted subject to this reservation.
NINTH: The Corporation shall indemnify to the fullest extent permitted by,
and in the manner permissible under, the laws of the State of Delaware as in
effect from time to time, any person made, or threatened to be made, a party to
an action, suit or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he is or was a director or officer of
the Corporation, or served another corporation,
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partnership, joint venture, trust or other enterprise as a director, officer,
employee or agent at the request of the Corporation, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding. The foregoing rights of indemnification shall not be deemed
exclusive of any other rights to which any such person may be entitled under any
By-Law, agreement, vote of stockholders or disinterested directors or otherwise.
The Board of Directors in its discretion shall have the power on behalf of the
Corporation to indemnify similarly any person, other than a director or officer,
made a party to any action, suit or proceeding by reason of the fact that he is
or was an employee or agent of the Corporation. The provisions of this Article
Ninth shall be applicable to persons who have ceased to be directors, officers,
employees or agents of the Corporation and shall inure to the benefit of their
heirs, executors and administrators.
Pursuant to section 102(b)(7) (or any successor statute) of the General
Corporation Law of the State of Delaware, the personal liability of a director
to the Corporation or the stockholders of the Corporation for monetary damages
for breach of fiduciary duty is hereby eliminated. The terms of the preceding
sentence, however, shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the Corporation or the
stockholders of the Corporation, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (or a successor statute) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment or repeal of this paragraph shall apply
to or have effect on the liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
TENTH: The incorporator is Dennis E. Noll., whose mailing address is
8023 Vantage Drive, San Antonio, Texas 78230.
The undersigned, being the incorporator hereinbefore named, for the
purposes of organizing a corporation pursuant to the General Corporation Law of
the State of Delaware, does make this certificate, hereby declaring and
certifying that this is his act and deed and the facts herein stated are true,
and accordingly has hereunto set his hand this 9th day of December, 1992.
/s/ Dennis E. Noll
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Dennis E. Noll, Incorporator
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EXHIBIT 3.18
BY-LAWS
OF
MRD, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The principal office of the Corporation outside
the State of Delaware shall be in the City of San Antonio, State of Texas. The
Corporation may also have offices at such other places both within and without
the State of Delaware as the Board of Directors may from time to time determine
or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meeting. All meetings of the stockholders
shall be held at such time and at such place within or without the State of
Delaware as shall be determined by the Board of Directors.
Section 2. Annual Meetings. An annual meeting of the stockholders shall be
held each year n such date and at such time as shall be designated from time to
time by the Board of Directors, and stated in the notice of the meeting, at
which meeting the stockholders shall elect by a plurality vote a board of
directors and transact such other business as may properly be brought before the
meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for any
proper purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, may be called at any time by
the Board of Directors, the Chairman of the Board or the President and Chief
Executive Officer. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at special meetings shall be confined to
the purpose or purposes stated in the notice of the meeting.
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Section 4. Notice. Written or printed notice stating the place, date and
hour of any meeting of stockholders, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President and Chief
Executive Officer, a Vice President, the Secretary, an Assistant Secretary or
the person calling the meeting, to each stockholder of record entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
stockholder at his address as it appears on the stock ledger of the Corporation.
Section 5. List of Shareholders. The officer or agent of the Corporation
having charge of the stock ledger of the Corporation shall make, at least ten
(10) days before each meeting of the stockholders, a complete list of the
stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list, for
a period of ten (10) days prior to such meeting, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting or, if
not so specified, at the place where the meeting is to be held. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole time of the
meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine such list or stock ledger, or to vote at any
meetings of stockholders.
Section 6. Quorum. The holders of issued and outstanding shares which
represent not less than a majority of the votes entitled to be cast thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation (all references to
the Certificate of Incorporation in these By-Laws includes any Certificate of
Designation respecting a resolution of the Board of Directors providing for the
issue of a series of preferred stock of the Corporation and which has been filed
in the office of the Secretary of State of the State of Delaware). If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority in interest of the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time until a quorum shall be present or represented
without notice of the adjourned meeting other than announcement of the time and
place thereof at the meeting at which the adjournment is taken. When any
adjourned meeting is reconvened and a quorum shall be present or represented,
any business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty (3O) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
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Section 7. Voting. When a quorum is present at any meeting, the vote of
the holders of the shares present or represented by proxy at such meeting and
representing a majority of the votes entitled to be cast shall decide any
question brought before such meeting, unless the vote of a different number is
expressly required by statute, the Certificate of Incorporation or these
By-Laws. The voting for election of directors may be by written ballot or other
means.
Section 8. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share having voting power
held by such stockholder. Every proxy must be executed in writing (which shall
include telegraphing or cabling) by the stockholder or by his duly authorized
attorney-in-fact, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period.
Section 9. Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares of the Corporation having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The initial number of directors of the
Corporation shall be such as may be determined by the incorporator and,
thereafter, the number of directors shall be such number as shall be determined
by resolution of a majority of the whole Board of Directors. Directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this Article, and each director shall hold office until his successor is
elected and qualified. Directors need not be stockholders of the Corporation.
Section 2. Vacancies and Additional Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify.
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Section 3. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute, or by
the Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
Section 4. Place of Meetings. The directors of the Corporation may hold
their meetings, both regular and special, either within or without the State
of Delaware.
Section 5. Annual Meetings. The first meeting of each newly elected Board
of Directors shall be held without further notice immediately following the
annual meeting of the stockholders, and at the same place, unless by unanimous
consent of the directors then elected and serving such time or place shall be
changed.
Section 6. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from
time to time be determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by either the Chairman of the Board or the President and Chief
Executive Officer on two business days' notice to each director, either
personally or by mail or by telegram, and in the case of notice by mail, such
notice shall be deemed to have been given on the third day following the date on
which such notice is deposited in the United States mail, postage prepaid,
properly addressed to such director. Special meetings shall be called by the
President and Chief Executive Officer or Secretary in like manner and on like
notice on the written request of any two directors.
Section 8. Quorum. At all meetings of the Board of Directors the presence
of a majority of the number of directors constituting the whole Board shall be
necessary and sufficient to constitute a quorum for the transaction of business,
and the affirmative vote of at least a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by statute, by the Certificate
of Incorporation or by these By-Laws. If a quorum shall not be present at any
meeting of directors, the directors present thereat may adjourn the meeting from
time to time without notice other than announcement at the meeting, until a
quorum shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate one or more committees in addition to
the executive committee provided for in Section 10 of this Article III, each
committee to consist of one or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the
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power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
By-Laws of the Corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Directors when required.
Section 10. Executive Committee. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate an executive committee which
shall consist of two or more members. The Chairman of the Board and the
President and Chief Executive Officer shall be members of the executive
committee. The executive committee shall have, except as otherwise provided by
law or by resolution of the Board of Directors, all the authority of the Board
of Directors during the intervals between the meetings of the Board of
Directors.
Section 11. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors,
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the committees of the Board of Directors may,
by resolution of the Board of Directors, be allowed like compensation for
attending meetings of such committees.
Section 12. Action Without a Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
designated by the Board of Directors may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or Committee.
Section 13. Meetings by Conference Call, Etc. Unless otherwise restricted
by the Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
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Section 14. Removal of Directors. Unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, with or without cause, by the affirmative vote of the
holders of shares representing a majority of the votes entitled to be cast at an
election of directors.
Section 15. Reliance Upon Books. Directors and members of any committee
designated by the Board of Directors shall, in the performance of their duties,
be fully protected in relying in good faith upon the books of accounts or
reports made to the Corporation by any of its officers, or by an independent
certified public accountant, or by an appraiser selected with reasonable care by
the Board of Directors or by any such committee, or in relying in good faith
upon other records of the Corporation.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the statutes,
the Certificate of Incorporation or these By-Laws, notice is required to be
given to any director or stockholder, and no provision is made as to how such
notice shall be given, it shall not be construed to mean personal notice, but
any such notice may be given in writing and personally delivered or sent by
mail, postage prepaid, addressed to such director or stockholder at such address
as appears on the books of the Corporation and any such notice required or
permitted to be given by mail shall be deemed to be given at the time when the
same be thus deposited in the United States mail as aforesaid; such notice may
also be given by some form of electronic transmission, in which case it shall be
so addressed as to be received by such director or stockholder at the address of
such director or stockholder as it appears on the books of the Corporation or at
a regular place of such director's or stockholder's business, in which case such
notice shall be deemed to be given at the time when the recipient of such
transmission acknowledges its receipt.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the statutes,
the Certificate of Incorporation or these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated in such notice, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the attendance is for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
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ARTICLE V
OFFICERS
Section 1. In General. The officers of the Corporation shall be elected by
the Board of Directors and shall be a Chairman of the Board, a President, a
Secretary and a Treasurer. The Board of Directors may also, if it chooses to do
so, elect one or more Vice Presidents, one or more Assistant Secretaries and one
or more Assistant Treasurers, all of whom shall also be officers. Two or more
offices may be held by the same person, unless the Certificate of Incorporation
or these By-Laws otherwise provide.
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of the stockholders shall elect a Chairman of the Board and
a President, both of whom shall be members of the Board, and shall elect a
secretary and a treasurer and, if it so chooses, one or more vice presidents who
need not be members of the Board. The Board of Directors may appoint such other
officers and agents as it shall deem necessary and may determine the salaries of
all officers and agents from time to time. The officers shall hold office until
their successors are chosen and qualified. Any officer elected or appointed by
the Board of Directors may be removed, for or without cause, at any time by a
majority vote of the whole Board. Election or appointment of an officer or agent
shall not of itself create contract rights.
Section 3. Chairman of the Board. Subject to the provisions of these
By-Laws and the direction of the Board of Directors, the Chairman of the Board
shall preside at all meetings of the stockholders and of the Board of Directors
and shall perform such other duties as the Board of Directors may prescribe.
Section 4. President. The President shall be the chief operating officer
of the Corporation and shall have such authority and perform such duties as
usually appertain to the chief operating officer in business corporations and as
are determined from time to time by the Board of Directors and the Chairman of
the Board. In the absence of the Chairman of the Board, the President shall
preside at all meetings of the stockholders and of the Board of Directors and
possess all the other authority of the Chairman of the Board.
Section 5. Vice Presidents. The Vice President or, if there be more than
one, the Vice Presidents in the order of their seniority or in any other order
determined by the Board of Directors, shall, in the absence or disability of the
President and Chief Executive Officer, perform the duties and exercise the
powers of such office and shall generally assist the President and Chief
Executive Officer and perform such other duties as the Board of Directors shall
prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and record all votes and the
minutes of
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all proceedings in a book to be kept for that purpose, and shall perform like
duties for committees of the Board when required. He shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or the President and Chief Executive, under whose
supervision he shall be. He shall keep in safe custody the seal of the
Corporation and he, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it and when so affixed it may be attested by
his signature or by the signature of such assistant secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his signature.
Section 7. Assistant Secretaries. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President and Chief Executive Officer.
Section 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation in such manner as may be authorized by the Board of
Directors from time to time, making proper vouchers for such disbursements, and
shall render to the President and Chief Executive Officer and directors, at the
regular meetings of the Board or whenever they may require it, an account of all
his transactions as Treasurer and of the financial condition of the Corporation,
and shall perform such other duties as may be prescribed by the Board of
Directors or the President and Chief Executive Officer.
Section 9. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President and Chief Executive Officer.
Section 10. Bonding. If required by the Board of Directors, all or certain
of the officers shall give the Corporation a bond in such form, in such sum and
with such surety or sureties as shall be satisfactory to the Board, for the
faithful performance of the duties of their office and for the restoration to
the Corporation, in case of their death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in their possession or under their control belonging to the Corporation.
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ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of certificates. The Corporation shall deliver
certificates representing all shares to which stockholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the holder's name, the number,
class of shares, and the par value of the shares or a statement that the shares
are without par value. They shall be signed by the Chairman of the Board of
Directors, or the President and Chief Executive Officer or a Vice President, and
by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer, and may be sealed with the seal of the Corporation or a facsimile
thereof if the Corporation shall then have a seal. If any certificate is
countersigned by a transfer agent or registered by a registrar, either of which
is other than the Corporation or an employee of the Corporation, the signatures
of the Corporation's officers may be facsimiles. In case any officer, transfer
agent or registrar who has signed, or whose facsimile signature has been placed
on such certificate, shall cease to be such officer, transfer agent or
registrar, whether because of death, resignation or otherwise, before such
certificate has been delivered by the Corporation or its agents, such
certificate may nevertheless be issued and delivered with the same effect as if
he were such officer, transfer agent or registrar at the date of issue.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Lost Certificates. The Board of Directors may direct that a new
certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. When authorizing the issue of a new certificate, the Board
of Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost, stolen or destroyed certificate, or
his legal representative, to advertise the same in such
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manner as it shall require and/or give the Corporation a bond in such form, in
such sum, and with such surety or sureties as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferable only
on the books of the Corporation by the holder thereof in person or by his duly
authorized attorney and, upon surrender to the Corporation or to the transfer
agent of the Corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation or the transfer agent of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 4. Registered Stockholders. The Corporation shall be entitled to
recognize the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the statutes and of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and payments
of dividends shall be in strict compliance with all applicable laws and the
Certificate of Incorporation.
10
<PAGE> 11
Section 2. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 3. Seal. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 4. Annual Statement. The Board of Directors shall present at each
annual meeting and when called for by vote of the stockholders at any special
meeting of the stockholders, a full and clear statement of the business and
condition of the Corporation.
ARTICLE VIII
BY-LAWS
Section 1. Amendments. These By-Laws may be altered, amended or repealed
and new By-Laws may be adopted by the stockholders or by the Board of Directors,
when such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal by-laws is conferred upon the Board of Directors by the
Certificate of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws. Any action of the Board of
Directors to effect any alteration, amendment, repeal or adoption of new By-Laws
may be taken only by the affirmative vote of a majority of the whole Board.
Section 2. When By-Laws Silent. It is expressly recognized that when
the By-Laws are silent as to the manner of performing any corporate function,
the provisions of the statutes shall control.
11
<PAGE> 12
SHAREHOLDERS' CONSENT
OF
MEDICAL RETRO DESIGN, INC.
------------------------------
Pursuant to Section 228(a) of the General Corporation Law of the State of
Delaware, the undersigned being the sole shareholder of Medical Retro Design,
Inc. (the "Corporation") hereby consents to the adoption of the following
resolution:
RESOLVED: That the Corporation's By-Laws shall be amended in the
manner set forth on Exhibit "A" hereto.
The undersigned, being the sole shareholder of the Corporation, hereby
certify to all the foregoing, effective this 13th day of June, 1993.
KINETIC CONCEPTS, INC.
By:/s/ Dennis E. Noll
------------------------------
Dennis E. Noll
Secretary
<PAGE> 13
EXHIBIT A
AMENDMENT TO BY-LAWS
1. Article III, Section 3 of the By-Laws shall be amended by adding the
following to the end of such Section:
"Without limiting the generality of the foregoing, the Board of Directors
shall be responsible for making all decisions regarding the following:
(a) adopting and approving business plans;
(b) negotiating and entering into national account contracts;
(c) appointing the officers of the Company; and
(d) providing policy directives as necessary."
2. Article IV, Section 8 of the By-Laws shall be amended to read, in its
entirety, as follows:
"Section 8. Quorum; Voting. At all meetings of the Board of
Directors, the presence of a majority of the number of directors
constituting the whole Board shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the affirmative
vote of at least a majority of the number of Directors determined in
accordance with Article III, Section 1 of these By-Laws shall be that act
of the Board of Directors, except as may be otherwise specifically
provided by statute, the Articles of Incorporation or these By-Laws.
If a quorum is not present at any meeting of the Directors, the
Directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present. Upon attainment of representation by a quorum, subsequent to an
adjournment of the meeting, any business may be transacted which might
have been transacted a the meeting as originally notified."
3. Section 16 shall be added to Article III of the By-Laws of the Company
and shall read, in its entirety, as follows:
"Section 16. Vote Required For Certain Actions.
In addition to any stockholder or other approvals required by law and
notwithstanding any other provision of these By-Laws, the following
actions shall
<PAGE> 14
require the affirmative vote of at least four-fifths (4/5) of the number
of Directors determined in accordance with Article III, Section 1 of these
By-Laws:
(a) Approval of annual budgets;
(b) Approval of prices paid to Kinetic Concepts, Inc. ("KCI") on
transactions with KCI or any of its direct or indirect subsidiaries
involving $10,000 or more individually or $50,000 or more in the
aggregate during any calendar year;
(c) Approval of any material transactions which materially impact or
modify the Corporation's cost structure;
(d) Approval of pricing guidelines;
(e) Approval of the issuance of any securities off the Corporation;
(f) Approval of dividends; or
(g) Approval of any powers of attorney with regard to the matters
specified in "a" through "f" above."
2
<PAGE> 1
EXHIBIT 3.19
CERTIFICATE OF INCORPORATION
OF
KCI THERAPEUTIC SERVICES, INC.
FIRST: The name of the Corporation is KCI Therapeutic Services, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is ten thousand (10,000) shares of Common Stock of the
par value of $.10 per share, amounting in the aggregate to One Thousand Dollars
($1,000).
FIFTH: The period of duration of the Corporation is perpetual.
<PAGE> 2
SIXTH: The business and affairs of the Corporation shall be managed by
the Board of Directors, and the directors need not be elected by ballot
unless required by the By-Laws of the Corporation.
SEVENTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized to adopt, amend or repeal the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of Delaware. All
rights herein conferred are granted subject to this reservation.
NINTH: The Corporation shall indemnify to the fullest extent permitted by,
and in the manner permissible under, the laws of the State of Delaware as in
effect from time to time, any person made, or threatened to be made, a party to
an action, suit or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he is or was a director or officer of
the Corporation, or served another corporation, partnership, joint venture,
trust or other enterprise as a director, officer, employee or agent at the
request of the Corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding. The foregoing
rights of indemnification shall not be deemed exclusive of any other rights to
which any such person may be entitled under any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise. The Board of Directors in
its discretion shall have the power on behalf of the Corporation to indemnify
similarly any person, other than a director or officer, made a party to any
action, suit or proceeding by reason of the fact that he is or was an employee
or agent of the Corporation. The provisions of this Article Ninth shall be
applicable to persons who have ceased to be directors, officers, employees or
agents of the Corporation and shall inure to the benefit of their heirs,
executors and administrators.
Pursuant to section 102(b)(7) (or any successor statute) of the General
Corporation Law of the State of Delaware, the personal liability of a director
to the Corporation or the stockholders of the Corporation for monetary damages
for breach of fiduciary duty is hereby eliminated. The terms of the preceding
sentence, however, shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the Corporation or the
stockholders of the Corporation, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (or a successor statute) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal
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<PAGE> 3
benefit. No amendment or repeal of this paragraph shall apply to or have effect
on the liability of any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
TENTH: The incorporator is Dennis E. Noll, whose mailing address is
112 E. Pecan Street, Suite 2000, San Antonio, Texas 78205.
The undersigned, being the incorporator hereinbefore named, for the
purposes of organizing a corporation pursuant to the General Corporation Law of
the State of Delaware, does make this certificate, hereby declaring and
certifying that this is his act and deed and the facts herein stated are true,
and accordingly has hereunto set his hand this 14th day of February, 1991.
/s/ Dennis E. Noll
---------------------------------
Dennis E. Noll
3
<PAGE> 4
CERTIFICATE OF MERGER
OF
KINETIC CONCEPTS THERAPEUTIC SERVICES, INC.
INTO
KCI THERAPEUTIC SERVICES, INC.
(UNDER SECTION 252 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)
KCI Therapeutic Services, Inc. hereby certifies that:
(1) The name and state of incorporation of each of the constituent
corporations are:
(a) Kinetic Concepts Therapeutic Services, Inc., a Texas corporation;
and
(b) KCI Therapeutic Services, Inc., a Delaware corporation.
(2) An Agreement and Plan of Merger has been approved, adopted, certified,
executed and acknowledged by Kinetic Concepts Therapeutic Services, Inc. and by
KCI Therapeutic Services, Inc. in accordance with the provisions of subsection
(c) of Section 252 of the General Corporation Law of the State of Delaware.
(3) The name of the surviving corporation is KCI Therapeutic
Services, Inc.
(4) The Certificate of Incorporation of KCI Therapeutic Services,
Inc. shall be the Certificate of Incorporation of the surviving corporation.
(5) The surviving corporation is a corporation of the State of
Delaware.
(6) The executed Agreement and Plan of Merger is on file at the
principal place of business of KCI Therapeutic Services, Inc. at 3440 East
Houston, San Antonio, Texas 78219.
(7) A copy of the Agreement and Plan of Merger will be furnished by
KCI Therapeutic Services, Inc., on request and without cost, to any
stockholder of Kinetic Concepts Therapeutic Services, Inc. or KCI Therapeutic
Services, Inc.
(8) The authorized capital stock of Kinetic Concepts Therapeutic
Services, Inc. is ten million shares of Common Stock, $.001 par value.
<PAGE> 5
IN WITNESS WHEREOF, KCI Therapeutic Services, Inc. has caused this
certificate to be signed by John A. Bardis, its President, and attested by
Robert A. Wehrmeyer, Jr., its Secretary, on the 28th day of February, 1991.
KCI THERAPEUTIC SERVICES, INC.
By:/s/ John A. Bardis
-------------------------------
President
ATTEST:
By:/s/ Robert A. Wehrmeyer, Jr.
-------------------------------
Secretary
2
<PAGE> 6
CERTIFICATE OF MERGER
OF
KCI MEDICAL SERVICES, INC.
INTO
KCI THERAPEUTIC SERVICES, INC.
(a Delaware corporation)
(Under Section 252 of the General
Corporation Law of the State of Delaware)
--------------------------
KCI Therapeutic Services, Inc., a Delaware corporation, hereby certifies
that:
1. The name and state of incorporation of each of the constituent
corporations are:
(a) KCI Medical Services, Inc., a Utah corporation ("KCI
Medical"); and
(b) KCI Therapeutic Services, Inc., a Delaware corporation
("KCI Therapeutic").
2. An agreement and plan of merger has been approved, adopted,
certified, executed and acknowledged by KCI Medical and KCI Therapeutic in
accordance with the provisions of subsection (c) of Section 252 of the General
Corporation Law of the State of Delaware.
3. The name of the surviving corporation is KCI Therapeutic
Services, Inc.
4. The Certificate of Incorporation of KCI Therapeutic shall be the
certificate of incorporation of the surviving corporation.
5. The surviving corporation is a corporation of the State of
Delaware.
6. The executed agreement and plan of merger is on file at the
principal place of business of KCI Therapeutic at 3440 East Houston, San
Antonio, Texas 78219.
7. A copy of the agreement and plan of merger will be furnished by KCI
Therapeutic on request and without cost to any stockholder of KCI Medical or any
stockholder of KCI Therapeutic.
<PAGE> 7
8. The authorized capital stock of KCI Medical is 10,000,000 shares of
Common Stock, par value $1.00 per share.
9. The Certificate of Merger shall be effective on December 30, 1991
at 5:00 p.m. Eastern Standard Time.
IN WITNESS WHEREOF, KCI Therapeutic Services, Inc. has caused this
certificate to be signed by Robert A. Wehrmeyer, Jr., its Vice President, and
attested by Brenda J. Cantu, its Assistant Secretary, on the 26th day of
December, 1991.
KCI THERAPEUTIC SERVICES, INC.
By:/s/ Robert A. Wehrmeyer, Jr.
-------------------------------------
Robert A. Wehrmeyer, Jr.,
Vice President
ATTEST:
By:/s/ Robert A. Wehrmeyer, Jr.
--------------------------------
Brenda J. Cantu,
Assistant Secretary
2
<PAGE> 1
EXHIBIT 3.20
BY-LAWS
OF
KCI THERAPEUTIC SERVICES, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The principal office of the Corporation outside
the State of Delaware shall be in the City of San Antonio, State of Texas. The
Corporation may also have offices at such other places both within and without
the State of Delaware as the Board of Directors may from time to time determine
or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meeting. All meetings of the stockholders
shall be held at such time and at such place within or without the State of
Delaware as shall be determined by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of the stockholders shall be
held each year on such date and at such time as shall be designated from time to
time by the Board of Directors, and stated in the notice of the meeting, at
which the stockholders shall elect by a plurality vote a board of directors and
transact such other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for any
proper purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, may be called at any time by
the Board of Directors, the Chairman of the Board or the President and Chief
Executive Officer. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at special meetings shall be confined to
the purpose or purposes stated in the notice of the meeting.
<PAGE> 2
Section 4. Notice. Written or printed notice stating the place, date and
hour of any meeting of stockholders, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (6O) days before the date of the meeting,
either personally or by mail, by or at the direction of the President and Chief
Executive Officer, a Vice President, the Secretary, an Assistant Secretary or
the person calling the meeting, to each stockholder of record entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
stockholder at his address as it appears on the stock ledger of the Corporation.
Section 5. List of Shareholders. The officer or agent of the Corporation
having charge of the stock ledger of the Corporation shall make, at least ten
(10) days before each meeting of the stockholders, a complete list of the
stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list, for
a period of ten (10) days prior to such meeting, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting or, if
not so specified, at the place where the meeting is to be held. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole time of the
meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine such list or stock ledger, or to vote at any
meetings of stockholders.
Section 6. Quorum. The holders of issued and outstanding shares which
represent not less than a majority of the votes entitled to be cast thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation (all references to
the Certificate of Incorporation in these By-Laws includes any Certificate of
Designation respecting a resolution of the Board of Directors providing for the
issue of a series of preferred stock of the Corporation and which has been filed
in the office of the Secretary of State of the State of Delaware). If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority in interest of the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time until a quorum shall be present or represented
without notice of the adjourned meeting other than announcement of the time and
place thereof at the meeting at which the adjournment is taken. When any
adjourned meeting is reconvened and a quorum shall be present or represented,
any business may be transacted which might have been transacted at the original
meeting. If the
2
<PAGE> 3
adjournment is for more than thirty (3O) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 7. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares present or represented by proxy at such
meeting and representing a majority of the votes entitled to be cast and shall
decide any question brought before such meeting, unless the vote of a different
number is expressly required by statute, the Certificate of Incorporation or
these By-Laws. The voting for election of directors may be by written ballot or
other means.
Section 8. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share having voting power
held by such stockholder. Every proxy must be executed in writing (which shall
include telegraphing or cabling) by the stockholder or by his duly authorized
attorney-in-fact, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period.
Section 9. Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares of the Corporation having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The initial number of directors of the
Corporation shall be such as may be determined by the incorporator and,
thereafter, the number of directors shall be such number as shall be determined
by resolution of a majority of the whole Board of Directors. Directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
2 of this Article, and each director shall hold office until his successor is
elected and qualified. Directors need not be stockholders of the Corporation.
3
<PAGE> 4
Section 2. Vacancies and Additional Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify.
Section 3. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute, or by
the Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
Section 4. Place of Meetings. The directors of the Corporation may hold
their meetings, both regular and special, either within or without the State
of Delaware.
Section 5. Annual Meetings. The first meeting of each newly elected Board
of Directors shall be held without further notice immediately following the
annual meeting of the stockholders, and at the same place, unless by unanimous
consent of the directors then elected and serving such time or place shall be
changed.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time
be determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by either the Chairman of the Board or the President on two
business days' notice to each director, either personally or by mail or by
telegram, and in the case of notice by mail, such notice shall be deemed to have
been given on the third day following the date on which such notice is deposited
in the United States mail, postage prepaid, properly addressed to such director.
Special meetings shall be called by the President and Chief Executive Officer or
Secretary in like manner and on like notice on the written request of any two
directors.
Section 8. Quorum. At all meetings of the Board of Directors the presence
of a majority of the number of directors constituting the whole Board shall be
necessary and sufficient to constitute a quorum for the transaction of business,
and the affirmative vote of at least a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by statute, by the Certificate
of Incorporation or by these By-Laws. If a quorum shall not be present at any
4
<PAGE> 5
meeting of directors, the directors present thereat may adjourn the meeting from
time to time without notice other than announcement at the meeting, until a
quorum shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate one or more committees in addition to
the executive committee provided for in Section 10 of this Article III, each
committee to consist of one or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation, adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the By-Laws of the Corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors when required.
Section 10. Executive Committee. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate an executive committee which
shall consist of two or more members. The Chairman of the Board and the
President and Chief Executive Officer shall be members of the executive
committee. The executive committee shall have, except as otherwise provided by
law or by resolution of the Board of Directors, all the authority of the Board
of Directors during the intervals between the meetings of the Board of
Directors.
Section 11. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors,
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the committees of the Board of Directors may,
by resolution of the Board of Directors, be allowed like compensation for
attending meetings of such committees.
5
<PAGE> 6
Section 12. Action Without a Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
designated by the Board of Directors may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or Committee.
Section 13. Meetings by Conference Call, Etc. Unless otherwise restricted
by the Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 14. Removal of Directors. Unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, with or without cause, by the affirmative vote of the
holders of shares representing a majority of the votes entitled to be cast at an
election of directors.
Section 15. Reliance Upon Books. Directors and members of any committee
designated by the Board of Directors shall, in the performance of their duties,
be fully protected in relying in good faith upon the books of accounts or
reports made to the Corporation by any of its officers, or by an independent
certified public accountant, or by an appraiser selected with reasonable care by
the Board of Directors or by any such committee, or in relying in good faith
upon other records of the Corporation.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the statutes,
the Certificate of Incorporation or these By-Laws, notice is required to be
given to any director or stockholder, and no provision is made as to how such
notice shall be given, it shall not be construed to mean personal notice, but
any such notice may be given in writing, and personally delivered or sent by
mail, postage prepaid, addressed to such director or stockholder at such address
as appears on the books of the Corporation. Any notice required or permitted to
be given by mail shall be deemed to be given at the time when the same be thus
deposited in the United States mail as aforesaid; such notice may also be given
by some form of electronic transmission, in which case it shall be so addressed
as to be received by such director or stockholder at the books of the
Corporation or at a
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<PAGE> 7
regular place of such director's or stockholder's business, in which case such
notice shall be deemed to be given at the time when the recipient of such
transmission acknowledges its receipt.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the statutes,
the Certificate of Incorporation or these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated in such notice, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the attendance is for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. In General. The officers of the Corporation shall be elected by
the Board of Directors and shall be a Chairman of the Board, a President, a
Secretary and a Treasurer. The Board of Directors may also, if it chooses to do
so, elect one or more Vice Presidents, one or more Assistant Secretaries and one
or more Assistant Treasurers, all of whom shall also be officers. Two or more
offices may be held by the same person, unless the Certificate of Incorporation
or these By-Laws otherwise provide.
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of the stockholders shall elect a Chairman of the Board and
a President, both of whom, shall be a members of the Board, and shall elect a
secretary and a treasurer and, if it so chooses, one or more vice presidents who
need not be members of the Board. The Board of Directors may appoint such other
officers and agents as it shall deem necessary and may determine the salaries of
all officers and agents from time to time. The officers shall hold office until
their successors are chosen and qualified. Any officer elected or appointed by
the Board of Directors may be removed, for or without cause, at any time by a
majority vote of the whole Board. Election or appointment of an officer or agent
shall not of itself create contract rights.
Section 3. Chairman. Subject to the provisions of these By-laws and the
direction of the Board of Directors, the Chairman of the Board shall preside at
all meetings of the stockholders and the Board of Directors and shall perform
such other duties as the Board of Directors shall prescribe.
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<PAGE> 8
Section 4. President. The President shall be the chief operating officer
of the Corporation, and shall have such authority and perform such duties as
usually appertain to the chief operating office in business corporation and as
are determined from time to time by the Board of Directors and the Chairman of
the Board. In the absence of the Chairman of the Board, the President shall
preside at all meetings of the stockholders and of the Board of Directors and
possess all the other authority of the Chairman of the Board.
Section 5. Vice Presidents. The Vice President or, if there be more than
one, the Vice Presidents in the order of their seniority or in any other order
determined by the Board of Directors, shall, in the absence or disability of the
President and Chief Executive Officer, perform the duties and exercise the
powers of such office, and shall generally assist the President and Chief
Executive Officer and perform such other duties as the Board of Directors shall
prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for committees of the Board when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or President and Chief Executive
Officer, under whose supervision he shall be. He shall keep in safe custody the
seal of the Corporation and he, or an assistant secretary, shall have authority
to affix the same to any instrument requiring it and when so affixed it may be
attested by his signature or by the signature of such assistant secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his signature.
Section 7. Assistant Secretaries. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President and Chief Executive Officer.
Section 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation in such manner as may be authorized by the Board of
Directors from time to time, making proper vouchers for such disbursements, and
shall render to the President and Chief Executive Officer and directors, at
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the regular meetings of the Board or whenever they may require it, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation, and shall perform such other duties as may be prescribed by the
Board of Directors or the President and Chief Executive Officer.
Section 9. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President and Chief Executive Officer.
Section 10. Bonding. If required by the Board of Directors, all or certain
of the officers shall give the Corporation a bond in such form, in such sum and
with such surety or sureties as shall be satisfactory to the Board, for the
faithful performance of the duties of their office and for the restoration to
the Corporation, in case of their death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in their possession or under their control belonging to the Corporation.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of certificates. The Corporation shall deliver
certificates representing all shares to which stockholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the holder's name, the number,
class of shares, and the par value of the shares or a statement that the shares
are without par value. They shall be signed by the Chairman of the Board of
Directors, or the President and Chief Executive Officer or a Vice President, and
by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer, and may be sealed with the seal of the Corporation or a facsimile
thereof if the Corporation shall then have a seal. If any certificate is
countersigned by a transfer agent or registered by a registrar, either of which
is other than the Corporation or an employee of the Corporation, the signatures
of the Corporation's officers may be facsimiles. In case any officer, transfer
agent or registrar who has signed, or whose facsimile signature has been placed
on such certificate, shall cease to be such officer, transfer agent or
registrar, whether because of death, resignation or otherwise, before such
certificate has been delivered by the Corporation or its agents, such
certificate may nevertheless be issued and delivered with the same effect as if
he were such officer, transfer agent or registrar at the date of issue.
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If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Lost Certificates. The Board of Directors may direct that a new
certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. When authorizing the issue of a new certificate, the Board
of Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost, stolen or destroyed certificate, or
his legal representative, to advertise the same in such manner as it shall
require and/or give the Corporation a bond in such form, in such sum, and with
such surety or sureties as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferable only
on the books of the Corporation by the holder thereof in person or by his duly
authorized attorney and, upon surrender to the Corporation or to the transfer
agent of the Corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation or the transfer agent of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 4. Registered Stockholders. The Corporation shall be entitled to
recognize the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
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Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the statutes and of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and payments
of dividends shall be in strict compliance with all applicable laws and the
Certificate of Incorporation.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 3. Seal. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 4. Annual Statement. The Board of Directors shall present at each
annual meeting and when called for by vote of the stockholders at any special
meeting of the stockholders, a full and clear statement of the business and
condition of the Corporation.
ARTICLE VIII
BY-LAWS
Section 1. Amendments. These By-Laws may be altered, amended or repealed
and new By-Laws may be adopted by the stockholders or by the Board of Directors,
when such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the
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Board of Directors or at any special meeting of the stockholders or of the Board
of Directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal by-laws is conferred upon the Board of Directors by the
Certificate of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws. Any action of the Board of
Directors to effect any alteration, amendment, repeal or adoption of new By-Laws
may be taken only by the affirmative vote of a majority of the whole Board.
Section 2. When By-Laws Silent. It is expressly recognized that when
the By-Laws are silent as to the manner of performing any corporate function,
the provisions of the statutes shall control.
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EXHIBIT 3.21
CERTIFICATE OF INCORPORATION
OF
KCI NEW TECHNOLOGIES, INC.
FIRST: The name of the corporation is KCI New Technologies, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is one million (1,000,000) shares of Common Stock of the
par value of $.001 per share, amounting in the aggregate to one thousand dollars
($1,000).
FIFTH: The period of duration of the Corporation is perpetual.
SIXTH: The business and affairs of the Corporation shall be managed by
the Board of Directors, and the directors need not be elected by ballot
unless required by the By-Laws of the Corporation.
SEVENTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized to adopt, amend or repeal the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by the laws of the State of Delaware. All
rights herein conferred are granted subject to this reservation.
NINTH: The corporation shall indemnify to the fullest extent permitted by,
and in the manner permissible under, the laws of the State of Delaware as in
effect from time to time, any person made, or threatened to be made, a party to
an action, suit or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he is or was a director or officer of
the Corporation, or served another corporation, partnership, joint venture,
trust or
<PAGE> 2
other enterprise as a director, officer, employee or agent at the request of the
Corporation, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding. The foregoing rights of
indemnification shall not be deemed exclusive of any other rights to which any
such person may be entitled under any By-Law, agreement, vote of stockholders or
disinterested directors or otherwise. The Board of Directors in its discretion
shall have the power on behalf of the Corporation to indemnify similarly any
person, other than a director or officer, made a party to any action, suit or
proceeding by reason of the fact that he is or was an employee or agent of the
Corporation. The provisions of this Article Ninth shall be applicable to persons
who have ceased to be directors, officers, employees or agents of the
Corporation and shall inure to the benefit of their heirs, executors and
administrators.
Pursuant to section 102(b)(7) (or any successor statute) of the General
Corporation Law of the State of Delaware, the personal liability of a director
to the Corporation or the stockholders of the Corporation for monetary damages
for breach of fiduciary duty is hereby eliminated. The terms of the preceding
sentence however shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the Corporation or the
stockholders of the Corporation, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (or a successor statute) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment or repeal of this paragraph shall apply
to or have effect on the liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
TENTH: The incorporator is Robert A. Wehrmeyer, Jr., whose mailing
address is 3440 East Houston Street, San Antonio, Texas 78219.
The undersigned, being the incorporator hereinbefore named, for the
purposes of organizing a corporation pursuant to the General Corporation Law of
the State of Delaware, does make this certificate, hereby declaring and
certifying that this is his act and deed and the facts herein stated are true,
and accordingly has hereunto set his hand this 23rd day of October, 1991.
/s/ Robert A. Wehrmeyer, Jr.
------------------------------------
Robert A. Wehrmeyer, Jr.
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<PAGE> 1
EXHIBIT 3.22
BY-LAWS
OF
KCI NEW TECHNOLOGIES, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The principal office of the Corporation outside
the State of Delaware shall be in the City of San Antonio, State of Texas. The
Corporation may also have offices at such other places both within and without
the State of Delaware as the Board of Directors may from time to time determine
or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meeting. All meetings of the stockholders
shall be held at such time and at such place within or without the State of
Delaware as shall be determined by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of the stockholders shall be
held on the 75th day after the expiration of the Corporation's fiscal year, if
not a legal holiday, and if a legal holiday, then on the next full business day
following, at 9:00 a.m., at which the stockholders shall elect by a plurality
vote a board of directors and transact such other business as may properly be
brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for any
proper purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, may be called at any time by
the President or the Board of Directors, and shall be called by the President or
Secretary at the request in writing of the holders of shares of the Corporation
then issued, outstanding and entitled to vote at the meeting which represent not
less than 10% of the votes entitled to be cast at the meeting. Such request
shall
<PAGE> 2
state the purpose or purposes of the proposed meeting. Business transacted at
special meetings shall be confined to the purpose or purposes stated in the
notice of the meeting.
Section 4. Notice. Written or printed notice stating the place, date and
hour of any meeting of stockholders, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, a Vice
President, the Secretary, an Assistant Secretary or the person calling the
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, postage prepaid, addressed to the stockholder at his
address as it appears on the stock ledger of the Corporation.
Section 5. List of Shareholders. The officer or agent of the Corporation
having charge of the stock ledger of the Corporation shall make, at least ten
(10) days before each meeting of the stockholders, a complete list of the
stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list, for
a period of ten (10) days prior to such meeting, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting or, if
not so specified, at the place where the meeting is to be held. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole time of the
meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine such list or stock ledger, or to vote at any
meetings of stockholders.
Section 6. Quorum. The holders of issued and outstanding shares which
represent not less than a majority of the votes entitled to be cast thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation (all references to
the Certificate of Incorporation in these By-Laws includes any Certificate of
Designation respecting a resolution of the Board of Directors providing for the
issue of a series of preferred stock of the Corporation and which has been filed
in the office of the Secretary of State of the State of Delaware). If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, a majority in interest of the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time until a quorum shall be present or represented
without notice of the adjourned meeting other than announcement of the time and
place thereof at the
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meeting at which the adjournment is taken. When any adjourned meeting is
reconvened and a quorum shall be present or represented, any business may be
transacted which might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 7. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares present or represented by proxy at such
meeting and entitled to vote shall decide any question brought before such
meeting, unless the vote of a different number is expressly required by statute,
the Certificate of Incorporation or these By-Laws. The voting for election of
directors may be by written ballot or other means.
Section 8. Proxy. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share having voting power
held by such stockholder. Every proxy must be executed in writing (which shall
include telegraphing or cabling) by the stockholder or by his duly authorized
attorney-in-fact, but no proxy shall be voted on after three years from its
date, unless the proxy provides for a longer period.
Section 9. Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares of the Corporation having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The initial number of directors of the
Corporation shall be such as may be determined by the incorporator and,
thereafter, the number of directors shall be such number as shall be determined
by resolution of the majority of the whole Board of Directors. Directors shall
be elected at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director shall hold office until his
successor is elected and qualified. Directors need not be stockholders of the
Corporation.
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Section 2. Vacancies and Additional Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify.
Section 3. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute, or by
the Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
Section 4. Place of Meetings. The directors of the Corporation may hold
their meetings, both regular and special, either within or without the State
of Delaware.
Section 5. Annual Meetings. The first meeting of each newly elected Board
of Directors shall be held without further notice immediately following the
annual meeting of the stockholders, and at the same place, unless by unanimous
consent of the directors then elected and serving such time or place shall be
changed.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time
be determined by the Board of Directors.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by either the Chairman of the Board or the President on two
business days' notice to each director, either personally or by mail or by
telegram, and in the case of notice by mail, such notice shall be deemed to have
been given on the third day following the date on which such notice is deposited
in the United States mail, postage prepaid, properly addressed to such director.
Special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of any two directors.
Section 8. Quorum. At all meetings of the Board of Directors the presence
of a majority of the number of directors constituting the whole Board shall be
necessary and sufficient to constitute a quorum for the transaction of business,
and the affirmative vote of at least a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by statute, by the Certificate
of Incorporation or by these By-Laws. If a quorum shall not be present at any
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<PAGE> 5
meeting of directors, the directors present thereat may adjourn the meeting from
time to time without notice other than announcement at the meeting, until a
quorum shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate one or more committees in addition to
the executive committee provided for in Section 10 of this Article III, each
committee to consist of one or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation, adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the By-Laws of the Corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors when required.
Section 10. Executive Committee. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate an executive committee which
shall consist of two or more members. The Chairman of the Board and the
President shall be members of the executive committee. The executive committee
shall have, except as otherwise provided by law or by resolution of the Board of
Directors, all the authority of the Board of Directors during the intervals
between the meetings of the Board of Directors.
Section 11. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors,
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the committees of the Board of Directors may,
by resolution of the Board of Directors, be allowed like compensation for
attending meetings of such committees.
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Section 12. Action Without a Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
designated by the Board of Directors may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or Committee.
Section 13. Meetings by Conference Call, Etc. Unless otherwise restricted
by the Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 14. Removal of Directors. Unless otherwise restricted by the
Certificate of Incorporation or by law, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
shares entitled to vote at an election of directors.
Section 15. Reliance Upon Books. Directors and members of any committee
designated by the Board of Directors shall, in the performance of their duties,
be fully protected in relying in good faith upon the books of accounts or
reports made to the Corporation by any of its officers, or by an independent
certified public accountant, or by an appraiser selected with reasonable care by
the Board of Directors or by any such committee, or in relying in good faith
upon other records of the Corporation.
ARTICLE IV
NOTICES
Section 1. Form of Notice. Whenever under the provisions of the statutes,
the Certificate of Incorporation or these By-Laws, notice is required to be
given to any director or stockholder, and no provision is made as to how such
notice shall be given, it shall not be construed to mean personal notice, but
any such notice may be given in writing, by mail, postage prepaid, addressed to
such director or stockholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail shall be
deemed to be given at the time when the same be thus deposited in the United
States mail as aforesaid.
Section 2. Waiver. Whenever any notice is required to be given to any
director or stockholder of the Corporation under the provisions of the statutes,
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the Certificate of Incorporation or these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated in such notice, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, not the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the attendance is for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. In General. The officers of the Corporation shall be elected by
the Board of Directors and shall be a Chairman of the Board, a President, a Vice
President, a Secretary and a Treasurer. The Board of Directors may also, if it
chooses to do so, elect a Chairman of the Board, additional Vice Presidents, one
or more Assistant Secretaries and one or more Assistant Treasurers, all of whom
shall also be officers. Two or more offices may be held by the same person,
unless the Certificate of Incorporation or these By-Laws otherwise provide.
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of the stockholders shall elect a Chairman of the Board, a
President, both of whom shall be members of the Board, and shall elect one or
more vice presidents, a secretary and a treasurer who need not be members of the
Board. The Board of Directors may appoint such other officers and agents as it
shall deem necessary and may determine the salaries of all officers and agents
from time to time. The officers shall hold office until their successors are
chosen and qualified. Any officer elected or appointed by the Board of Directors
may be removed, for or without cause, at any time by a majority vote of the
whole Board. Election or appointment of an officer or agent shall not of itself
create contract rights.
Section 3. Chairman. The Chairman of the Board shall the Chief Executive
Officer of the Corporation and shall have such authority and perform such duties
as usually appertain to the Chief Executive Officer in business corporations. He
shall preside at all meetings of the stockholders and the Board of Directors.
Subject to the provisions of these By-laws and to the direction of the Board of
Directors, the Chairman of the Board of Directors shall have the general and
active management of the business of the Corporation, shall execute all
contracts requiring a seal and shall also execute any mortgages, conveyances or
other legal instruments in the name of and on behalf of the Corporation, but
this provision shall not prohibit the delegation of such powers
7
<PAGE> 8
by the Board of Directors to some other officer, agent or attorney-in-fact of
the Corporation.
Section 4. Chief Executive Officer. The Chief Executive Officer of the
Company shall have the responsibility for the general and active management of
the business of the Company including the formulation of business plans, the
preparation of budgets, and the review of day-to-day operations. The Chief
Executive Officer shall see that all orders and resolutions of the Board of
Directors or any committee thereof are carried into effect. The Chief Executive
Officer shall have authority to execute all contracts in the name of and on
behalf of the Company, but this grant of authority shall not prohibit the
delegation of such powers by the Board of Directors to some other officer, agent
or attorney of the Company. The signature of the Chief Executive Officer need
not be attested by another officer of the Company.
Section 5. President. The President shall be the Chief Operating Officer
of the Corporation and shall have such authority and perform such duties as
usually appertain to the Chief Operating Officer in business corporations and as
are determined from time to time by the Board of Directors and the Chairman of
the Board. In the absence of the Chairman of the Board, the President shall
preside at all meetings of the stockholders and the Board of Directors and
possess all the other authority of the Chairman of the Board.
Section 6. Chief Financial Officer. The Board of Directors may elect a
Chief Financial Officer who shall coordinate the financial planning for the
Corporation with the Chief Executive Officer and/or President. The Chief
Financial Officer shall be responsible for maintaining and reviewing all of the
obligations of the Company under any debt instruments the Corporation may, from
time to time execute.
Section 7. Senior Vice Presidents. The Senior Vice President or, if there
be more than one, the Senior Vice Presidents in the order of their seniority or
in any other order determined by the Board of Directors, shall, in the absence
or disability of the President, perform the duties and exercise the powers of
the President, and shall generally assist the President and perform such other
duties as the Board of Directors shall prescribe.
Section 8. Vice Presidents. The Vice President or, if there be more than
one, the Vice Presidents in the order of their seniority or in any other order
determined by the Board of Directors, shall, in the absence or disability of the
Chairman of the Board, if there be one, or the President, perform the duties and
exercise the powers of such offices, respectively, and shall generally assist
the Chairman of the Board, if there be one, and President and perform such other
duties as the Board of Directors shall prescribe.
8
<PAGE> 9
Section 9. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for committees of the Board when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or President, under whose supervision he
shall be. He shall keep in safe custody the seal of the Corporation and he, or
an assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed it may be attested by his signature or by the
signature of such assistant secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest the affixing by his signature.
Section 10. Assistant Secretaries. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 11. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation in such manner as may be authorized by the Board of
Directors from time to time, making proper vouchers for such disbursements, and
shall render to the President and directors, at the regular meetings of the
Board or whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation, and shall perform
such other duties as may be prescribed by the Board of Directors or the
President.
Section 12. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
Section 13. Bonding. If required by the Board of Directors, all or certain
of the officers shall give the Corporation a bond in such form, in such sum and
with such surety or sureties as shall be satisfactory to the Board, for the
faithful performance of the duties of their office and for the restoration to
the Corporation, in case of their death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in their possession or under their control belonging to the Corporation.
9
<PAGE> 10
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
Section 1. Form of certificates. The Corporation shall deliver
certificates representing all shares to which stockholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the holder's name, the number,
class of shares, and the par value of the shares or a statement that the shares
are without par value. They shall be signed by the Chairman of the Board of
Directors, or the President or a Vice President, and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof if the
Corporation shall then have a seal. If any certificate is countersigned by a
transfer agent or registered by a registrar, either of which is other than the
Corporation or an employee of the Corporation, the signatures of the
Corporation's officers may be facsimiles. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed on such
certificate, shall cease to be such officer, transfer agent or registrar,
whether because of death, resignation or otherwise, before such certificate has
been delivered by the Corporation or its agents, such certificate may
nevertheless be issued and delivered with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions or such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Lost Certificates. The Board of Directors may direct that a new
certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
10
<PAGE> 11
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. When authorizing the issue of a new certificate, the Board
of Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost, stolen or destroyed certificate, or
his legal representative, to advertise the same in such manner as it shall
require and/or give the Corporation a bond in such form, in such sum, and with
such surety or sureties as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 3. Transfer of Shares. Shares of stock shall be transferable only
on the books of the Corporation by the holder thereof in person or by his duly
authorized attorney and, upon surrender to the Corporation or to the transfer
agent of the Corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation or the transfer agent of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 4. Registered Stockholders. The Corporation shall be entitled to
recognize the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
11
<PAGE> 12
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the statutes and of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and payments
of dividends shall be in strict compliance with all applicable laws and the
Certificate of Incorporation.
Section 2. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 3. Seal. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 4. Annual Statement. The Board of Directors shall present at each
annual meeting and when called for by vote of the stockholders at any special
meeting of the stockholders, a full and clear statement of the business and
condition of the Corporation.
ARTICLE VIII
BY-LAWS
Section 1. Amendments. These By-Laws may be altered, amended or repealed
and new By-Laws may be adopted by the stockholders or by the Board of Directors,
when such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal by-laws is conferred upon the Board of Directors by the
Certificate of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws. Any action of the Board of
Directors to effect any alteration, amendment, repeal or adoption of new By-Laws
may be taken only by the affirmative vote of a majority of the whole Board.
Section 2. When By-Laws Silent. It is expressly recognized that when
the By-Laws are silent as to the manner of performing any corporate function,
the provisions of the statutes shall control.
12
<PAGE> 1
EXHIBIT 4.1
KINETIC CONCEPTS, INC.
as Issuer
and
The GUARANTORS named herein
and
MARINE MIDLAND BANK
as Trustee
-------------------------
INDENTURE
Dated as of November 5, 1997
----------------------
up to $300,000,000
9 5/8% Senior Subordinated Notes due 2007, Series A
9 5/8% Senior Subordinated Notes due 2007, Series B
<PAGE> 2
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1)....................................... 7.10
(a)(2)...................................... 7.10
(a)(3)...................................... N.A.
(a)(4)...................................... N.A.
(a)(5)...................................... 7.10; 7.11
(b)......................................... 7.08; 7.10; 11.02
(c)......................................... N.A.
311(a).......................................... 7.11
(b)......................................... 7.11
(c)......................................... N.A.
312(a).......................................... 2.05
(b)......................................... 11.03
(c)......................................... 11.03
313(a).......................................... 7.06
(b)(1)...................................... 7.06
(b)(2)...................................... 7.06
(c)......................................... 7.06; 11.02
(d)......................................... 7.06
314(a).......................................... 4.06; 4.08; 11.02
(b)......................................... N.A.
(c)(1)...................................... 7.02; 11.04
(c)(2)...................................... 7.02; 11.04
(c)(3)...................................... N.A.
(d)......................................... N.A.
(e)......................................... 11.05
(f)......................................... N.A.
315(a).......................................... 7.01(b)
(b)......................................... 7.05; 11.02
(c)......................................... 7.01(a)
(d)......................................... 6.05; 7.01(c)
(e)......................................... 6.11
316(a)(last sentence)........................... 2.09
(a)(1)(A)................................... 6.05
(a)(1)(B)................................... 6.04
(a)(2)...................................... N.A.
(b)......................................... 6.07
(c)......................................... 9.04
317(a)(1)....................................... 6.08
(a)(2)...................................... 6.09
(b)......................................... 2.04
318(a).......................................... 11.01
(c)......................................... 11.01
- ----------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to
be a part of the Indenture.
- i -
<PAGE> 3
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions..............................................1
SECTION 1.02. Incorporation by Reference of TIA.......................35
SECTION 1.03. Rules of Construction...................................36
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.........................................37
SECTION 2.02. Execution and Authentication; Aggregate
Principal Amount.....................................38
SECTION 2.03. Registrar and Paying Agent..............................40
SECTION 2.04. Paying Agent To Hold Assets in Trust....................41
SECTION 2.05. Holder Lists............................................42
SECTION 2.06. Transfer and Exchange...................................42
SECTION 2.07. Replacement Notes.......................................43
SECTION 2.08. Outstanding Notes.......................................43
SECTION 2.09. Treasury Notes..........................................44
SECTION 2.10. Temporary Notes.........................................44
SECTION 2.11. Cancellation............................................45
SECTION 2.12. Defaulted Interest......................................45
SECTION 2.13. CUSIP Number............................................47
SECTION 2.14. Deposit of Monies.......................................47
SECTION 2.15. Restrictive Legends.....................................47
SECTION 2.16. Book-Entry Provisions for Global Note...................48
SECTION 2.17. Registration of Transfers and Exchanges.................50
SECTION 2.18. Liquidated Damages Under Registration Rights
Agreement............................................57
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee......................................57
SECTION 3.02. Selection of Notes To Be Redeemed.......................58
SECTION 3.03. Optional Redemption.....................................58
SECTION 3.04. Notice of Redemption....................................59
SECTION 3.05. Effect of Notice of Redemption..........................61
SECTION 3.06. Deposit of Redemption Price.............................61
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<PAGE> 4
Page
----
SECTION 3.07. Notes Redeemed in Part..................................62
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes........................................62
SECTION 4.02. Maintenance of Office or Agency.........................63
SECTION 4.03. Corporate Existence.....................................63
SECTION 4.04. Payment of Taxes and Other Claims.......................64
SECTION 4.05. Maintenance of Properties and Insurance.................64
SECTION 4.06. Compliance Certificate; Notice of Default...............65
SECTION 4.07. Compliance with Laws....................................66
SECTION 4.08. Reports to Holders......................................67
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.................67
SECTION 4.10. Limitation on Restricted Payments.......................68
SECTION 4.11. Limitation on Transactions with Affiliates..............71
SECTION 4.12. Limitation on Incurrence of Additional
Indebtedness.........................................72
SECTION 4.13. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted
Subsidiaries.........................................73
SECTION 4.14. Limitation on Restricted and Unrestricted
Subsidiaries.........................................75
SECTION 4.15. Change of Control.......................................76
SECTION 4.16. Limitation on Asset Sales...............................79
SECTION 4.17. Limitation on Preferred Stock of Restricted
Subsidiaries.........................................84
SECTION 4.18. Limitation on Liens.....................................85
SECTION 4.19. Conduct of Business.....................................85
SECTION 4.20. Additional Subsidiary Guarantees........................86
SECTION 4.21. Prohibition on Incurrence of Senior
Subordinated Debt....................................87
SECTION 4.22. Deposit of Proceeds with Escrow Agent...................87
SECTION 4.23. Prepayment of Credit Agreement..........................90
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets................91
SECTION 5.02. Successor Corporation Substituted.......................93
- iii -
<PAGE> 5
Page
----
ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default.......................................94
SECTION 6.02. Acceleration............................................96
SECTION 6.03. Other Remedies..........................................97
SECTION 6.04. Waiver of Past Defaults.................................98
SECTION 6.05. Control by Majority.....................................98
SECTION 6.06. Limitation on Suits.....................................99
SECTION 6.07. Right of Holders To Receive Payment.....................99
SECTION 6.08. Collection Suit by Trustee.............................100
SECTION 6.09. Trustee May File Proofs of Claim.......................100
SECTION 6.10. Priorities.............................................101
SECTION 6.11. Undertaking for Costs..................................101
SECTION 6.12. Restoration of Rights and Remedies.....................102
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee......................................102
SECTION 7.02. Rights of Trustee......................................104
SECTION 7.03. Individual Rights of Trustee...........................106
SECTION 7.04. Trustee's Disclaimer...................................106
SECTION 7.05. Notice of Default......................................107
SECTION 7.06. Reports by Trustee to Holders..........................107
SECTION 7.07. Compensation and Indemnity.............................108
SECTION 7.08. Replacement of Trustee.................................109
SECTION 7.09. Successor Trustee by Merger, Etc.......................111
SECTION 7.10. Eligibility; Disqualification..........................111
SECTION 7.11. Preferential Collection of Claims Against the
Company.............................................112
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations...................112
SECTION 8.02. Application of Trust Money.............................115
SECTION 8.03. Repayment to the Company...............................116
SECTION 8.04. Reinstatement..........................................116
SECTION 8.05. Acknowledgment of Discharge by Trustee.................117
- iv -
<PAGE> 6
Page
----
ARTICLE NINE
MODIFICATION OF THIS INDENTURE
SECTION 9.01. Without Consent of Holders.............................117
SECTION 9.02. With Consent of Holders................................118
SECTION 9.03. Compliance with TIA....................................119
SECTION 9.04. Revocation and Effect of Consents......................119
SECTION 9.05. Notation on or Exchange of Notes.......................120
SECTION 9.06. Trustee To Sign Amendments, Etc........................120
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Debt......................121
SECTION 10.02. Suspension of Payment When Senior Debt Is in
Default.............................................121
SECTION 10.03. Notes Subordinated to Prior Payment of All
Senior Debt on Dissolution, Liquidation or
Reorganization of Company...........................123
SECTION 10.04. Holders To Be Subrogated to Rights of Holders
of Senior Debt......................................125
SECTION 10.05. Obligations of the Company Unconditional...............126
SECTION 10.06. Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice.....................127
SECTION 10.07. Application by Trustee of Assets Deposited with
It..................................................128
SECTION 10.08. No Waiver of Subordination Provisions..................128
SECTION 10.09. Holders Authorize Trustee To Effectuate
Subordination of Notes..............................129
SECTION 10.10. Right of Trustee to Hold Senior Debt...................130
SECTION 10.11. This Article Ten Not To Prevent Events of
Default.............................................130
SECTION 10.12. No Fiduciary Duty of Trustee to Holders of
Senior Debt.........................................131
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls...........................................131
SECTION 11.02. Notices................................................132
SECTION 11.03. Communications by Holders with Other Holders...........134
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent...........................................134
- v -
<PAGE> 7
Page
----
SECTION 11.05. Statements Required in Certificate or Opinion..........135
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar..............136
SECTION 11.07. Legal Holidays.........................................136
SECTION 11.08. Governing Law..........................................136
SECTION 11.09. No Adverse Interpretation of Other Agreements..........137
SECTION 11.10. No Personal Liability..................................137
SECTION 11.11. Successors.............................................137
SECTION 11.12. Duplicate Originals....................................137
SECTION 11.13. Severability...........................................138
ARTICLE TWELVE
GUARANTEE OF NOTES
SECTION 12.01. Unconditional Guarantee................................138
SECTION 12.02. Limitations on Guarantees..............................140
SECTION 12.03. Execution and Delivery of Guarantee....................140
SECTION 12.04. Release of a Guarantor.................................141
SECTION 12.05. Waiver of Subrogation..................................142
SECTION 12.06. No Set-Off.............................................143
SECTION 12.07. Obligations Absolute...................................143
SECTION 12.08. Obligations Continuing.................................144
SECTION 12.09. Obligations Not Reduced................................144
SECTION 12.10. Obligations Reinstated.................................144
SECTION 12.11. Obligations Not Affected...............................145
SECTION 12.12. Waiver.................................................147
SECTION 12.13. No Obligation To Take Action Against the
Company.............................................147
SECTION 12.14. Dealing with the Company and Others....................148
SECTION 12.15. Default and Enforcement................................149
SECTION 12.16. Amendment, Etc.........................................149
SECTION 12.17. Acknowledgment.........................................149
SECTION 12.18. Costs and Expenses.....................................149
SECTION 12.19. No Merger or Waiver; Cumulative Remedies...............150
SECTION 12.20. Survival of Obligations................................150
SECTION 12.21. Guarantee in Addition to Other Obligations.............151
SECTION 12.22. Severability...........................................151
SECTION 12.23. Successors and Assigns.................................151
- vi -
<PAGE> 8
Page
----
ARTICLE THIRTEEN
SUBORDINATION OF GUARANTEE
SECTION 13.01. Obligations of Guarantors Subordinated to
Guarantor Senior Debt...............................152
SECTION 13.02. Suspension of Guarantee Obligations When
Guarantor Senior Debt Is in Default.................153
SECTION 13.03. Guarantee Obligations Subordinated to Prior
Payment of All Guarantor Senior Debt on
Dissolution, Liquidation or Reorganization
of Such Guarantor...................................155
SECTION 13.04. Holders of Guarantee Obligations To Be
Subrogated to Rights of Holders of Guarantor
Senior Debt.........................................157
SECTION 13.05. Obligations of the Guarantors Unconditional............158
SECTION 13.06. Trustee Entitled To Assume Payments Not
Prohibited in Absence of Notice.....................159
SECTION 13.07. Application by Trustee of Assets Deposited with
It..................................................160
SECTION 13.08. No Waiver of Subordination Provisions..................161
SECTION 13.09. Holders Authorize Trustee To Effectuate
Subordination of Guarantee Obligations..............162
SECTION 13.10. Right of Trustee To Hold Guarantor Senior Debt.........162
SECTION 13.11. No Suspension of Remedies..............................163
SECTION 13.12. No Fiduciary Duty of Trustee to Holders of
Guarantor Senior Debt...............................163
SIGNATURES...........................................................140
Exhibit A - Form of Series A Note.....................................A-1
Exhibit B - Form of Series B Note.....................................B-1
Exhibit C - Form of Legend for Global Notes...........................C-1
Exhibit D - Form of Certificate To Be Delivered in
Connection with Transfers to Non-QIB
Accredited Investors......................................D-1
Exhibit E - Form of Certificate To Be Delivered in
Connection with Transfers Pursuant to
Regulation S..............................................E-1
Exhibit F - Form of Guarantee.........................................F-1
- vii -
<PAGE> 9
- 1 -
INDENTURE, dated as of November 5, 1997, among Kinetic Concepts,
Inc., a Texas corporation (the "Company"), each of the Guarantors named herein,
as guarantors, and Marine Midland Bank, as Trustee (the "Trustee").
The Company has duly authorized the creation of an issue of 9 5/8%
Senior Subordinated Notes due 2007, Series A, and 9 5/8% Senior Subordinated
Notes due 2007, Series B, to be issued in exchange for the 9 5/8% Senior
Subordinated Notes due 2007, Series A, pursuant to the Registration Rights
Agreement (as defined herein) and, to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture. All things necessary to
make the Notes (as defined), when duly issued and executed by the Company, and
authenticated and delivered hereunder, the valid obligations of the Company, and
to make this Indenture a valid and binding agreement of the Company and each of
the Guarantors, have been done.
Each party hereto agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders (as defined) of the
Company's 9 5/8% Senior Subordinated Notes due 2007, Series A and Series B.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries (i) existing at the time such Person becomes a Restricted
Subsidiary of such Company or at the time it merges or consolidates with the
Company or any of its Restricted Subsidiaries or (ii) which becomes Indebtedness
of the Company or a Restricted Subsidiary in connection with the acquisition of
assets from such Person, and in each case not incurred by such Person or its
Subsidiary in connection with, or in anticipation or contemplation of, such
Person becoming a Restricted Subsidiary of the Company or such acquisition,
merger or consolidation.
"Additional Interest" shall have the meaning set forth in the
Registration Rights Agreement.
"Affiliate" means, with respect to any specified Person, any other
Person who directly or indirectly through one or
<PAGE> 10
- 2 -
more intermediaries controls, or is controlled by, or is under common control
with, such specified Person. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing. Notwithstanding the foregoing, no Person
(other than the Company or any Subsidiary of the Company) who makes an
Investment in connection with a Securitization Entity shall be deemed an
Affiliate of the Company or any of its Subsidiaries solely by reason of such
Investment.
"Affiliate Transaction" has the meaning provided in Section 4.11.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.16.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Restricted Subsidiary of
the Company of (a) any Capital Stock of any Restricted Subsidiary of the
Company; or (b) any other property or assets of the Company or any Restricted
Subsidiary of the Company other than in the ordinary course of business;
provided, however, that Asset Sales shall not include (i) a transaction or
series of related transactions for which the Company or its Restricted
Subsidiaries receive aggregate consideration
<PAGE> 11
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of less than $1.0 million, (ii) the sale, lease, conveyance, disposition or
other transfer of all or substantially all of the assets of the Company as
permitted under Section 5.01 or any such disposition that constitutes a Change
of Control, (iii) sales of accounts receivable, equipment and related assets
(including contract rights) of the type specified in the definition of
"Qualified Securitization Transaction" to a Securitization Entity for the fair
market value thereof, including cash in an amount at least equal to 75% of the
fair market value thereof, and (iv) transfers of accounts receivable, equipment
and related assets (including contract rights) of the type specified in the
definition of "Qualified Securitization Transaction" (or a fractional undivided
interest therein) by a Securitization Entity in a Qualified Securitization
Transaction. For the purposes of clause (iii), Purchase Money Notes shall be
deemed to be cash.
"Authenticating Agent" has the meaning provided in Section 2.02.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal,
state or foreign law for the relief of debtors.
"Blockage Period" has the meaning provided in Section 10.02.
"Board of Directors" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which banking institutions in the city of New York are required or
authorized by law or other governmental action to be closed.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
<PAGE> 12
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amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether voting or nonvoting) of corporate stock,
including each class of Common Stock and Preferred Stock of such Person and (ii)
with respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the four highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $100.0 million; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; (vi) investments in money market
funds which invest substantially all their assets in securities of the types
described in clauses (i) through (v) above; and (vii) investments made by
Foreign Subsidiaries in local currencies in instruments issued by or with
entities of such jurisdiction having correlative attributes to the foregoing.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
<PAGE> 13
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of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of this
Indenture); (ii) the approval by the holders of Capital Stock of the Company of
any plan or proposal for the liquidation or dissolution of the Company (whether
or not otherwise in compliance with the provisions of this Indenture); (iii) any
Person or Group (other than any of the Permitted Holders(s)) shall become the
owner, directly or indirectly, beneficially or of record, of shares representing
more than 50% of the aggregate ordinary voting power represented by the issued
and outstanding Capital Stock of the Company; or (iv) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"Change of Control Offer" has the meaning provided in Section 4.15.
"Change of Control Payment Date" has the meaning provided in Section
4.15.
"Collateral" means (i) the Escrow Account, (ii) the Proceeds and all
other cash or Cash Equivalents deposited in the Escrow Account from time to time
pursuant to Section 4.22, (iii) all of the Company's and the Guarantors' rights,
title, interest and privileges with respect to the Escrow Account and such cash
and Cash Equivalents, (iv) all dividends, interest and other payments and
distributions made on or with respect to such Cash Equivalents or the Escrow
Account and (v) all proceeds of any of the foregoing.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor and also includes for the purposes of any provision contained herein
and required by the TIA any other obligor on the Notes.
<PAGE> 14
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"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable to
sales or dispositions outside the ordinary course of business), (B) Consolidated
Interest Expense, (C) the aggregate depreciation and amortization (including
amortization of goodwill and other intangibles) of such Person and its
Restricted Subsidiaries for such period, and (D) other non-cash charges of such
Person and its Restricted Subsidiaries for such period, less any non-cash
charges increasing Consolidated Net Income during such period and less the
amount of all cash payments made by such Person or any of its Restricted
Subsidiaries during such period to the extent such payments relate to non-cash
charges that were added back in determining Consolidated EBITDA for such period
or any prior period, all as determined on a consolidated basis for such Person
and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to
any Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisi-
<PAGE> 15
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tion giving rise to the need to make such calculation as a result of such Person
or one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming
or otherwise being liable for Acquired Indebtedness and also including any
Consolidated EBITDA (provided that such Consolidated EBITDA shall be included
only to the extent includable pursuant to the definition of "Consolidated Net
Income") attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Four Quarter Period) occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset Sale,
Asset Acquisition (including the incurrence, assumption or liability for any
such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for
any period, the sum, without duplication, of (i) Consolidated Interest Expense,
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person (other than dividends paid in Qualified
Capital Stock) paid, accrued or scheduled to be paid or accrued during such
period times (y) a fraction, the numerator of which
<PAGE> 16
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is one and the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person, expressed as a
decimal.
"Consolidated Interest Expense" means, with respect to any Person
for any period, the sum of, without duplication: (i) the aggregate of the
interest expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount, (b) the net costs under
Interest Swap Obligations, (c) all capitalized interest and (d) the interest
portion of any deferred payment obligation, but excluding amortization or
write-off of deferred financing costs; and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, (e) the net income of any Person
in which the referant Person has an interest, other than a Restricted Subsidiary
of the referent Person, except to the extent of cash dividends or distributions
paid to the referent Person or to a Restricted Subsidiary of the referent Person
by such Person, (f) any restoration to income of any contingency reserve in
accordance with GAAP, except to the extent that provision for such reserve was
made out of Consolidated Net Income accrued at any time following the Issue
Date, (g) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued), and (h) in the case of a
successor to the referent Person by consolidation or merger
<PAGE> 17
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or as a transferee of the referent Person's assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of assets.
"consolidation" means, with respect to any Person, the consolidation
of the accounts of the Restricted Subsidiaries of such Person with those of such
Person, all in accordance with GAAP; provided, however, that "consolidation"
will not include consolidation of the accounts of any Unrestricted Subsidiary of
such Person with the accounts of such Person. The term "consolidated" has a
correlative meaning to the foregoing.
"Continuing Directors" means, as of the date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 140 Broadway, 12th Floor, New York, New York 10005.
"Covenant Defeasance" has the meaning set forth in Section 8.01.
"Credit Agreement" means the Credit Agreement dated as of November 3, 1997,
among the Company, certain subsidiary borrowers from time to time parties
thereto, the lenders party thereto in their capacities as lenders thereunder and
Bank of America National Trust and Savings Association, as Administrative Agent,
and Bankers Trust Company, as Syndication Agent, together with the related
documents thereto (including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented, replaced, restated or
otherwise modified from time to time, including any agreement (and related
documents) extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by Section
4.12) or adding Restricted Subsidiaries of the Company as additional borrowers
or guarantors thereunder) all or any portion of the Indebtedness under such
agreement (and related documents) or any successor or replacement agreement (and
re-
<PAGE> 18
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lated documents) and whether with the same or any other agent, lender or group
of lenders.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depository" means The Depository Trust Company, its nominees and
successors.
"Designated Guarantor Senior Debt" means (i) Indebtedness of any
Guarantor under the Credit Agreement and (ii) any other Indebtedness
constituting Guarantor Senior Debt which, at the time of determination, has an
aggregate principal amount of at least $25.0 million and is specifically
designated in the instrument evidencing such Guarantor Senior Debt as
"Designated Guarantor Senior Debt" by the Guarantor incurring said Guarantor
Senior Debt.
"Designated Senior Debt" means (i) Indebtedness under the Credit
Agreement and (ii) any other Indebtedness constituting Senior Debt which, at the
time of determination, has an aggregate principal amount of at least $25.0
million and is specifically designated in the instrument evidencing such Senior
Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the Notes.
"Eligible Investments" has the meaning set forth in Section 4.22.
<PAGE> 19
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"Equity Offering" has the meaning provided in Section 3.03 of this
Indenture.
"Escrow Account" has the meaning set forth in Section 4.22.
"Escrow Agent" means Bankers Trust Company.
"Escrow Agreement" means the Escrow Agreement dated as of the
Closing Date among the Company, the Guarantors, the Initial Purchasers, the
Trustee and the Escrow Agent.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"Exchange Notes" means the 9 5/8% Senior Subordinated Notes due
2007, Series B to be issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement or, with respect to Initial Notes issued under
this Indenture subsequent to the Issue Date pursuant to Section 2.02, a
registration rights agreement substantially identical to the Registration Rights
Agreement.
"Exchange Offer" has the meaning provided in the Registration Rights
Agreement.
"fair market value" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of the
Board of Directors of the Company delivered to the Trustee.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company
which (i) is not organized under the laws of the United States, any state
thereof or the District of Columbia and (ii) conducts substantially all of its
business operations in a country other than the United States of America.
"Fremont" means Fremont Partners, L.P. and its Affiliates.
<PAGE> 20
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"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, as in effect from time to time.
"Global Note" has the meaning provided in Section 2.01.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part) (but if in part, only to the extent thereof); provided,
however, that the term "guarantee" shall not include (A) endorsements for
collection or deposit in the ordinary course of business and (B) guarantees
(other than guarantees of Indebtedness) by the Company in respect of assisting
one or more Subsidiaries in the ordinary course of their respective businesses,
including without limitation guarantees of trade obligations and operating
leases, on ordinary business terms. The term "guarantee" used as a verb has a
corresponding meaning.
"Guarantee" means the guarantee of the obligations under this
Indenture and the Notes by each of the Guarantors as set forth in Article
Twelve.
"Guarantor" means (i) the domestic Subsidiaries of the Company on
the Issue Date and (ii) each of the Company's Restricted Subsidiaries that in
the future executes a supplemental indenture in which such Restricted Subsidiary
agrees to be bound by the terms of this Indenture as a Guarantor; provided that
any Person constituting a Guarantor as described above shall cease to constitute
a Guarantor when its respective
<PAGE> 21
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Guarantee is released in accordance with the terms of this Indenture.
"Guarantor Senior Debt" means with respect to any Guarantor, (i) the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy or the commencement of any
bankruptcy, insolvency, reorganization, receivership or other similar proceeding
at the rate provided for in the documentation with respect thereto, whether or
not such interest is an allowed claim under applicable law) and fees and
expenses (including costs of collection), indemnity obligations on, and all
other amounts and obligations owing in respect of, any Indebtedness of a
Guarantor, whether outstanding on the Issue Date or thereafter created, incurred
or assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Guarantor. Without limiting the generality of
the foregoing, "Guarantor Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy or the commencement of any bankruptcy,
insolvency, reorganization, receivership or other similar proceeding at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, (x) all monetary obligations of every nature of the Company
or such Guarantor under the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, commissions, expenses and indemnities, (y) all Interest
Swap Obligations of such Guarantor and (z) all obligations of such Guarantor
under Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Debt"
shall not include (i) any Indebtedness of such Guarantor to a Subsidiary of such
Guarantor or any Affiliate of such Guarantor or any of such Affiliate's
Subsidiaries, (ii) Indebtedness of such Guarantor to, or guaranteed by such
Guarantor on behalf of, any shareholder who holds more than ten percent of the
equity securities of the Company pursuant to Rule 13d-3 under the Securities
Act, director, officer or employee of such Guarantor or any Restricted
Subsidiary of such Guarantor (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other trade payables
incurred in connection with obtaining goods, materials or services, (iv)
Indebtedness represented by Disqualified Capital Stock,
<PAGE> 22
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(v) any liability for federal, state, local or other taxes owed or owing by such
Guarantor, (vi) Indebtedness incurred in violation of the Indenture provisions
set forth under Section 4.12 (but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (vi) if the holder(s) of
such Indebtedness or their representative and the Trustee shall have received an
officers' certificate of the Company to the effect that the incurrence of such
Indebtedness does not (or, in the case of revolving credit Indebtedness or other
Indebtedness available to be borrowed under the Credit Agreement after the date
of the initial borrowing thereunder, that the incurrence of the entire committed
amount thereof at the date on which the initial borrowing thereunder is made
would not) violate such provisions of this Indenture), (vii) Indebtedness which,
when incurred and without respect to any election under Section 1111(b) of Title
11, United States Code, is without recourse to the Company and (viii) any
Indebtedness which is, by its express terms, subordinated in right of payment to
any other Indebtedness of such Guarantor.
"Holder" means any holder of Notes.
"IAI Global Note" has the meaning provided in Section 2.01.
"incur" has the meaning set forth in Section 4.12.
"Indebtedness" means with respect to any Person, without
duplication, (i) all Obligations of such Person for borrowed money, (ii) all
Obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all Capitalized Lease Obligations of such Person,
(iv) all Obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all Obligations under
any title retention agreement (but excluding trade accounts payable and other
accrued liabilities arising in the ordinary course of business that are not
overdue by 90 days or more or are being contested in good faith by appropriate
proceedings), (v) all Obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (vi)
guarantees and other contingent obligations in respect of Indebtedness of other
Persons of the type referred to in clauses (i) through (v) above and clause
(viii) below, (vii) all Obligations of any other Person of the type referred to
in clauses (i) through (vi) which are secured by any Lien on any property or
asset of such Person, the amount of such Obligation being deemed to be
<PAGE> 23
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the lesser of the fair market value of such property or asset or the amount of
the Obligation so secured, (viii) all Obligations under Currency Agreements and
Interest Swap Obligations of such Person and (ix) all Disqualified Capital Stock
issued by such Person with the amount of Indebtedness represented by such
Disqualified Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed repurchase price, but
excluding accrued dividends, if any. For purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
this Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Capital Stock.
"Indenture" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect material financial interest in the Company and (ii) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged, and may include a
commercial or investment banking, appraisal or accounting firm.
"Initial Notes" means, collectively, (i) the 9 5/8% Senior
Subordinated Notes due 2007, Series A, of the Company issued on the Issue Date
and (ii) one or more series of 9 5/8% Senior Subordinated Notes due 2007 that
are issued under this Indenture subsequent to the Issue Date pursuant to Section
2.02, in each case for so long as such securities constitute Restricted
Securities.
"Initial Purchasers" means BT Alex. Brown Incorporated and
BancAmerica Robertson Stephens.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
<PAGE> 24
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"interest" means, when used with respect to any Note, the amount of
all interest accruing on such Note, including any applicable defaulted interest
pursuant to Section 2.12 and any Additional Interest pursuant to the
Registration Rights Agreement.
"Interest Payment Date" means the stated maturity of an installment
of interest on the Notes.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any other Person. "Investment" shall exclude extensions of trade
credit by the Company and its Restricted Subsidiaries on commercially reasonable
terms in accordance with normal trade practices of the Company or such
Restricted Subsidiary, as the case may be. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Common Stock of any
direct or indirect Restricted Subsidiary of the Company such that, after giving
effect to any such sale or disposition, it ceases to be a Subsidiary of the
Company, the Company shall be deemed to have made an Investment on the date of
any such sale or disposition equal to the fair market value of the Capital Stock
of such Restricted Subsidiary not sold or disposed of.
"Investors" means Fremont II, Inc. and RCBA Purchaser I, L.P.
<PAGE> 25
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"Issue Date" means November 5, 1997.
"Legal Defeasance" has the meaning set forth in Section 8.01.
"Legal Holiday" has the meaning provided in Section 11.07.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Management Agreement" means a management agreement to be entered
into among the Company, Fremont and RCBA and which provides for the payment or
accrual of not more than $2,000,000 of compensation annually beginning on
November 1 and ending on October 31 of the following year.
"Maturity Date" means November 1, 2007.
"Merger" means the merger of the Investors with and into the Company
pursuant to the Transaction Agreement with the Company as the surviving
corporation of the merger.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to available
tax credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts (determined by the Company in good faith) to be
provided by the Company or any Restricted Subsidiary, as the case may be, as a
reserve, against any post closing adjustments or liabilities associated with
such Asset Sale and retained by the Company or any Restricted Subsidiary, as the
case may be, after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabili-
<PAGE> 26
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ties under any indemnification obligations associated with such Asset Sale.
"Net Proceeds Offer" has the meaning set forth in Section 4.16.
"Net Proceeds Offer Amount" has the meaning set forth in Section
4.16.
"Net Proceeds Offer Payment Date" has the meaning set forth in
Section 4.16.
"Net Proceeds Offer Trigger Date" has the meaning set forth in
Section 4.16.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Non-Recourse Indebtedness" means Indebtedness secured only by an
asset and which is expressly stated to be without recourse to the Company or its
Restricted Subsidiaries from the date of incurrence of such Indebtedness.
"Notes" means, collectively, the Initial Notes, the Private Exchange
Notes, if any, and the Unrestricted Notes, treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms of this Indenture, that are issued pursuant to this Indenture.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, commissions, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any
Indebtedness.
"Offer to Purchase" means the offer to purchase of the Company dated
October 8, 1997.
"Officer" means, with respect to any Person, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer, the Treasurer, the Controller, or the
Secretary of such Person, or any other officer designated by the Board of
Directors serving in a similar capacity and with respect to the Trustee or any
agent of the Trustee, a Trust Officer.
"Officers' Certificate" means a certificate signed by two Officers
of the Company.
<PAGE> 27
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"Opinion of Counsel" means a written opinion from legal counsel who
is reasonably acceptable to the Trustee complying with the requirements of
Sections 11.04 and 11.05, as they relate to the giving of an Opinion of Counsel.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Holder(s)" means RCBA and Fremont.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the Notes offered hereby and the Guarantees
thereof;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $400.0
million, less (x) the aggregate amount of any Indebtedness of
Securitization Entities in Qualified Securitization Transactions incurred
at a time that the Company is not able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 4.12, provided that the Company may elect in writing to the
Trustee to have the amount of said reduction resulting from such
Indebtedness incurred in connection with a Qualified Securitization
Transaction to be reduced by an amount (the "Transferred Reduction
Amount") up to the then remaining amount of Permitted Indebtedness that
could be incurred pursuant to clause (xiii) below, and in the event of
such election, the amount of Permitted Indebtedness that can be incurred
pursuant to clause (xiii) will be reduced by the Transferred Reduction
Amount, (y) the amount of all scheduled principal payments actually made
by the Company and (z) the amount of all required permanent prepayments of
Indebtedness under the Credit Agreement actually made with the proceeds of
an Asset Sale;
(iii) Indebtedness incurred by Foreign Subsidiaries not to exceed
$20.0 million (or the equivalent amount thereof, at the time of
incurrence, in other foreign currencies);
(iv) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments
<PAGE> 28
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or permanent mandatory prepayments when actually paid or permanent
reductions thereon;
(v) Interest Swap Obligations of the Company covering Indebtedness
of the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; provided, however, that such
Interest Swap Obligations are entered into to protect the Company and its
Restricted Subsidiaries from fluctuations in interest rates on
Indebtedness incurred in accordance with this Indenture to the extent the
notional principal amount of such Interest Swap Obligation does not exceed
the principal amount of the Indebtedness to which such Interest Swap
Obligation relates;
(vi) Indebtedness under Currency Agreements; provided that such
Currency Agreements do not increase the Indebtedness of the Company and
its Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(vii) Indebtedness of a Restricted Subsidiary of the Company to the
Company or to a Restricted Subsidiary of the Company for so long as such
Indebtedness is held by the Company or a Restricted Subsidiary of the
Company, in each case subject to no Lien (other than a Lien in connection
with the Credit Agreement and Permitted Liens which are not consensual)
held by a Person other than the Company or a Restricted Subsidiary of the
Company; provided that if as of any date any Person other than the Company
or a Restricted Subsidiary of the Company owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness (other than a
Lien in connection with the Credit Agreement and Permitted Liens which are
not consensual), such date shall be deemed the incurrence of Indebtedness
not constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(viii) Indebtedness of the Company to a Restricted Subsidiary of the
Company for so long as such Indebtedness is held by a Restricted
Subsidiary of the Company, in each case subject to no Lien (other than a
Lien in connection with the Credit Agreement and Permitted Liens which are
not consensual); provided that (a) any Indebtedness of the Company to any
Restricted Subsidiary of the Company (other than a Restricted Subsidiary
which is a Guarantor) is un-
<PAGE> 29
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secured and subordinated, pursuant to a written agreement, to the
Company's obligations under this Indenture and the Notes and (b) if as of
any date any Person other than a Restricted Subsidiary of the Company owns
or holds any such Indebtedness or any Person holds a Lien in respect of
such Indebtedness (other than a Lien in connection with the Credit
Agreement and Permitted Liens which are not consensual), such date shall
be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by the Company;
(ix) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished within five business days of
incurrence;
(x) Indebtedness of the Company or any Restricted Subsidiary
represented by performance bonds, warranty or contractual service
obligations, standby letters of credit or appeal bonds, in each case to
the extent incurred in the ordinary course of business of the Company or
such Restricted Subsidiary in accordance with customary industry
practices, in amounts and for the purposes customary in the Company's
industry;
(xi) the incurrence by a Securitization Entity of Indebtedness in a
Qualified Securitization Transaction that is not recourse to the Company
or any Subsidiary of the Company (except for Standard Securitization
Undertakings);
(xii) Refinancing Indebtedness; and
(xiii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $75.0 million
at any one time outstanding (which may be Indebtedness under the Credit
Agreement in addition to that permitted by clause (ii)).
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Restricted Subsidiary of the Company or that
will merge or consolidate into the Company or a Restricted Subsidiary of the
Company, (ii) Investments in the Company by any Restricted Subsidiary of the
Company; provided that any Indebtedness evidenc-
<PAGE> 30
- 22 -
ing such Investment is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under the Notes and this Indenture;
(iii) investments in cash and Cash Equivalents; (iv) loans and advances to
employees and officers of the Company and its Restricted Subsidiaries in the
ordinary course of business for bona fide business purposes not in excess of
$5.0 million at any one time outstanding; (v) Currency Agreements and Interest
Swap Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with this
Indenture; (vi) Investments in Unrestricted Subsidiaries not to exceed $10.0
million at any one time outstanding; (vii) Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (viii) Investments made by the Company or its Restricted Subsidiaries
as a result of consideration received in connection with an Asset Sale made in
compliance with Section 4.16; (ix) Investments existing on the date of this
Indenture; (x) accounts receivable, advances, loans, guarantees or extensions of
credit created or acquired in the ordinary course of business, consistent with
past or industry practice; (xi) any Investment by the Company or a Wholly Owned
Restricted Subsidiary of the Company in a Securitization Entity or any
Investment by a Securitization Entity in any other Person in connection with a
Qualified Securitization Transaction; provided that any Investment in a
Securitization Entity is in the form of a Purchase Money Note or an equity
interest; and (xii) Investments committed to by the Company or its Restricted
Subsidiaries on the Issue Date not to exceed $1.5 million in the aggregate.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required
pursuant to GAAP;
(ii) statutory, contractual and common law Liens of landlords to
secure rent payments and Liens of carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen and other Liens imposed by law incurred
in the ordinary course of business for sums not yet delinquent or being
contested in good faith, if such reserve or other appropriate provision,
if any, as shall be required by GAAP shall have been made in respect
thereof;
<PAGE> 31
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(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens securing judgments not giving rise to an Event
of Default;
(v) easements, rights-of-way, zoning restrictions, restrictive
covenants, minor imperfections in title and other similar charges or
encumbrances in respect of real property not interfering in any material
respect with the ordinary conduct of the business of the Company or any of
its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) purchase money Liens to finance property or assets (including
the cost of construction) of the Company or any Restricted Subsidiary of
the Company acquired in the ordinary course of business; provided,
however, that (A) the related purchase money Indebtedness shall not exceed
the cost of such property or assets and shall not be secured by any
property or assets of the Company or any Restricted Subsidiary of the
Company other than the property and assets so acquired or constructed and
(B) the Lien securing such Indebtedness shall be created within 180 days
of such acquisition or construction;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber
<PAGE> 32
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documents and other property relating to such letters of credit and
products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset
and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in accordance
with Section 4.12; provided that (A) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
were not granted in connection with, or in anticipation of, the incurrence
of such Acquired Indebtedness by the Company or a Restricted Subsidiary of
the Company and (B) such Liens do not extend to or cover any property or
assets of the Company or of any of its Restricted Subsidiaries other than
the property or assets that secured the Acquired Indebtedness prior to the
time such Indebtedness became Acquired Indebtedness of the Company or a
Restricted Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company;
(xiv) Liens arising under this Indenture;
(xv) leases or subleases granted to others that do not materially
interfere with the business of the Company and its Restricted
Subsidiaries;
(xvi) Liens in connection with any filing of Uniform Commercial Code
financing statements regarding leases;
(xvii) Liens securing Non-Recourse Indebtedness incurred pursuant to
this Indenture;
<PAGE> 33
- 25 -
(xviii) Liens arising from a bank or financial institution honoring
a check or draft inadvertently drawn against insufficient funds in the
ordinary course of business; and
(xix) Liens on assets transferred to a Securitization Entity or on
assets of a Securitization Entity, in either case incurred in connection
with a Qualified Securitization Transaction.
"Person" means an individual, partnership, corporation,
unincorporated organization, limited liability company, trust or joint venture,
or a governmental agency or political subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"principal" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Exchange Notes" shall have the meaning provided in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on
the Initial Notes in the form set forth in Exhibit A.
"Proceeds" has the meaning set forth in Section 4.22.
"pro forma" means, with respect to any calculation made or required
to be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act.
"Property" means, with respect to any Person, any interests of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including, without limitation, Capital Stock,
partnership interests and other equity or ownership interests in any other
Person.
<PAGE> 34
- 26 -
"Purchase Money Indebtedness" means Indebtedness the net proceeds of
which are used to finance the cost (including the cost of construction) of
property or assets acquired in the normal course of business by the Person
incurring such Indebtedness.
"Purchase Money Note" means a promissory note of a Securitization
Entity evidencing a line of credit, which may be irrevocable, from the Company
or any Subsidiary of the Company in connection with a Qualified Securitization
Transaction to a Securitization Entity, which note shall be repaid from cash
available to the Securitization Entity, other than amounts required to be
established as reserves pursuant to agreements, amounts paid to investors in
respect of interest, principal and other amounts owing to such investors,
amounts paid in connection with the purchase of newly generated receivables or
newly acquired equipment and amounts paid for administrative costs in the
ordinary course of business.
"QIB Global Note" has the meaning provided in Section 2.01.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A.
"Qualified Securitization Transaction" means any transaction or
series of transactions that may be entered into by the Company or any of its
Subsidiaries pursuant to which the Company or any or its Subsidiaries may sell,
convey or otherwise transfer to (a) a Securitization Entity (in the case of a
transfer by the Company or any of its Subsidiaries) and (b) any other Person (in
the case of a transfer by a Securitization Entity), or may grant a security
interest in, any accounts receivable or equipment (whether now existing or
arising or acquired in the future) of the Company or any of its Subsidiaries,
and any assets related thereto including, without limitation, all collateral
securing such accounts receivable and equipment, all contracts and contract
rights and all guarantees or other obligations in respect of such accounts
receivable and equipment, proceeds of such accounts receivable and equipment and
other assets (including contract rights) which are customarily transferred or in
respect of which security interests are customarily granted in connection with
asset securitization transactions involving accounts receivable and equipment.
<PAGE> 35
- 27 -
"RCBA" means Richard C. Blum Associates, Inc. and its Affiliates.
"Receivables" means any right of payment from or on behalf of any
obligor, whether constituting an account, chattel paper, instrument, general
intangible or otherwise, arising from the financing by the Company or any
Restricted Subsidiary of the Company of merchandise or services, and monies due
thereunder, security in the merchandise and services financed thereby, records
related thereto, and the right to payment of any interest or finance charges and
other obligations with respect thereto, proceeds from claims on insurance
policies related thereto, any other proceeds related thereto, and any other
related rights.
"Record Date" means the Record Dates specified in the Notes.
"Redemption Date" means, when used with respect to any Note to be
redeemed, the date fixed for such redemption pursuant to this Indenture and the
Notes.
"Redemption Price" means, when used with respect to any Note to be
redeemed, the price fixed for such redemption, including principal and premium,
if any, pursuant to this Indenture and the Notes.
"Reference Date" has the meaning set forth in Section 4.08.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or
any Restricted Subsidiary of the Company of Indebtedness incurred in accordance
with Section 4.12 (other than pursuant to clause (ii), (iii), (v), (vi), (vii),
(viii), (ix), (x), (xi) or (xiii) of the definition of Permitted Indebtedness),
in each case that does not (1) result in an increase in the aggregate principal
amount of Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium required to be paid under the terms
of the instrument governing such Indebtedness or the amount of any premium
reasonably determined to be necessary to accomplish such refi-
<PAGE> 36
- 28 -
nancing and plus the amount of reasonable expenses incurred by the Company and
any Restricted Subsidiary in connection with such Refinancing) or (2) create
Indebtedness with (A) a Weighted Average Life to Maturity that is less than the
Weighted Average Life to Maturity of the Indebtedness being Refinanced or (B) a
final maturity earlier than the final maturity of the Indebtedness being
Refinanced; provided that (x) if such Indebtedness being Refinanced is
Indebtedness solely of the Company or any Restricted Subsidiary or is
Indebtedness solely of the Company and any Restricted Subsidiary or Restricted
Subsidiaries, then such Refinancing Indebtedness shall be Indebtedness solely of
the Company or such Restricted Subsidiary or the Company and such Restricted
Subsidiary or Restricted Subsidiaries, as the case may be, and (y) if such
Indebtedness being Refinanced is subordinate or junior to the Notes, then such
Refinancing Indebtedness shall be subordinate to the Notes at least to the same
extent and in the same manner as the Indebtedness being Refinanced.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Issue Date among the Company, the Guarantors and the
Initial Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" has the meaning provided in Section 2.01.
"Related Person" means, with respect to any Person, any other Person
directly or indirectly owning 10% or more of the outstanding voting Common Stock
of such Person (or, in the case of a Person that is not a corporation, 10% or
more of the equity interest in such Person).
"Remaining Proceeds" has the meaning set forth in Section 4.22.
"Replacement Assets" shall have the meaning set forth in Section
4.16.
"Representative" means the indenture trustee or other trustee, agent
or representative in respect of any Designated Senior Debt; provided that (a)
if, and for so long as, any Designated Senior Debt lacks such a representative,
then the Representative for such Designated Senior Debt shall at all times
<PAGE> 37
- 29 -
constitute the holders of a majority of such Designated Senior Debt and (b) the
administrative agent (or any successor thereto) shall be a Representative of the
lenders under the Credit Agreement.
"Restricted Payment" shall have the meaning set forth in Section
4.10.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" of any Person means any Subsidiary of such
Person which at the time of determination is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such Property.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Securitization Entity" means a Wholly Owned Restricted Subsidiary
of the Company (or another Person in which the Company or any Subsidiary of the
Company makes an Investment and to which the Company or any Subsidiary of the
Company transfer accounts receivable or equipment and related assets) which
engages in no activities other than in connection with the financing of accounts
receivable or equipment and which is designated by the Board of Directors of the
Company (as provided below) as a Securitization Entity (a) no portion of the
Indebtedness or any other Obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any Subsidiary of the Company (excluding guarantees
of Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings), (ii) is recourse to or
<PAGE> 38
- 30 -
obligates the Company or any Subsidiary of the Company in any way other than
pursuant to Standard Securitization Undertakings or (iii) subjects any property
or asset of the Company or any Subsidiary of the Company, directly or
indirectly, contingently or otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization Undertakings, (b) with which neither the
Company nor any Subsidiary of the Company has any material contract, agreement,
arrangement or understanding other than on terms no less favorable to the
Company or such Subsidiary than those that might be obtained at the time from
Persons that are not Affiliates of the Company, other than fees payable in the
ordinary course of business in connection with servicing receivables of such
entity, and (c) to which neither the Company nor any Subsidiary of the Company
has any obligation to maintain or preserve such entity's financial condition or
cause such entity to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolution of the
Board of Directors of the Company giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy or the commencement of any bankruptcy, insolvency, reorganization,
receivership or other similar proceeding at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) and fees and expenses (including costs of
collection), indemnity obligations on, and all other amounts and obligations
owing in respect of, any Indebtedness of the Company, whether outstanding on the
Issue Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Debt" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy or the commencement of any
bankruptcy, insolvency, reorganization, receivership or other similar proceeding
at the rate provided for in the documentation with respect thereto, whether or
not such interest is an allowed claim under applicable law) on, and all other
amounts owing in respect of, (x) all monetary obligations of every nature of the
Company under the Credit Agreement, including, without limitation, obligations
to
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pay principal and interest, reimbursement obligations under letters of credit,
guaranteed obligations, fees, commissions, expenses and indemnities, (y) all
Interest Swap Obligations and (z) all obligations under Currency Agreements, in
each case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include (i) any
Indebtedness of the Company to a Subsidiary of the Company or any Affiliate of
the Company or any of such Affiliate's Subsidiaries, (ii) Indebtedness of the
Company to, or guaranteed by the Company on behalf of, any shareholder who holds
more than ten percent of the equity securities of the Company pursuant to Rule
13d-3 under the Securities Act, director, officer or employee of the Company or
any Subsidiary of the Company (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other trade payables
incurred in connection with obtaining goods, materials or services, (iv)
Indebtedness represented by Disqualified Capital Stock, (v) any liability for
federal, state, local or other taxes owed or owing by the Company, (vi)
Indebtedness incurred in violation of this Indenture provisions set forth under
Section 4.12 (but, as to any such obligation, no such violation shall be deemed
to exist for purposes of this clause (vi) if the holder(s) of such Indebtedness
or their representative and the Trustee shall have received an officers'
certificate of the Company to the effect that the incurrence of such
Indebtedness does not (or, in the case of revolving credit Indebtedness or other
Indebtedness available to be borrowed under the Credit Agreement after the date
of the initial borrowing thereunder, that the incurrence of the entire committed
amount thereof at the date on which the initial borrowing thereunder is made
would not) violate such provisions of this Indenture), (vii) Indebtedness which,
when incurred and without respect to any election under Section 1111(b) of Title
11, United States Code, is without recourse to the Company and (viii) any
Indebtedness which is, by its express terms, subordinated in right of payment to
any other Indebtedness of the Company.
"Significant Subsidiary" shall have the meaning set forth in Rule
1.02(w) of Regulation S-X under the Securities Act.
"Special Redemption" has the meaning set forth in Section 4.22.
"Special Redemption Date" has the meaning set forth in Section 4.22.
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"Special Redemption Notice" has the meaning set forth in Section
4.22.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company which are reasonably customary in an accounts
receivable or equipment securitization transaction.
"Subsidiary," with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Surviving Entity" shall have the meaning set forth in Section 5.01.
"Tender Offer" means the offer to purchase all of the Common Stock
of the Company, pursuant to the Transaction Agreement and the Offer to Purchase.
"Tender Offer Officers' Certificate" has the meaning set forth in
Section 4.22.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb), as amended, as in effect on the date of this
Indenture, except as otherwise provided in Section 9.03.
"Transaction Agreement" means the Transaction Agreement dated as of
October 2, 1997 among Fremont Purchaser II, Inc., RCBA Purchaser I, L.P. and the
Company as in effect on the Issue Date.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer this Indenture, or in the case of
a successor trustee, an officer assigned to the department, division or group
performing the
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corporation trust work of such successor and assigned to administer this
Indenture.
"U.S. Government Obligations" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"Unrestricted Notes" means one or more Notes that do not and are not
required to bear the Private Placement legend in the form set forth in Exhibit
A, including, without limitation, the Exchange Notes.
"Unrestricted Subsidiary" means any Subsidiary of the Company
designated as such pursuant to and in compliance with Section 4.14. Any such
designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of Section 4.14.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than, in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
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"indenture securities" means the Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the Indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP of any date of determination;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(6) any reference to a statute, law or regulation means that
statute, law or regulation as amended and in effect from time to time and
includes any successor statute, law or regulation; provided, however, that
any reference to the Bankruptcy Law shall mean the Bankruptcy Law as
applicable to the relevant case.
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ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
The Initial Notes, the notation thereon relating to the Guarantees,
if any, and the Trustee's certificate of authentication relating thereto shall
be substantially in the form of Exhibit A hereto, provided, that any Initial
Notes issued in a public offering shall be substantially in the form of Exhibit
B hereto. The Exchange Notes, the notation thereon relating to the Guarantees,
if any, and the Trustee's certificate of authentication relating thereto shall
be substantially in the form of Exhibit B hereto. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or depository rule
or usage. The Company and the Trustee shall approve the form of the Notes and
any notation, legend or endorsement on them. Each Note shall be dated the date
of its issuance and shall show the date of its authentication. Each Note shall
have an executed Guarantee endorsed thereon substantially in the form of Exhibit
F hereto.
The terms and provisions contained in the Notes and the Guarantees,
if any, annexed hereto as Exhibits A, B and F, shall constitute, and are hereby
expressly made, a part of this Indenture and, to the extent applicable, the
Company, the Guarantors, if any, and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
Notes offered and sold (i) in reliance on Rule 144A, (ii) to
Institutional Accredited Investors or (iii) in reliance on Regulation S shall,
unless the applicable Holder requests Notes in the form of Certificated Notes in
registered form ("Physical Notes"), which shall be in substantially the form set
forth in Exhibit A, be issued initially in the form of one or more permanent
global Notes in registered form, substantially in the form set forth in Exhibit
A (the "Global Note"), deposited with the Trustee, as custodian for the
Depository, duly executed by the Company (and having an executed Guarantee
endorsed thereon) and authenticated by the Trustee as hereinafter provided, and
shall bear the legend set forth in Exhibit C. One or more separate Global Notes
shall be issued to represent Notes held by (i) Qualified Institutional Buyers (a
"QIB Global Note"), (ii) Institutional Accredited Investors (an "IAI Global
Note") and (iii) Persons acquiring Notes in reliance on Regula-
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tion S (a "Regulation S Global Note"). The Company shall cause the QIB Global
Notes, IAI Global Notes and Regulation S Global Notes to have separate CUSIP
numbers. The aggregate principal amount of any Global Note may from time to time
be increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depository, as hereinafter provided.
All Notes offered and sold in reliance on Regulation S shall remain
in the form of a Global Note until the consummation of the Exchange Offer
pursuant to the Registration Rights Agreement; provided, however, that all of
the time periods specified in the Registration Rights Agreement to be complied
with by the Company and the Guarantors have been so complied with.
SECTION 2.02. Execution and Authentication; Aggregate Principal
Amount.
Two Officers, or an Officer and an Assistant Secretary of the
Company and each Guarantor, shall sign, or one Officer shall sign and one
Officer or an Assistant Secretary (each of whom shall, in each case, have been
duly authorized by all requisite corporate actions) shall attest to, the Notes
for the Company and the Guarantees for the Guarantors by manual or facsimile
signature.
If an Officer or Assistant Secretary whose signature is on a Note or
a Guarantee was an Officer or Assistant Secretary at the time of such execution
but no longer holds that office or position at the time the Trustee
authenticates the Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue
in the aggregate principal amount not to exceed $300,000,000 in one or more
series (of which no more than $100,000,000 may be issued after the Issue Date,
provided that such subsequent issuance complies with Section 4.12 (other than
clause (i) of the definition of Permitted Indebtedness) and no Default or Event
of Default exists under this Indenture at the time of such subsequent issuance
or will result therefrom), (ii) Private Exchange Notes from time to time for
issue only in exchange for a like principal amount of Initial Notes, and (iii)
Unrestricted Notes from time to time only (A) in exchange
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for a like principal amount of Initial Notes or (B) in an aggregate principal
amount of not more than the excess of $300,000,000 over the sum of the aggregate
principal amount of (x) Initial Notes then outstanding, (y) Private Exchange
Notes then outstanding and (z) Unrestricted Notes issued in accordance with
(iii)(A) above, in each case upon a written order of the Company in the form of
an Officers' Certificate of the Company. Each such written order shall specify
the amount of Notes to be authenticated and the date on which the Notes are to
be authenticated, whether the Notes are to be Initial Notes, Private Exchange
Notes or Unrestricted Notes and whether the Notes are to be issued as Physical
Notes or Global Notes or such other information as the Trustee may reasonably
request. The aggregate principal amount of Notes outstanding at any time may not
exceed $300,000,000, except as provided in Section 2.07.
In the event that the Company shall issue and the Trustee shall
authenticate any Notes issued under this Indenture subsequent to the Issue Date
pursuant to clauses (i) and (iii) of the first sentence of the immediately
preceding paragraph, the Company shall use its reasonable efforts to obtain the
same "CUSIP" number for such Notes as is printed on the Notes outstanding at
such time; provided, however, that if any series of Notes issued under this
Indenture subsequent to the Issue Date is determined, pursuant to an Opinion of
Counsel of the Company in a form reasonably satisfactory to the Trustee to be a
different class of security than the Notes outstanding at such time for federal
income tax purposes, the Company may obtain a "CUSIP" number for such Notes that
is different than the "CUSIP" number printed on the Notes then outstanding.
Notwithstanding the foregoing, all Notes issued under this Indenture shall vote
and consent together on all matters as one class and no series of Notes will
have the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company or with any Affiliate of the Company.
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The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
The Trustee is authorized to enter into a letter of representation
with the Depository in the form provided to the Trustee by the Company and to
act in accordance with such letter. The Trustee is authorized to enter into the
Escrow Agreement and to act in accordance therewith.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in the City of New York, State of New York)
where (a) Notes may be presented or surrendered for registration of transfer or
for exchange ("Registrar"), (b) Notes may be presented or surrendered for
payment ("Paying Agent") and (c) notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Registrar shall keep
a register of the Notes and of their transfer and exchange. The Company may have
one or more Co-Registrars and one or more additional Paying Agents reasonably
acceptable to the Trustee. The term "Paying Agent" or "Registrar" includes any
additional Paying Agent or Registrar, as the case may be. The Company may act as
its own Paying Agent, except that for the purposes of payments on the Notes
pursuant to Sections 4.15 and 4.16, neither the Company nor any Affiliate of the
Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Trustee of the name and address of
any such Agent. If the Company shall fail to maintain a Registrar or Paying
Agent the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of demands and notices in connection with the Notes,
until such time as the Trustee has resigned or a successor has been appointed.
Any of the Registrar, the Paying Agent or any other agent may resign upon 30
days' notice to the Company. The Company may change any Paying Agent and
Registrar without notice to the Holders.
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SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that such Paying Agent shall hold in trust for the benefit
of the Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, premium, if any, or interest on, the Notes (whether
such assets have been distributed to it by the Company or any other obligor on
the Notes), and the Company and the Paying Agent shall notify the Trustee of any
Default by the Company (or any other obligor on the Notes) in making any such
payment. The Company at any time may require a Paying Agent to distribute all
assets held by it to the Trustee and account for any assets disbursed and the
Trustee may at any time during the continuance of any payment Default, upon
written request to a Paying Agent, require such Paying Agent to distribute all
assets held by it to the Trustee and to account for any assets distributed. Upon
distribution to the Trustee of all assets that shall have been delivered by the
Company to the Paying Agent, the Paying Agent shall have no further liability
for such assets.
SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish or cause the Registrar to
furnish to the Trustee three (3) Business Days (or such shorter period as the
Trustee may expressly agree to) before each Record Date and at such other times
as the Trustee may request in writing a list as of such date and in such form as
the Trustee may reasonably require of the names and addresses of the Holders,
which list may be conclusively relied upon by the Trustee, and the Company shall
otherwise comply with TIA Section 312(a).
SECTION 2.06. Transfer and Exchange.
Subject to Sections 2.16 and 2.17, when Notes are presented to the
Registrar or a Co-Registrar with a request to register the transfer of such
Notes or to exchange such Notes for an equal principal amount of Notes or other
authorized denominations, the Registrar or Co-Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transaction are met; provided, however, that the Notes presented or surrendered
for registration of transfer or exchange shall be duly endorsed or accompanied
by a written in-
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strument of transfer in form satisfactory to the Company, the Trustee and the
Registrar or Co-Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing. To permit registration of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Notes and the
Guarantors shall execute Guarantees thereon at the Registrar's or Co-Registrar's
request. No service charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
transfer tax, fee or similar governmental charge payable in connection therewith
(other than any such transfer taxes or similar governmental charge payable upon
exchanges or transfers pursuant to Section 2.10, 3.07, 4.15, 4.16 or 9.05, in
which event the Company shall be responsible for the payment of such taxes).
The Registrar or Co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business on the day which is 15 days before the mailing of a notice of
redemption of Notes and ending at the close of business on the day of such
mailing and (ii) selected for redemption in whole or in part pursuant to Article
Three, except the unredeemed portion of any Note being redeemed in part.
Any Holder of a beneficial interest in a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interests in
such Global Notes may be effected only through a book entry system maintained by
the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a book
entry system.
SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder
of a Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note and
the Guarantors shall execute a Guarantee thereon if the Trustee's requirements
are met. If required by the Trustee or the Company, such Holder must provide an
indemnity bond or other indemnity of reasonable tenor, sufficient in the
reasonable judgment of the Company, the Guarantors and the Trustee, to protect
the Company, the Guarantors, the Trustee or any Agent from any loss which any of
them may suffer if a Note is replaced. Every replacement Note shall constitute
an additional obligation of the Company and the Guarantors.
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SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to the provisions of Section 2.09, a Note does not cease to be outstanding
because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender sufficient to pay all of the principal, premium, if any, and
interest due on the Notes payable on that date and is not prohibited from paying
such money to the Holders thereof pursuant to the terms of this Indenture, then
on and after that date such Notes shall be deemed not to be outstanding and
interest on them shall cease to accrue.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver, consent or notice, Notes owned
by the Company or an Affiliate of the Company shall be considered as though they
are not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes which a Trust Officer of the Trustee actually knows are so owned
shall be so considered. The Company shall notify the Trustee, in writing, when
either it or, to its knowledge, any of its Affiliates repurchases or otherwise
acquires Notes, of the aggregate principal amount of such Notes so repurchased
or otherwise acquired and such other information as the Trustee may reasonably
request and the Trustee shall be entitled to rely thereon.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon receipt of a
written order of the Company in the form of an Officers' Certificate. The
Officers' Certifi-
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cate shall specify the amount of temporary Notes to be authenticated and the
date on which the temporary Notes are to be authenticated. Temporary Notes shall
be substantially in the form of definitive Notes but may have variations that
the Company consider appropriate for temporary Notes and so indicate in the
Officers' Certificate. Without unreasonable delay, the Company shall prepare,
the Trustee shall authenticate and the Guarantors shall execute Guarantees on,
upon receipt of a written order of the Company pursuant to Section 2.02,
definitive Notes in exchange for temporary Notes.
SECTION 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Company, shall dispose,
in its customary manner, of all Notes surrendered for transfer, exchange,
payment or cancellation. Subject to Section 2.07, the Company may not issue new
Notes to replace Notes that it has paid for or delivered to the Trustee for
cancellation. If the Company shall acquire any of the Notes, such acquisition
shall not operate as a redemption or satisfaction of the Indebtedness
represented by such Notes unless and until the same are surrendered to the
Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
The Company will pay interest on overdue principal from time to time
on demand at the rate of interest then borne by the Notes. The Company shall, to
the extent lawful, pay interest on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
of interest then borne by the Notes. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months, and, in the case of a partial
month, the actual number of days elapsed.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest, to the Persons who are (i) Holders on a
subsequent special record date, if it so elects, which special record date shall
be the fifteenth day next preceding the date fixed by the Company for the
payment of defaulted interest or the next succeeding
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Business Day if such date is not a Business Day, or (ii) if the Company does not
elect a special record date, Holders on the next Record Date, which payment
shall be made on the next regular Interest Payment Date. The Company shall
notify the Trustee in writing of the amount of defaulted interest proposed to be
paid on each Note and the date of the proposed payment (a "Default Interest
Payment Date"), and at the same time the Company shall deposit with the Trustee
an amount of money equal to the aggregate amount proposed to be paid in respect
of such defaulted interest or shall make arrangements satisfactory to the
Trustee for such deposit on or prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons entitled
to such defaulted interest as provided in this Section; provided, however, that
in no event shall the Company deposit monies proposed to be paid in respect of
defaulted interest later than 10:30 a.m. New York City time on the proposed
Default Interest Payment Date. At least 15 days before the subsequent special
record date, the Company shall mail (or cause to be mailed) to each Holder, as
of a recent date selected by the Company, with a copy to the Trustee, a notice
that states the subsequent special record date, the payment date and the amount
of defaulted interest, and interest payable on such defaulted interest, if any,
to be paid. Notwithstanding the foregoing, any interest which is paid prior to
the expiration of the 30-day period set forth in Section 6.01(i) shall be paid
to Holders as of the regular record date for the Interest Payment Date for which
interest has not been paid. Notwithstanding the foregoing, the Company may make
payment of any defaulted interest in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange.
SECTION 2.13. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number, and, if
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; provided, however, that no representation is hereby
deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any change in the CUSIP number.
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SECTION 2.14. Deposit of Monies.
Prior to 10:30 a.m. New York City time on each Interest Payment
Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net
Proceeds Offer Payment Date, the Company shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date, Maturity Date, Redemption Date, Change
of Control Payment Date and Net Proceeds Offer Payment Date, as the case may be,
in a timely manner which permits the Paying Agent to remit payment to the
Holders on such Interest Payment Date, Maturity Date, Redemption Date, Change of
Control Payment Date and Net Proceeds Offer Payment Date, as the case may be.
SECTION 2.15. Restrictive Legends.
Each Global Note and Physical Note that constitutes a Restricted
Security shall bear the legend (the "Private Placement Legend") as set forth in
Exhibit A on the face thereof until after the second anniversary of the later of
the Issue Date and the last date on which the Company or any Affiliate of the
Company was the owner of such Note (or any predecessor security) (or such
shorter period of time as permitted by Rule 144 under the Securities Act or any
successor provision thereunder, unless otherwise agreed by the Company and the
Holder thereof) (or such longer period of time as may be required under the
Securities Act or applicable state securities laws in the opinion of counsel for
the Company).
Each Global Note shall also bear the legend as set forth in Exhibit
C.
SECTION 2.16. Book-Entry Provisions for Global Note
(a) The Global Notes initially shall (i) be registered in the name
of the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear the legend as set forth
in Exhibit C.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository, or the Trustee as its custodian, or under the
Global Notes, and the Depository may be treated by the Company, the Trustee and
any Agent of the Company or the Trustee as the ab-
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solute owner of such Global Note for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or any
Agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depository or
impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Note.
(b) Transfers of a Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in a Global Note may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository and the provisions of Section 2.17. In addition, Physical Notes shall
be transferred to all beneficial owners in exchange for their beneficial
interests in a Global Note if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for the Global Notes and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Note to beneficial owners pursuant to paragraph
(b), the Registrar shall (if one or more Physical Notes are to be issued)
reflect on its books and records the date and a decrease in the principal amount
of such Global Note in an amount equal to the principal amount of the beneficial
interest in the Global Note to be transferred, and the Company shall execute,
the Guarantors shall execute Guarantees on, and the Trustee shall authenticate
and deliver, one or more Physical Notes of like tenor and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b) of this Section 2.16, such Global
Note shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, the Guarantors shall execute Guarantees on and the
Trustee shall authenticate and deliver, to each beneficial owner identified by
the Depository in exchange for its beneficial interest in the Global Note, an
equal aggregate principal amount of Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered
in exchange for an interest in a Global Note
<PAGE> 54
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pursuant to paragraph (b) or (c) of this Section 2.16 shall, except as otherwise
provided by paragraphs (a)(i)(x) and (d) of Section 2.17, bear the Private
Placement Legend.
(f) The Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
SECTION 2.17. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Notes. When Physical Notes are
presented to the Registrar or Co-Registrar with a request:
(i) to register the transfer of the Physical Notes; or
(ii) to exchange such Physical Notes for an equal number of Physical
Notes of other authorized denominations,
the Registrar or Co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.17 for such transactions are met; provided, however, that the Physical
Notes presented or surrendered for registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Registrar or Co-Registrar, duly
executed by the Holder thereof or his attorney-in-fact duly authorized in
writing; and
(II) in the case of Physical Notes the offer and sale of which have
not been registered under the Securities Act, such Physical Notes shall be
accompanied, in the sole discretion of the Company, by the following
additional information and documents, as applicable:
(A) if such Physical Note is being delivered to the Registrar or
Co-Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect (substantially in the form of Exhibit G hereto); or
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(B) if such Physical Note is being transferred to a Qualified
Institutional Buyer in accordance with Rule 144A, a certification to
that effect (substantially in the form of Exhibit G hereto); or
(C) if such Physical Note is being transferred to an Institutional
Accredited Investor, delivery of a certification to that effect
(substantially in the form of Exhibit G hereto) and a Transferee
Certificate for Institutional Accredited Investors substantially in
the form of Exhibit D hereto; or
(D) if such Physical Note is being transferred in reliance on Regulation
S, delivery of a certification to that effect (substantially in the
form of Exhibit G hereto) and a Transferee Certificate for
Regulation S Transfers substantially in the form of Exhibit E hereto
and an Opinion of Counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the Securities
Act; or
(E) if such Physical Note is being transferred in reliance on Rule 144
under the Securities Act, delivery of a certification to that effect
(substantially in the form of Exhibit G hereto) and an Opinion of
Counsel reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act; or
(F) if such Physical Note is being transferred in reliance on another
exemption from the registration requirements of the Securities Act,
a certification to that effect (substantially in the form of Exhibit
G hereto) and an Opinion of Counsel reasonably acceptable to the
Company to the effect that such transfer is in compliance with the
Securities Act.
(b) Restrictions on Transfer of a Physical Note for a Beneficial
Interest in a Global Note. Unless otherwise agreed to by the Company, a Physical
Note may not be exchanged for a beneficial interest in a Global Note except upon
satisfaction of the requirements set forth below. Upon receipt by the Registrar
or Co-Registrar of a Physical Note, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Registrar or Co-Registrar,
together with:
(A) certification, substantially in the form of Exhibit G hereto, that
such Physical Note is being transferred
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(I) to a Qualified Institutional Buyer, (II) to an Institutional
Accredited Investor or (III) in reliance on Regulation S and, in the
case of (II), a Transferee Certificate for Institutional Accredited
Investors substantially in the form of Exhibit D hereto and, in the
case of (III), a Transferee Certificate for Regulation S Transfers
substantially in the form of Exhibit E hereto and an Opinion of
Counsel reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act; and
(B) written instructions directing the Registrar or Co-Registrar to
make, or to direct the Depository to make, an endorsement on the
applicable Global Note to reflect an increase in the aggregate
amount of the Notes represented by the Global Note,
then the Registrar or Co-Registrar shall cancel such Physical Note and cause, or
direct the Depository to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Registrar or Co-Registrar,
the principal amount of Notes represented by the applicable Global Note to be
increased accordingly. If no Global Note representing Notes held by Qualified
Institutional Buyers, Institutional Accredited Investors or Persons acquiring
Notes in reliance on Regulation S, as the case may be, is then outstanding, the
Company shall issue and the Trustee shall, upon written instructions from the
Company in accordance with Section 2.02, authenticate such a Global Note in the
appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange
of Global Notes or beneficial interests therein shall be effected through the
Depository in accordance with this Indenture (including the restrictions on
transfer set forth herein) and the procedures of the Depository therefor. Upon
receipt by the Registrar or Co-Registrar of written instructions, or such other
instruction as is customary for the Depository, from the Depository or its
nominee, requesting the registration of transfer of an interest in a QIB Global
Note, an IAI Global Note or a Regulation S Global Note, as the case may be, to
another type of Global Note, together with the applicable Global Notes (or, if
the applicable type of Global Note required to represent the interest as
requested to be transferred is not then outstanding, only the Global Note
representing the interest being transferred), the Registrar or Co-Registrar
shall cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures exist-
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ing between the Depository and the Registrar or Co-Registrar, the principal
amount of Notes represented by the applicable Global Notes involved in such
transfer or exchange to be adjusted accordingly to reflect the applicable
increase and decrease of the principal amount of Notes represented by such types
of Global Notes, giving effect to such transfer. If the applicable type of
Global Note required to represent the interest as requested to be transferred is
not outstanding at the time of such request, the Company shall issue and the
Trustee shall, upon written instructions from the Company in accordance with
Section 2.02, authenticate a new Global Note of such type in principal amount
equal to the principal amount of the interest requested to be transferred. Any
such transfer or exchange of Global Notes or beneficial interests therein shall
be effected through the Depository in accordance with this Indenture (including
the restrictions on transfer as contemplated herein) and the procedure of the
Depository therefor. Unless otherwise agreed to by the Company, any request for
the registration of the transfer of an interest in a QIB Global Note, an IAI
Global Note or a Regulation S Global Note to another type of Global Note must be
accompanied by a certificate from the transferor, substantially in the form of
Exhibit G hereto, that the transferee is either (i) a Qualified Institutional
Buyer in accordance with Rule 144A, (ii) an Institutional Accredited Investor,
or (iii) relying on Regulation S, and in the case of (ii), a Transferee
Certificate for Institutional Accredited Investors substantially in the form of
Exhibit D hereto and, in the case of (iii), a Transferee Certificate for
Regulation S Transfers substantially in the form of Exhibit E hereto and an
Opinion of Counsel reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for a
Physical Note.
(i) Any Person having a beneficial interest in a Global Note
may upon request exchange such beneficial interest for a
Physical Note. Upon receipt by the Registrar or
Co-Registrar of written instructions, or such other form
of instructions as is customary for the Depository, from
the Depository or its nominee on behalf of any Person
having a beneficial interest in a Global Note and upon
receipt by the Trustee of a written order or such other
form of instructions as is customary for the Depository
or the Person designated by the Depository as having
such a beneficial interest containing registration
in-
<PAGE> 58
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structions and, in the case of any such transfer or exchange
of a beneficial interest in Notes the offer and sale of which
have not been registered under the Securities Act, the
following additional information and documents:
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the
beneficial owner, a certification from such Person to
that effect (substantially in the form of Exhibit G
hereto); or
(B) if such beneficial interest is being transferred to a
Qualified Institutional Buyer in accordance with Rule
l44A, a certification to that effect (substantially in
the form of Exhibit G hereto); or
(C) if such beneficial interest is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the form
of Exhibit G hereto) and a Certificate for Institutional
Accredited Investors substantially in the form of
Exhibit D hereto; or
(D) if such beneficial interest is being transferred in
reliance on Regulation S, delivery of a certification to
that effect (substantially in the form of Exhibit G
hereto) and a Transferee Certificate for Regulation S
Transfers substantially in the form of Exhibit E hereto
and an Opinion of Counsel reasonably satisfactory to the
Company to the effect that such transfer is in
compliance with the Securities Act; or
(E) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act, delivery
of a certification to that effect (substantially in the
form of Exhibit G hereto) and an Opinion of Counsel
reasonably satisfactory to the Company to the effect
that such transfer is in compliance with the Securities
Act; or
<PAGE> 59
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(F) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect (substantially in the form of Exhibit G
hereto) and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act,
then the Registrar or Co-Registrar will cause, in accordance with
the standing instructions and procedures existing between the
Depository and the Registrar or Co-Registrar, the aggregate
principal amount of the applicable Global Note to be reduced and,
following such reduction, the Company will execute and, upon receipt
of an authentication order in the form of an Officers' Certificate
in accordance with Section 2.02, the Trustee will authenticate and
deliver to the transferee a Physical Note.
(ii) Notes issued in exchange for a beneficial interest in a
Global Note pursuant to this Section 2.17(d) shall be
registered in such names and in such authorized
denominations as the Depository, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Registrar or Co-Registrar
in writing. The Registrar or Co-Registrar shall deliver
such Physical Notes to the Persons in whose names such
Physical Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provisions of this Indenture, a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar or
Co-Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar or Co-Registrar shall deliver only Notes that
bear the Private Placement Legend unless (i) the requested transfer is after the
second anniversary of the Issue Date (provided, however, that neither the
Company nor
<PAGE> 60
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any Affiliate of the Company has held any beneficial interest in such Note, or
portion thereof, at any time prior to or on the second anniversary of the Issue
Date unless otherwise agreed by the Company), or (ii) there is delivered to the
Registrar or Co-Registrar a certificate and/or, if requested, an Opinion of
Counsel, each reasonably satisfactory to the Company and the Trustee to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(g) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time during the
Registrar's normal business hours upon the giving of reasonable written notice
to the Registrar.
(h) Transfers of Notes Held by Affiliates. Any certificate (i)
evidencing a Note that has been transferred to an Affiliate of the Company
within two years after the Issue Date, as evidenced by a notation on the
Assignment Form for such transfer or in the representation letter delivered in
respect thereof or (ii) evidencing a Note that has been acquired from an
Affiliate (other than by an Affiliate) in a transaction or a chain of
transactions not involving any public offering, shall, until two years after the
last date on which the Company or any Affiliate of the Company was an owner of
such Note, in each case, bear the Private Placement Legend, unless otherwise
agreed by the Company (with written notice thereof to the Trustee).
SECTION 2.18. Liquidated Damages Under Registration Rights
Agreement.
Under certain circumstances, the Company shall be obligated to pay
certain liquidated damages to the Holders, all as set forth in Section 5 of the
Registration Rights Agreement. The terms thereof are hereby incorporated herein
by reference.
<PAGE> 61
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ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Paragraph 6 of the
Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice to the Trustee provided for in
this Section 3.01 45 days before the Redemption Date (unless a shorter notice
period shall be satisfactory to the Trustee), together with an Officers'
Certificate stating that such redemption shall comply with the conditions
contained herein and in the Notes. Any such notice may be cancelled at any time
prior to notice of such redemption being mailed to any Holder and shall thereby
be void and of no effect.
The Company shall give notice of a redemption pursuant to Paragraph
5 of the Notes ("Special Redemption") to the Paying Agent and the Trustee at
least ten days before the Redemption Date with respect to the Special Redemption
(unless a shorter notice period shall be agreed to by the Trustee in writing),
together with an Officers' Certificate stating that such redemption will comply
with the conditions contained herein.
SECTION 3.02. Selection of Notes To Be Redeemed.
In the event that less than all of the Notes are to be redeemed at
any time, selection of such Notes, or portions thereof, for redemption will be
made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which such Notes are listed or, if such
Notes are not then listed on a national securities exchange, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate;
provided, however, that no Notes of a principal amount of $1,000 or less shall
be redeemed in part; provided, further, that if a partial redemption is made
with the proceeds of an Equity Offering, selection of the Notes or portions
thereof for redemption shall be made by the Trustee only on a pro rata basis or
on as nearly a pro rata basis as is practicable (subject to DTC procedures),
unless such method is otherwise prohibited. Notice of redemption shall be mailed
by first-class mail at least 30 but not more than 60 days before
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the Redemption Date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the Redemption Date, interest
will cease to accrue on Notes or portions thereof called for redemption as long
as the Company has deposited with the Paying Agent funds in satisfaction of the
applicable Redemption Price pursuant to this Indenture.
SECTION 3.03. Optional Redemption.
The Notes will be redeemable, at the Company's option, in whole at
any time or in part from time to time, on and after November 1, 2002, upon not
less than 30 nor more than 60 days' notice, at the following Redemption Prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on November 1 of the year set forth below,
plus, in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
Year Percentage
---- ----------
2002 104.813%
2003 103.208%
2004 101.604%
2005 and thereafter 100.000%
Optional Redemption upon Equity Offerings. At any time, or from time
to time, on or prior to November 1, 2000, the Company may, at its option, on one
or more occasions use all or a portion of the net cash proceeds of one or more
Equity Offerings (as defined below) to redeem the Notes issued under this
Indenture at a Redemption Price equal to 109.625% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided that at least 65% of the principal amount of Notes
originally issued remains outstanding immediately after any such redemption. In
order to effect the foregoing redemption with the proceeds of any Equity
Offering, the Company shall make such redemption not more than 120 days after
the consummation of any such Equity Offering.
As used in the preceding paragraph, "Equity Offering" means any
offering of Qualified Capital Stock of the Company.
<PAGE> 63
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SECTION 3.04. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date
(other than with respect to a Special Redemption), the Company shall mail or
cause to be mailed a notice of redemption by first class mail to each Holder of
Notes to be redeemed at its registered address, with a copy to the Trustee and
any Paying Agent. At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. The Company shall
provide such notices of redemption to the Trustee at least five days before the
intended mailing date (unless a shorter period shall be satisfactory to the
Trustee) (other than with respect to a Special Redemption).
Each notice of redemption shall identify (including the CUSIP
number) the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest,
if any, to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such
redemption is being made;
(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(6) that, unless the Company defaults in making the redemption
payment, interest on Notes or applicable portions thereof called for
redemption ceases to accrue on and after the Redemption Date, and the only
remaining right of the Holders of such Notes is to receive payment of the
Redemption Price plus accrued interest as of the Redemption Date, if any,
upon surrender to the Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes in
the aggregate principal amount equal to the unredeemed portion thereof
will be issued; and
<PAGE> 64
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(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes of such Holder (or portion thereof)
to be redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption.
The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Notes.
SECTION 3.05. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.04,
such notice of redemption shall be irrevocable and Notes called for redemption
become due and payable on the Redemption Date and at the Redemption Price plus
accrued interest as of such date, if any. Upon surrender to the Trustee or
Paying Agent, such Notes called for redemption shall be paid at the Redemption
Price plus accrued interest thereon to the Redemption Date, but installments of
interest, the maturity of which is on or prior to the Redemption Date, shall be
payable to Holders of record at the close of business on the relevant record
dates referred to in the Notes. Interest shall accrue on or after the Redemption
Date and shall be payable only if the Company defaults in payment of the
Redemption Price.
SECTION 3.06. Deposit of Redemption Price.
On or before the Redemption Date and in accordance with Section
2.14, the Company shall deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the Redemption Price plus accrued interest, if any, of all
Notes to be redeemed on that date. The Paying Agent shall promptly return to the
Company any U.S. Legal Tender so deposited which is not required for that
purpose, except with respect to monies owed as obligations to the Trustee
pursuant to Article Seven.
Unless the Company fails to comply with the preceding paragraph and
defaults in the payment of such Redemption Price plus accrued interest, if any,
interest on the Notes to be redeemed will cease to accrue on and after the
applicable Redemption Date, whether or not such Notes are presented for payment.
<PAGE> 65
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SECTION 3.07. Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part, the Trustee
shall authenticate for the Holder a new Note or Notes equal in principal amount
to the unredeemed portion of the Note surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
(a) The Company shall pay the principal of, premium, if any, and
interest on the Notes on the dates and in the manner provided in the Notes and
in this Indenture.
(b) An installment of principal of or interest on the Notes shall be
considered paid on the date it is due if the Trustee or Paying Agent (other than
the Company or any of its Affiliates) holds, prior to 10:30 a.m. New York City
time on that date, U.S. Legal Tender designated for and sufficient to pay the
installment in full and is not prohibited from paying such money to the Holders
pursuant to the terms of this Indenture or the Notes.
(c) Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain the office or agency required under
Section 2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.02.
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SECTION 4.03. Corporate Existence.
Except as otherwise permitted by Article Five, the Company shall do
or cause to be done, at its own cost and expense, all things necessary to
preserve and keep in full force and effect its corporate existence and the
corporate existence of each of its Restricted Subsidiaries in accordance with
the respective organizational documents of each such Restricted Subsidiary and
the material rights (charter and statutory) and franchises of the Company and
each such Restricted Subsidiary; provided, however, that the Company shall not
be required to preserve, with respect to itself, any material right or franchise
and, with respect to any of its Restricted Subsidiaries, any such existence,
material right or franchise, if the Board of Directors of the Company (or if
such existence is with respect to any Restricted Subsidiary which is not a
Significant Subsidiary, by the appropriate officers of the Company) shall
determine in good faith that the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Subsidiaries, taken as a
whole.
SECTION 4.04. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon it or any of
its Restricted Subsidiaries or properties of it or any of its Restricted
Subsidiaries and (ii) all material lawful claims for labor, materials and
supplies that, if unpaid, might by law become a Lien upon the property of the
Company or any of its Restricted Subsidiaries; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate negotiations or
proceedings properly instituted and conducted for which adequate reserves, to
the extent required under GAAP, have been taken.
SECTION 4.05. Maintenance of Properties and Insurance.
(a) The Company shall, and shall cause each of the Restricted
Subsidiaries to, maintain all properties used or useful in the conduct of its
business in good working order and condition (subject to ordinary wear and tear)
and make all necessary repairs, renewals, replacements, additions, betterments
<PAGE> 67
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and improvements thereto and actively conduct and carry on its business;
provided, however, that nothing in this Section 4.05 shall prevent the Company
or any of the Restricted Subsidiaries of the Company from discontinuing the
operation and maintenance of any of its properties, if such discontinuance is
(i) in the ordinary course of business pursuant to customary business terms or
(ii) in the good faith judgment of the respective Boards of Directors or other
governing body of the Company or Restricted Subsidiary, as the case may be,
desirable in the conduct of their respective businesses and is not
disadvantageous in any material respect to the Holders.
(b) The Company shall provide or cause to be provided, for itself
and each of the Restricted Subsidiaries of the Company, insurance (including
appropriate self-insurance) against loss or damage of the kinds that, in the
good faith judgment of the Company, are adequate and appropriate for the conduct
of the business of the Company and its Restricted Subsidiaries in a prudent
manner, with reputable insurers or with the Government of the United States of
America or any agency or instrumentality thereof (if not through
self-insurance).
SECTION 4.06. Compliance Certificate; Notice of Default.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each of the Company's fiscal years, an Officers' Certificate
(provided, however, that one of the signatories to each such Officers'
Certificate shall be the Company's principal executive officer, principal
financial officer or principal accounting officer), as to such Officers'
knowledge, without independent investigation, of the Company's compliance with
all conditions and covenants under this Indenture (without regard to any period
of grace or requirement of notice provided hereunder) and in the event any
Default of the Company's exists, such Officers shall specify the nature of such
Default. Each such Officers' Certificate shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year-end.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the annual financial
statements delivered pursuant to Section 4.08 shall be accompanied by a written
report of the Company's independent certified public accountants (who shall be a
firm of established national reputation) stating (A) that their audit
examination has included a review of the terms of this Indenture and the form of
the Notes as they relate to ac-
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counting matters, and (B) whether, in connection with their audit examination,
any Default or Event of Default has come to their attention and if such a
Default or Event of Default has come to their attention, specifying the nature
and period of existence thereof; provided, however, that, without any
restriction as to the scope of the audit examination, such independent certified
public accountants shall not be liable by reason of any failure to obtain
knowledge of any such Default or Event of Default that would not be disclosed in
the course of an audit examination conducted in accordance with generally
accepted auditing standards.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 11.02, by
registered or certified mail or by facsimile transmission followed by hard copy
by registered or certified mail an Officers' Certificate specifying such event,
notice or other action promptly upon its becoming aware of such occurrence.
SECTION 4.07. Compliance with Laws.
The Company shall comply, and shall cause each of its Subsidiaries
to comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as could not singly or in the
aggregate reasonably be expected to have a material adverse effect on the
financial condition or results of operations of the Company and its Subsidiaries
taken as a whole.
SECTION 4.08. Reports to Holders.
The Company will deliver to the Trustee within 15 days after filing
of the same with the Commission, copies of the quarterly and annual reports and
of the information, documents and other reports, if any, which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with
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such annual reports and such information, documents and other reports specified
in Sections 13 and 15(d) of the Exchange Act. The Company will also comply with
the other provisions of Section 314(a) of the TIA.
SECTION 4.09. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.10. Limitation on Restricted Payments.
The Company will not and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
in Qualified Capital Stock of the Company or warrants, options or other rights
to acquire Qualified Capital Stock (but excluding any debt security or
Disqualified Capital Stock convertible into, or exchangeable for, Qualified
Capital Stock)) on or in respect of shares of the Company's Capital Stock to
holders of such Capital Stock, (b) purchase, redeem or otherwise acquire or
retire for value any Capital Stock of the Company or any warrants, rights or
options to purchase or acquire shares of any class of such Capital Stock, (c)
make any principal payment on, purchase, defease, redeem, prepay, decrease or
otherwise acquire or retire for value, prior to any scheduled final maturity,
scheduled repayment or scheduled sinking fund payment, any Indebtedness of the
Company that is subordinate or junior in right of payment to the Notes, or (d)
make any Investment (other than Permitted Investments) (each of the foregoing
actions set forth in clauses (a), (b) (c) and (d) being referred to as a
"Restricted Payment"), if at the time of such Restricted Payment or immediately
after giving effect thereto, (i) a Default or an Event of Default shall have
occurred and be
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continuing or (ii) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12
or (iii) the aggregate amount of Restricted Payments (including such proposed
Restricted Payment) made subsequent to the Issue Date (the amount expended for
such purposes, if other than in cash, being the fair market value of such
property as determined reasonably and in good faith by the Board of Directors of
the Company, whose determination shall be conclusive) shall exceed the sum,
without duplication, of: (u) 50% of the cumulative Consolidated Net Income (or
if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss)
of the Company earned subsequent to the Issue Date and on or prior to the date
the Restricted Payment occurs (the "Reference Date") (treating such period as a
single accounting period); plus (v) 100% of the aggregate net cash proceeds
received by the Company from any Person (other than a Subsidiary of the Company)
from the issuance and sale subsequent to the Issue Date and on or prior to the
Reference Date of Qualified Capital Stock of the Company; plus (w) 100% of the
aggregate net cash proceeds received after the Issue Date by the Company from
the issuance or sale (other than to a Subsidiary of the Company) of debt
securities or Disqualified Capital Stock that have been converted into or
exchanged for Qualified Capital Stock of the Company, together with (without
duplication) any net cash proceeds received by the Company at the time of such
conversion or exchange; plus (x) to the extent not otherwise included in the
Consolidated Net Income of the Company, an amount equal to the net reduction in
Investments (other than reductions in Permitted Investments) in Unrestricted
Subsidiaries resulting from the payments in cash of interest on Indebtedness,
dividends, repayments of loans or advances or other transfers of assets, in each
case to the Company or a Restricted Subsidiary or from the redesignation of an
Unrestricted Subsidiary as a Restricted Subsidiary; plus (y) to the extent not
otherwise included in Consolidated Net Income, net cash proceeds from sale of
Investments which were treated as Restricted Payments, but not to exceed the
amounts so treated; plus (z) without duplication of any amounts included in
clause (iii)(v) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock (excluding, in the case of clauses (iii)(v) and (z), any net cash proceeds
from an Equity Offering to the extent used to redeem the Notes); plus (aa) $15.0
million.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
or redemption payment within 60
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days after the date of declaration of such dividend or redemption payment if the
dividend or redemption payment would have been permitted on the date of
declaration; (2) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any shares of Capital Stock of the Company,
either (i) solely in exchange for shares of Qualified Capital Stock of the
Company (or warrants, options or other rights to acquire Qualified Capital Stock
of the Company (but excluding any debt security or Disqualified Capital Stock
convertible into, or exchangeable for, Qualified Capital Stock)) or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of shares of Qualified Capital Stock
of the Company (or warrants, options or other rights to acquire Qualified
Capital Stock of the Company (but excluding any debt security or Disqualified
Capital Stock convertible into, or exchangeable for, Qualified Capital Stock));
(3) if no Default or Event of Default shall have occurred and be continuing, the
acquisition of any Indebtedness of the Company or of any Guarantor that is
subordinate or junior in right of payment to the Notes or such Guarantor's
Guarantee, as the case may be, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company (or warrants, options or other rights to
acquire Qualified Capital Stock of the Company (but excluding any debt security
or Disqualified Capital Stock convertible into, or exchangeable for, Qualified
Capital Stock)); or (ii) through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of the
Company) of (A) shares of Qualified Capital Stock of the Company (or warrants,
options or other rights to acquire Qualified Capital Stock of the Company (but
excluding any debt security or Disqualified Capital Stock convertible into, or
exchangeable for, Qualified Capital Stock)); or (B) Refinancing Indebtedness;
(4) the purchase of any Subordinated Indebtedness at a purchase price not
greater than 101% of the principal amount thereof in the event of a Change of
Control in accordance with provisions similar to Section 4.15; provided that
prior to such purchase the Company has made the Change of Control Offer as
provided in Section 4.15 with respect to the Notes and has purchased all Notes
validly tendered for payment in connection with such Change of Control Offer and
that no Default or Event of Default is in existence prior to or as a result of
such purchase; (5) so long as no Default or Event of Default shall have occurred
and be continuing, repurchases by the Company of Common Stock of the Company
from employees of the Company or any of its Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of such
employees, in an amount not to exceed $10.0 million in the aggregate; and (6)
the acquisition of
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shares of Capital Stock (or warrants, rights or options to acquire Capital Stock
of the Company) of the Company in connection with the consummation of the
Merger. In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of the immediately
preceding paragraph, amounts expended pursuant to clauses (2)(ii) and (5) shall
be included in such calculation.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment complies with this Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal quarterly
financial statements.
SECTION 4.11. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an "Affiliate
Transaction"), other than (x) Affiliate Transactions permitted under paragraph
(b) of this Section 4.11 and (y) Affiliate Transactions on terms that are no
less favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a Person that
is not an Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other property
with a fair market value in excess of $1.5 million shall be approved by the
Board of Directors of the Company or such Restricted Subsidiary, as the case may
be, such approval to be evidenced by a Board Resolution stating that such Board
of Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary of the Company enters
into an Affiliate Transaction (or a series of related Affiliate Transactions
related to a common plan) that involves an aggregate fair market value of more
than $10.0 million, the Company or such Restricted Subsidiary, as the case may
be, shall, prior to the consummation thereof, obtain a favorable opinion as to
the fairness of such transaction or series of related transactions to the
Company or the relevant Restricted Subsidiary, as the case may be, from a
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financial point of view, from an Independent Financial Advisor and file the same
with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
fees and compensation paid to and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company or any Restricted Subsidiary
of the Company in the ordinary course of business of the Company or such
Restricted Subsidiary; (ii) transactions exclusively between or among the
Company and any of its Restricted Subsidiaries or exclusively between or among
such Restricted Subsidiaries, provided such transactions are not otherwise
prohibited hereunder; (iii) any agreement as in effect as of the Issue Date or
any amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement thereto so long
as any such amendment or replacement agreement is not more disadvantageous to
the Holders in any material respect than the original agreement as in effect on
the Issue Date; (iv) so long as no Default or Event of Default has occurred and
is continuing, the payment of amounts owing pursuant to the Management
Agreement; (v) so long as no Default or Event of Default has occurred and is
continuing, the payment of amounts owing pursuant to the Transaction Agreement;
(vi) loans or advances to employees not to exceed $5.0 million at any time
outstanding; (vii) issuance of employee stock options approved by the Board of
Directors of the Company and the shareholders of the Company; (viii)
transactions effected as part of a Qualified Securitization Transaction; and
(ix) Restricted Payments permitted hereunder.
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or otherwise
become responsible for payment of (collectively, "incur") any Indebtedness
(other than Permitted Indebtedness); provided, however, that if no Default or
Event of Default shall have occurred and be continuing at the time of or as a
consequence of the incurrence of any such Indebtedness, the Company or any of
its Restricted Subsidiaries may incur Indebtedness (including, without
limitation, Acquired Indebtedness) if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the Consolidated
Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0. No
Indebtedness incurred pursuant to the next preceding sentence shall be included
in calculating any limita-
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tion set forth in the definition of Permitted Indebtedness. Upon the incurrence
or repayment of Indebtedness which may have been incurred pursuant to more than
one provision of this Indenture, the Company may, in its sole discretion,
designate which provision such Indebtedness shall have been incurred under.
For purposes of determining any particular amount of Indebtedness
under this Section 4.12, guarantees of Indebtedness otherwise included in the
determination of such amount shall not also be included.
Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary (whether by merger, consolidation, acquisition of Capital
Stock or otherwise) or is merged with or into the Company or any Restricted
Subsidiary or which is secured by a Lien on an asset acquired by the Company or
a Restricted Subsidiary (whether or not such Indebtedness is assumed by the
acquiring Person) shall be deemed incurred at the time the Person becomes a
Restricted Subsidiary or at the time of the asset acquisition, as the case may
be.
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or make
any other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company or
any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture; (3) customary non-assignment
provisions of any contract or any lease governing a leasehold interest of any
Restricted Subsidiary of the Company; (4) any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable to any
Restricted Subsidiaries, or the properties or assets of any Restricted
Subsidiaries, other than the Person or such Person's Subsidiaries or the
properties or assets of the Person so acquired or such Person's Subsidiaries;
(5) agreements existing on the Issue Date to the extent and in the manner such
agreements are in effect on the Issue Date; (6) any agreement to
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sell assets or Capital Stock permitted under this Indenture to any Person
pending the closing of such sale; (7) any instrument governing a Permitted Lien,
to the extent and only to the extent such instrument restricts the transfer or
other disposition of assets subject to such Permitted Lien; (8) restrictions on
cash or other deposits imposed by customers under contracts entered into in the
ordinary course of business; (9) customary provisions in joint venture
agreements and other similar agreements; (10) the documentation relating to
Indebtedness of Foreign Subsidiaries incurred pursuant to the terms of this
Indenture provided that such encumbrances or restrictions are not more
restrictive than those contained in the Credit Agreement; (11) the Credit
Agreement; (12) the documentation relating to other Indebtedness permitted to be
incurred subsequent to the Issue Date pursuant to the provisions of the covenant
described under Section 4.12; provided that such encumbrances or restrictions
are not more restrictive than those contained in the Credit Agreement; (13) the
documentation relating to Indebtedness of a Securitization Entity in connection
with a Qualified Securitization Transaction; provided that such restrictions
apply only to such Securitization Entity; (14) an agreement governing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred
pursuant to an agreement referred to in clause (2), (4), (5) or (11) above;
provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of the
Company in their reasonable and good faith judgment than the provisions relating
to such encumbrance or restriction contained in agreements referred to in such
clause (2), (4), (5) or (11). Nothing contained in this Section 4.13 shall
prevent the Company or any Subsidiary of the Company from creating, incurring,
assuming or suffering to exist any Permitted Liens.
SECTION 4.14. Limitation on Restricted and Unrestricted
Subsidiaries.
(a) The Board of Directors may designate any Subsidiary (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any Restricted Subsidiary of the Company that is
not a Subsidiary of the Subsidiary to be so designated; provided that (i) the
Company certifies to the Trustee that such designation complies with Section
4.10 and (ii) each Subsidiary to be so designated and each of its Subsidiaries
has not at the time of designation, and does not
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thereafter, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable with respect to any Indebtedness pursuant to which the
lender has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries (other than the assets of such Restricted Subsidiary to be
designated an Unrestricted Subsidiary and its Subsidiaries).
(b) The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if (i) immediately after giving effect to
such designation, the Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12
unless such designated Subsidiary shall, at the time of designation, have no
Indebtedness outstanding other than Permitted Indebtedness, and (ii) immediately
before and immediately after giving effect to such designation, no Default or
Event of Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
(c) For purposes of Section 4.10, (i) "Investment" shall include and
be valued at the fair market value of the net assets of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary (proportionate to the Company's equity interest in such
Subsidiary) and shall exclude, and the aggregate amount of all Restricted
Payments made as Investments since the Issue Date shall exclude and be reduced
by, the fair market value of the net assets of any Unrestricted Subsidiary
(proportionate to the Company's equity interest in such Subsidiary) at the time
that such Unrestricted Subsidiary is designated a Restricted Subsidiary, such
exclusion and reduction not to exceed the amount of Investments previously made
by the referant Person and its Restricted Subsidiaries and treated as Restricted
Payments, and (ii) the amount of any Investment shall be the original cost of
such Investment, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment, reduced by
the payment of dividends or distributions in connection with such Investment or
any other amounts received in respect of such Investment; provided that no such
payment of dividends or distributions or receipt of any such other amounts shall
reduce the amount of any Investment if such payment of dividend or distributions
or receipt of any such amounts would be included in Consolidated Net Income. If
the Company or any Restricted Subsidiary of the
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Company sells or otherwise disposes of any Common Stock of any direct or
indirect Restricted Subsidiary of the Company such that, after giving effect to
any such sale or disposition, it ceases to be a Subsidiary of the Company, the
Company shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Capital Stock of such
Restricted Subsidiary not sold or disposed of.
(d) Subsidiaries of the Company that are not designated by the Board
of Directors of the Company as Restricted or Unrestricted Subsidiaries will be
deemed to be Restricted Subsidiaries of the Company. Notwithstanding any
provisions of this Section 4.14, all Subsidiaries of an Unrestricted Subsidiary
will be Unrestricted Subsidiaries.
SECTION 4.15. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder will
have the right to require that the Company purchase all or a portion of such
Holder's Notes pursuant to the offer described below (the "Change of Control
Offer"), at a purchase price equal to 101% of the principal amount thereof plus
accrued interest to the date of purchase.
(b) Prior to the mailing of the notice referred to below, but in any
event within 30 days following any Change of Control, the Company covenants to
(i) obtain the requisite consents under the Credit Agreement (so long as the
terms of which provide that a Change of Control would result in a default or
event of default or would otherwise require repayment) and all other Senior Debt
(the terms of which provide that a Change of Control would result in a default
or event of default or would otherwise require repayment) to permit the
repurchase of the Notes as provided below or (ii) in the event a consent is not
obtained with respect to such Credit Agreement or any such other Senior Debt,
repay in full and terminate all commitments under Indebtedness under such Credit
Agreement or such other Senior Debt, as the case may be, or offer to repay in
full and terminate all commitments under all Indebtedness under such Credit
Agreement or such other Senior Debt, as the case may be, and to repay the
Indebtedness owed to each lender which has accepted such offer. The Company
shall first comply with the covenant in the immediately preceding sentence
before it shall be required to repurchase Notes pursuant to the provisions
described below. The Company's failure to comply with the first sentence of this
paragraph shall be governed by Section 6.01(iii) and not Section 6.01(ii).
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(c) Within 30 days following the date upon which a Change of Control
occurs, the Company must send, by first class mail, a notice to each Holder at
such Holder's last registered address, with a copy to the Trustee, which notice
shall govern the terms of the Change of Control Offer. The notice to the Holders
shall contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Change of Control Offer. Such notice shall state:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.15, that all Notes tendered and not withdrawn will be accepted
for payment and that the Change of Control Offer shall remain open for a
period of 20 Business Days or such longer period as may be required by
law;
(ii) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be no earlier than 30 days nor later
than 45 days from the date such notice is mailed, other than as may be
required by law) (the "Change of Control Payment Date");
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date;
(v) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing its election to have such Notes purchased;
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(vii) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided, however, that each Note purchased and
each new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof; and
(viii) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall
(i) accept for payment Notes or portions thereof tendered pursuant to the Change
of Control Offer, (ii) deposit with the Paying Agent in accordance with Section
2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued
interest, if any, of all Notes so tendered and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. Upon receipt by the Paying
Agent of the monies specified in clause (ii) above and a copy of the Officers'
Certificate specified in clause (iii) above, the Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price plus accrued interest, if any, and the Trustee shall promptly
authenticate and mail to such Holders new Notes equal in principal amount to any
unpurchased portion of the Notes surrendered. For purposes of this Section 4.15,
the Trustee shall act as the Paying Agent.
Neither the Board of Directors of the Company nor the Trustee may
waive the provisions of this Section 4.15 relating to the Company's obligation
to make a Change of Control Offer.
The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.15, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the provisions of this Section 4.15 by virtue thereof.
SECTION 4.16. Limitation on Asset Sales.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or the
applicable Restricted Subsidiary, as the
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case may be, receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets sold or otherwise disposed of (as
determined in good faith by the Company's Board of Directors), (ii) at least 75%
of the consideration received by the Company or the Restricted Subsidiary, as
the case may be, from such Asset Sale shall be in the form of cash or Cash
Equivalents and is received at the time of such disposition (provided that for
purposes of this provision, the amount of (x) any liabilities (as shown on the
most recent balance sheet of the Company or such Restricted Subsidiary or in the
notes thereto) of the Company or such Restricted Subsidiary that are assumed by
the transferee of any such assets (other than liabilities that are by their
terms pari passu with or subordinated to the Notes or the guarantee of the
Guarantors, as applicable) and (y) any securities or other obligations received
by the Company or any such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash or
Cash Equivalents (or as to which the Company or such Restricted Subsidiary has
received at or prior to the consummation of the Asset Sale a commitment (which
may be subject to customary conditions) from a nationally recognized investment,
merchant or commercial bank to convert into cash or Cash Equivalents within 180
days of the consummation of such Asset Sale and which are thereafter actually
converted into cash or Cash Equivalents within such 180-day period) will be
deemed to be cash or Cash Equivalents (and shall be deemed to be Net Cash
Proceeds for purposes of the following provisions as and when reduced to cash or
Cash Equivalents) to the extent of the net cash or Cash Equivalents realized
thereon), and (iii) upon the consummation of an Asset Sale, the Company shall
apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 365 days of receipt thereof either (A) to
repay or prepay any Senior Debt and, in the case of any Senior Debt under any
revolving credit facility, effect a permanent reduction in the availability
under such revolving credit facility, (B) to make an investment in properties
and assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of the
Company and its Subsidiaries as existing on the Issue Date or in businesses
which are the same, similar or reasonably related or complementary to the
businesses in which the Company and its Restricted Subsidiaries are engaged on
the Issue Date ("Replacement Assets"), or (C) a combination of prepayment and
investment permitted by the foregoing clauses (iii)(A) and (iii)(B). On the
366th day after an Asset Sale or such earlier date, if any, as the Board of
Directors of the Company or of such Restricted Subsidiary determines not to
apply the Net Cash
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Proceeds relating to such Asset Sale as set forth in clauses (iii)(A), (iii)(B)
and (iii)(C) of the next preceding sentence (each, a "Net Proceeds Offer Trigger
Date"), such aggregate amount of Net Cash Proceeds which have not been applied
on or before such Net Proceeds Offer Trigger Date as permitted in clauses
(iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence (each a "Net
Proceeds Offer Amount") shall be applied by the Company or such Restricted
Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date
(the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on a
pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount at a
price equal to 100% of the principal amount of the Notes to be purchased, plus
accrued and unpaid interest thereon, if any, to the date of purchase; provided,
however, that if at any time any non-cash consideration received by the Company
or any Restricted Subsidiary of the Company, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash consideration),
then such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this Section 4.16. The Company may defer the Net Proceeds Offer until there is
an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $10.0
million resulting from one or more Asset Sales (at which time, the entire
unutilized Net Proceeds Offer Amount, and not just the amount in excess of $10.0
million, shall be applied as required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of
the property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.01, the
successor corporation shall be deemed to have sold the properties and assets of
the Company and its Restricted Subsidiaries not so transferred for purposes of
this Section 4.16, and shall comply with the provisions of this Section 4.16
with respect to such deemed sale as if it were an Asset Sale. In addition, the
fair market value of such properties and assets of the Company or its Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this Section 4.16.
(b) Notwithstanding the two immediately preceding paragraphs, the
Company and its Restricted Subsidiaries will be permitted to consummate an Asset
Sale without complying with such paragraphs to the extent (a) the consideration
for such
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Asset Sale constitutes Replacement Assets and (b) such Asset Sale is for fair
market value.
(c) Each notice of a Net Proceeds Offer pursuant to this Section
4.16 shall be mailed or caused to be mailed, by first class mail, by the Company
not more than 25 days after the Net Proceeds Offer Trigger Date to all Holders
at their last registered addresses, with a copy to the Trustee. The notice shall
contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Net Proceeds Offer and shall state the following
terms:
(i) that the Net Proceeds Offer is being made pursuant to this
Section 4.16, that all Notes tendered will be accepted for payment;
provided, however, that if the aggregate principal amount of Notes
tendered in a Net Proceeds Offer plus accrued interest at the expiration
of such offer exceeds the aggregate amount of the Net Proceeds Offer, the
Company shall select the Notes to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000 or multiples thereof shall be purchased)
and that the Net Proceeds Offer shall remain open for a period of 20
Business Days or such longer period as may be required by law;
(ii) the purchase price (including the amount of accrued interest)
and the Net Proceeds Offer Payment Date (which shall be not less than 30
nor more than 45 days following the applicable Net Proceeds Offer Trigger
Date and which shall be at least three Business Days after the Trustee
receives notice thereof from the Company unless a shorter period shall be
agreed to by the Trustee);
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Net Proceeds Offer Payment Date;
(v) that Holders electing to have a Note purchased pursuant to a Net
Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice
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prior to the close of business on the third Business Day prior to the Net
Proceeds Offer Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Net Proceeds Offer Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing its election to have such Note purchased; and
(vii) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided, however, that each Note purchased and
each new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof.
On or before the Net Proceeds Offer Payment Date, the Company shall
(i) accept for payment Notes or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in accordance with item (b)(i) above,
(ii) deposit with the Paying Agent in accordance with Section 2.14 U.S. Legal
Tender sufficient to pay the purchase price plus accrued interest, if any, of
all Notes to be purchased and (iii) deliver to the Trustee Notes so accepted
together with an Officers' Certificate stating the Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to the
Holders of Notes so accepted payment in an amount equal to the purchase price
plus accrued interest, if any. For purposes of this Section 4.16, the Trustee
shall act as the Paying Agent. The Trustee shall promptly authenticate and mail
to such Holders new Notes equal in principal amount to any unpurchased portion
of the Notes surrendered. Upon the payment of the purchase price for the Notes
accepted for purchase, the Trustee shall either cancel the Notes or return the
Notes purchased to the Company for cancellation. Any monies remaining after the
purchase of Notes pursuant to a Net Proceeds Offer shall be returned within
three Business Days by the Trustee to the Company except with respect to monies
owed as obligations to the Trustee pursuant to Article Seven. For purposes of
this Section 4.16, the Trustee shall act as the Paying Agent.
To the extent the amount of Notes tendered pursuant to any Net
Proceeds Offer is less than the amount of Net Cash Proceeds subject to such Net
Proceeds Offer, the Company may use any remaining portion of such Net Cash
Proceeds not re-
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quired to fund the repurchase of tendered Notes for general corporate purposes
and such Net Proceeds Offer Amount shall be reset to zero.
(d) The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Section 4.16, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
the provisions of this Section 4.16 by virtue thereof.
SECTION 4.17. Limitation on Preferred Stock of Restricted
Subsidiaries.
The Company will not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a Wholly Owned
Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly Owned Restricted Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary of the Company.
SECTION 4.18. Limitation on Liens.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of the Company or any of its Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes or any Guarantee, the
Notes and such Guarantee, as the case may be, are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Liens and (ii)
in all other cases, the Notes and the Guarantees are equally and ratably
secured, except for (A) Liens existing as of the Issue Date to the extent and in
the manner such Liens are in effect on the Issue Date; (B) Liens securing the
Credit Agreement; (C) Liens securing Senior Debt and Liens securing Guarantor
Senior Debt; (D) Liens securing the Notes and the Guarantees; (E) Liens of the
Company or a Restricted Subsidiary of the Company on assets of any Subsidiary of
the Company; (F) Liens securing Refinancing Indebtedness which is
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incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under this Indenture and which has been incurred in accordance with
the provisions of this Indenture; provided, however, that such Liens (y) are no
less favorable to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (z) do not extend to or cover any property or assets of the
Company or any of its Restricted Subsidiaries not securing the Indebtedness so
Refinanced; and (G) Permitted Liens.
SECTION 4.19. Conduct of Business.
The Company and its Restricted Subsidiaries will not engage in any
businesses which are not the same, similar or reasonably related or
complementary to the businesses in which the Company and its Restricted
Subsidiaries are engaged on the Issue Date.
SECTION 4.20. Additional Subsidiary Guarantees.
If the Company or any of its Restricted Subsidiaries transfers or
causes to be transferred, in one transaction or a series of related
transactions, any property to any Restricted Subsidiary (other than a Foreign
Subsidiary or Securitization Entity) that is not a Guarantor, or if the Company
or any of its Restricted Subsidiaries shall organize, acquire or otherwise
invest in another Restricted Subsidiary (other than a Foreign Subsidiary or
Securitization Entity) having total assets with a book value in excess of
$500,000, then such transferee or acquired or other Restricted Subsidiary shall
within 15 days of the end of the next succeeding fiscal quarter (unless the book
value of such Restricted Subsidiary is in excess of $5.0 million in which case,
contemporaneously with the organization, acquisition or other investment in such
Restricted Subsidiary, as the case may be) (i) execute and deliver to the
Trustee a supplemental indenture in form reasonably satisfactory to the Trustee
pursuant to which such Restricted Subsidiary shall unconditionally guarantee all
of the Company's obligations under the Notes and this Indenture on the terms set
forth in this Indenture and (ii) deliver to the Trustee an Opinion of Counsel
that such supplemental indenture has been duly authorized, executed and
delivered by such Restricted Subsidiary and constitutes a legal, valid, binding
and enforceable obligation of such Restricted Subsidiary. Thereafter, such
Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture.
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In the event that (i) a Restricted Subsidiary shall be required
pursuant to the preceding paragraph to deliver the documents described above in
clauses (i) and (ii) of the preceding paragraph (the "Additional Guarantee
Documents"), (ii) the Company would be required to publicly disclose separate
financial statements of such Restricted Subsidiary for the periods required by
Rules 3-01 and 3-02 of Regulation S-X under the Securities Act, (iii) such
Restricted Subsidiary is not a Significant Subsidiary of the Company, and (iv)
the Company shall be able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 4.12, then such
Restricted Subsidiary shall not be required to deliver the Additional Guarantee
Documents to the Trustee until the earlier of (x) one year and three months from
the date such Restricted Subsidiary would otherwise have had to deliver the
Additional Guarantee Documents and (y) the date such financial statements would
not be required to be publicly disclosed; provided that in no event shall more
than one such Restricted Subsidiary not be required to deliver the Additional
Guarantee Documents at any one time pursuant to this paragraph.
SECTION 4.21. Prohibition on Incurrence of Senior Subordinated Debt.
The Company will not, and will not permit any Guarantor to, incur or
suffer to exist Indebtedness that is senior in right of payment to the Notes or
any Guarantee, as the case may be, and expressly contractually subordinate in
right of payment to any other Indebtedness of the Company or such Guarantor, as
the case may be.
SECTION 4.22. Deposit of Proceeds with Escrow Agent.
(a) On the Closing Date, the Company shall deposit with the Escrow
Agent as hereinafter provided the net proceeds from the issuance of the Notes,
to wit: $191,684,793.92 (the "Proceeds").
(b) In order to secure the full and punctual payment and performance
of the Company's obligation to redeem the Notes upon a Special Redemption, if
any, the Company hereby grants to the Trustee, for the ratable benefit of the
Holders, a continuing perfected security interest in and to the Collateral,
whether now owned or existing or hereafter acquired or arising. The Company
shall be required to effect the Special Redemption upon the occurrence of an
event specified in subsection (f) below at a redemption price equal to 100% of
the principal amount
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of the Notes to be redeemed plus accrued and unpaid interest thereon to the date
of redemption.
(c) At all times until the release of the proceeds in accordance
with this Section 4.22 and the Escrow Agreement, there shall be maintained with
the Escrow Agent an account (the "Escrow Account") designated "Kinetic Concepts,
Inc., Account Pledged to Marine Midland Bank as Trustee," which account shall be
under the sole dominion and control of the Escrow Agent. On the Closing Date,
the Company shall cause the Proceeds to be deposited in the Escrow Account.
Amounts on deposit in the Escrow Account shall be invested and reinvested from
time to time in (i) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof and
backed by the full faith and credit of the United States, in each case maturing
within 30 days from the date of acquisition thereof; (ii) marketable direct
obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within 30 days from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either
Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc.
("Moody's"); (iii) commercial paper maturing no more than 30 days from the date
of creation thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or
bankers' acceptances maturing within 30 days from the date of acquisition
thereof issued by any bank (including the Escrow Agent) organized under the laws
of the United States of America or any state thereof or the District of Columbia
or any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; (vi) investments in money market
funds (including those of the Escrow Agent) which invest substantially all their
assets in securities of the types described in clauses (i) through (v) above
(with (i) through (vi) above being collectively referred to as "Eligible
Investments"), which Eligible Investments shall be held in the Escrow Account.
Any income, including any interest or capital gains received with respect to the
balance from time to time standing to the credit of the Escrow Account, shall
remain, or be deposited, in the Escrow Account. The Escrow Agent shall in no
event have any liability for any tax, fee, loss or other charge incurred in
connection with the Company's written instructions
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to the Escrow Agent regarding any investment, reinvestment or liquidation of any
such investment.
(d) Upon the earlier to occur of (i) any Proceeds being released by
the Escrow Agent to be used in the Tender Offer and (ii) the Special Redemption
Date, the security interests in the Collateral shall automatically terminate.
(e) Upon receipt by the Escrow Agent on or prior to November 6, 1997
of a certificate signed by the President or any Vice President and any other
officer of the Company (the "Tender Offer Officers' Certificate") stating that
the Tender Offer is to be effected on the terms and conditions described in all
material respects in the Offer to Purchase on a date specified therein and
requesting the Escrow Agent to release the aggregate amount of Proceeds required
to effect the Tender Offer to the order of the Company to be used to purchase
Common Stock of the Company in the Tender Offer in accordance with the Offer to
Purchase (and such Officers' Certificate the Company may withdraw if the Tender
Offer is postponed), the Escrow Agent shall disburse all such Proceeds to, or at
the direction of, the Company on the closing date of the Tender Offer, which
shall be specified in such certificate.
(f) At 5:00 P.M., New York City time, on November 6, 1997, if the
Escrow Agent has not received the Tender Offer Officers' Certificate:
(i) The Escrow Agent shall notify the Trustee in writing that the
appropriate conditions have occurred. The Trustee is then authorized to
redeem the Notes in accordance with clause (ii) below and the terms of
this Indenture;
(ii) Within five days after the date of the notice referred to in
clause (i) above, the Trustee shall mail a notice (the "Special Redemption
Notice") to the Holders of the Notes stating that the Notes shall be
redeemed (the "Special Redemption") on the tenth day following the date of
such notice (or, if such day is not a Business Day, the first Business Day
thereafter) (the "Special Redemption Date"), at the redemption price set
forth in Section 5 of the Notes, and shall state that Notes must be
surrendered to the Trustee as paying agent in order to collect the
redemption price, it being acknowledged and agreed that the failure of the
Company to deliver the Tender Offer Officers' Certificate by 5:00 P.M.,
New York time, on November
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6, 1997 shall be a request for the Trustee to give the Special Redemption
Notice to the Holders of the Notes;
(iii) By 10:30 A.M., New York City time, on the Special Redemption
Date, the Escrow Agent shall disburse all Proceeds to the Trustee as
paying agent in connection with the redemption of the Notes as specified
in this Indenture; and
(iv) The Company shall, at or prior to 10:30 A.M., New York City
time, on the Special Redemption Date, deposit with the Trustee as paying
agent an amount of funds such that on the Special Redemption Date the
Trustee shall have immediately available funds (including the Proceeds
disbursed pursuant to clause (iii) above) to pay the redemption price set
forth in Section 5 of the Notes for all outstanding Notes to be redeemed.
SECTION 4.23. Prepayment of Credit Agreement.
In the event the Merger is not consummated prior to the earlier of
the date set forth in Section 11(1)(i) of the Credit Agreement or May 31, 1998,
the Company shall permanently prepay Term Loans under the Credit Agreement and
reduce commitments by an amount equal to the net proceeds of the Notes less the
amount of such proceeds used to purchase shares of Common Stock of the Company
pursuant to the Transaction Agreement and related fees and expenses.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.
(a) The Company will not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person (other than
the Merger), or sell, assign, transfer, lease, convey or otherwise dispose of
(or cause or permit any Restricted Subsidiary of the Company to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of the
Company's assets (determined on a consolidated basis for the Company and the
Company's Restricted Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless: (i) either (1) with respect to such a
consolidation or merger, the Company shall be the
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surviving or continuing corporation or (2) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or the
Person which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and of the Company's
Restricted Subsidiaries substantially as an entirety (the "Surviving Entity")
(x) shall be a corporation organized and validly existing under the laws of the
United States or any State thereof or the District of Columbia and (y) shall
expressly assume, by supplemental indenture (in form and substance satisfactory
to the Trustee), executed and delivered to the Trustee, the due and punctual
payment of the principal of, and premium, if any, and interest on all of the
Notes and the performance of every covenant of the Notes, this Indenture and the
Registration Rights Agreement on the part of the Company to be performed or
observed; (ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect to
any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, shall be able to incur at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 4.12; (iii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred
or anticipated to be incurred and any Lien granted in connection with or in
respect of the transaction), no Default or Event of Default shall have occurred
or be continuing; and (iv) the Company or the Surviving Entity, as the case may
be, shall have delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture comply with the applicable provisions of this Indenture and that all
conditions precedent in this Indenture relating to such transaction have been
satisfied.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
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(c) Each Guarantor (other than any Guarantor whose Guarantee is to
be released in accordance with the terms of the Guarantee and this Indenture in
connection with any transaction complying with the provisions of Section 4.16)
will not, and the Company will not cause or permit any Guarantor to, consolidate
with or merge with or into any Person other than the Company or any other
Guarantor unless: (i) the entity formed by or surviving any such consolidation
or merger (if other than the Guarantor) or to which such sale, lease, conveyance
or other disposition shall have been made is a corporation organized and
existing under the laws of the United States or any State thereof or the
District of Columbia; (ii) such entity assumes by supplemental indenture all of
the obligations of the Guarantor on the Guarantee; and (iii) immediately after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing. Any merger or consolidation of a Guarantor with and
into the Company (with the Company being the surviving entity) or another
Guarantor that is a Wholly Owned Restricted Subsidiary of the Company need only
comply with clause (iv) of the first paragraph of this Section 5.01.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with Section
5.01, in which the Company is not the continuing corporation, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Notes with the same effect as if such successor had been
named as the Company herein and thereafter (except in the case of a sale,
assignment, transfer, lease, conveyance or other disposition) the predecessor
corporation will be relieved of all further obligations and covenants under this
Indenture and the Notes; provided that solely for purposes of computing the
amounts described in subclauses (u), (v) and (w) of Section 4.10, any successor
Person shall only be deemed to have succeeded to and be substituted for the
Company with respect to periods subsequent to the effective time of such merger,
consolidation or transfer of assets.
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ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" means any of the following events:
(i) the failure to pay interest on any Notes when the same becomes
due and payable and the default continues for a period of 30 days (whether
or not such payment shall be prohibited by Article Ten of this Indenture);
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by Article Ten of this
Indenture);
(iii) a default in the observance or performance of any other
covenant or agreement contained in this Indenture which default continues
for a period of 30 days after the Company receives written notice
specifying the default (and demanding that such default be remedied) from
the Trustee or the Holders of at least 25% of the outstanding principal
amount of the Notes (except in the case of a default with respect to
Section 5.01, which will constitute an Event of Default with such notice
requirement but without such passage of time requirement);
(iv) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary of the
Company (other than a Securitization Entity) and such failure continues
for a period of 30 days or more, or the acceleration of the final stated
maturity of any such Indebtedness (which acceleration is not rescinded,
annulled or otherwise cured within 30 days of receipt by the Company or
such Restricted Subsidiary of notice of any such acceleration) if the
aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to
pay principal at final maturity or which has been accelerated, in each
case with
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respect to which the 30-day period described above has passed, aggregates
$20.0 million or more at any time;
(v) one or more judgments which exceeds in the aggregate $20.0
million (excluding judgments to the extent covered by insurance by a
reputable insurer as to which the insurer has acknowledged coverage) shall
have been rendered against the Company or any of its Significant
Subsidiaries that is a Restricted Subsidiary of the Company and such
judgments remain undischarged, unvacated, unpaid or unstayed for a period
of 60 days after such judgment or judgments become final and
non-appealable;
(vi) the Company or any of its Significant Subsidiaries (A)
commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (B) consents to the entry of a judgment, decree or
order for relief against it in an involuntary case or proceeding under any
Bankruptcy Law, (C) consents to the appointment of a Custodian of it or
for substantially all of its property, (D) consents to or acquiesces in
the institution of a bankruptcy or an insolvency proceeding against it,
(E) makes a general assignment for the benefit of its creditors, or (F)
takes any corporate action to authorize or effect any of the foregoing;
(vii) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case or proceeding under any Bankruptcy
Law, which shall (A) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of the
Company or any of its Significant Subsidiaries, (B) appoint a Custodian of
the Company or any of its Significant Subsidiaries or for substantially
all of its property or (C) order the winding-up or liquidation of its
affairs; and such judgment, decree or order shall remain unstayed and in
effect for a period of 60 consecutive days;
(viii) any of the Guarantees ceases to be in full force and effect
or any of the Guarantees is declared to be null and void and unenforceable
or any of the Guarantees is found to be invalid or any of the Guarantors
denies its liability under its Guarantee (other than by reason of release
of a Guarantor in accordance with the terms of this Indenture).
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SECTION 6.02. Acceleration.
(a) If an Event of Default (other than an Event of Default specified
in clause (vi) or (vii) of Section 6.01 with respect to the Company) shall occur
and be continuing, the Trustee or the Holders of at least 25% in principal
amount of outstanding Notes may declare the principal of and accrued interest on
all the Notes to be due and payable by notice in writing to the Company and the
Trustee specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice"), and the same (i) shall become
immediately due and payable or (ii) if there are any amounts outstanding under
the Credit Agreement, shall become immediately due and payable upon the first to
occur of an acceleration under the Credit Agreement or 5 Business Days after
receipt by the Company and the representative under the Credit Agreement of such
Acceleration Notice. If an Event of Default specified in clause (vi) or (vii) of
Section 6.01 with respect to the Company occurs and is continuing, then all
unpaid principal of, and premium, if any, and accrued and unpaid interest on all
of the outstanding Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
(b) At any time after a declaration of acceleration with respect to
the Notes as described in the preceding paragraph, the Holders of a majority in
principal amount of the Notes may rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances and (v) in
the event of the cure or waiver of an Event of Default of the type described in
clause (vi) or (vii) of Section 6.01, the Trustee shall have received an
Officers' Certificate and an Opinion of Counsel that such Event of Default has
been cured or waived. No such rescission shall affect any subsequent Default or
impair any right consequent thereto.
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SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of the principal of, premium, if any, or interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
All rights of action and claims under this Indenture or the Notes
may be enforced by the Trustee even if it does not possess any of the Notes or
does not produce any of them in the proceeding. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Prior to the declaration of acceleration of the Notes, the Holders
of not less than a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may, on behalf of the Holders of all the
Notes, waive any existing Default or Event of Default and its consequences under
this Indenture, except a Default or Event of Default specified in Section
6.01(i) or (ii) or in respect of any provision hereof which cannot be modified
or amended without the consent of the Holder so affected pursuant to Section
9.02. When a Default or Event of Default is so waived, it shall be deemed cured
and shall cease to exist. This Section 6.04 shall be in lieu of Section
316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA is hereby
expressly excluded from this Indenture and the Notes, as permitted by the TIA.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of the Notes may not enforce
this Indenture or the Notes except as provided in this Article Six and under the
TIA. The Holders of not less than a majority in aggregate principal amount of
the outstanding Notes shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided, however, that
the Trustee may refuse to follow any direction (a) that conflicts with any rule
of law or this Indenture, (b) that the Trustee determines may be unduly
prejudicial to the rights of another Holder, or (c) that may
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expose the Trustee to personal liability for which reasonable indemnity provided
to the Trustee against such liability shall be inadequate; provided, further,
however, that the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction or this Indenture. This Section
6.05 shall be in lieu of Section 316(a)(1)(A) of the TIA, and such Section
316(a)(1)(A) of the TIA is hereby expressly excluded from this Indenture and the
Notes, as permitted by the TIA.
SECTION 6.06. Limitation on Suits.
No Holder of any Notes shall have any right to institute any
proceeding with respect to this Indenture or the Notes or any remedy hereunder,
unless the Holders of at least 25% in aggregate principal amount of the
outstanding Notes have made written request, and offered reasonable indemnity,
to the Trustee to institute such proceeding as Trustee under the Notes and this
Indenture, the Trustee has failed to institute such proceeding within 45 days
after receipt of such notice, request and offer of indemnity and the Trustee,
within such 45-day period, has not received directions inconsistent with such
written request by Holders of not less than a majority in aggregate principal
amount of the outstanding Notes.
The foregoing limitations shall not apply to a suit instituted by a
Holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on, such Note on or after the respective due dates
expressed or provided for in such Note.
A Holder may not use this Indenture to prejudice the rights of any
other Holders or to obtain priority or preference over such other Holders.
SECTION 6.07. Right of Holders To Receive Payment.
Notwithstanding any other provision in this Indenture, the right of
any Holder of a Note to receive payment of the principal of, premium, if any,
and interest on such Note, on or after the respective due dates expressed or
provided for in such Note, or to bring suit for the enforcement of any such
payment on or after the respective due dates, is absolute and unconditional and
shall not be impaired or affected without the consent of the Holder.
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SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in clause (i) or (ii) of Section
6.01 occurs and is continuing, the Trustee may recover judgment in its own name
and as trustee of an express trust against the Company, or any other obligor on
the Notes for the whole amount of the principal of, premium, if any, and accrued
interest remaining unpaid, together with interest on overdue principal and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum provided for by the
Notes and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents, counsel, accountants and
experts) and the Holders allowed in any judicial proceedings relative to the
Company or Restricted Subsidiaries (or any other obligor upon the Notes), their
creditors or their property and shall be entitled and empowered to participate
as a member, voting or otherwise, of any official committee of creditors
appointed in such matter and to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each Holder
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. The Company's payment obligations
under this Section 6.09 shall be secured in accordance with the provisions of
Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
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SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article Six it
shall pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for interest accrued on the Notes, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for interest;
Third: to Holders for the principal amounts (including any premium) owing
under the Notes, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for the principal
(including any premium); and
Fourth: the balance, if any, to the Company or any other obligor on the
Notes, as their interests may appear, or as a court of competent
jurisdiction may direct.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this Section
6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may in its discretion require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to any suit by the Trustee, any suit by a
Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in aggregate principal amount of the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture or any Note and such proceeding
has been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee
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or to such Holder, then and in every such case the Company, the Trustee and the
Holders shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee may exercise such of the rights and powers vested in it by this
Indenture and shall use the same degree of care and skill in its exercise
thereof as a prudent person would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no duties, covenants or obligations of the
Trustee shall be implied in this Indenture.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to the Trustee,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture (but
need not conform or investigate the accuracy or mathematical calculations
or other facts stated therein or otherwise verify the contents thereof).
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
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(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01 and
Section 7.02.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
assets except to the extent required by law.
(g) The Trustee may refuse to perform any duty or exercise any right
or power hereunder unless (i) it is provided adequate funds to enable it to do
so and (ii) it receives indemnity reasonably satisfactory to it against any
loss, liability, fee or expense.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may conclusively rely and shall be fully protected
in acting or refraining from acting upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not and shall not be required to investigate any fact or
matter stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may consult
with counsel of its selection and may require an Officers' Certificate or
an Opinion of Counsel, or both, which shall conform to Sections 11.04 and
11.05. The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such Officers' Certificate or Opinion of
Counsel.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled, upon reasonable
notice to the Company, to examine the books, records, and premises of the
Company, personally or by agent or attorney and to consult with the
officers and representatives of the Company, including the Company's
accountants and attorneys.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee security
or indemnity reasonably satisfactory to the Trustee against the costs,
expenses and liabilities which may be incurred by it in compliance with
such request, order or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(h) Delivery of reports, information and documents to the Trustee
under Section 4.08 is for informational
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purposes only and the Trustee's receipt of the foregoing shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of their covenants hereunder (as to which the Trustee
is entitled to rely exclusively on Officers' Certificates).
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, any of their
Subsidiaries, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, and it shall not
be accountable for the Company's use of the proceeds from the Notes, and it
shall not be responsible for any statement of the Company in this Indenture or
any document entered into or issued in connection with the issuance and sale of
the Notes or any statement in the Notes other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if
it is known to a Trust Officer, the Trustee shall mail to each Holder notice of
the uncured Default or Event of Default within 90 days after obtaining knowledge
thereof. Except in the case of a Default or an Event of Default in payment of
principal of, or interest on, any Note, including an accelerated payment, a
Default in payment on the Change of Control Payment Date pursuant to a Change of
Control Offer or on the Net Proceeds Offer Payment Date pursuant to a Net
Proceeds Offer and a Default in compliance with Article Five hereof, the Trustee
may withhold the notice if and so long as its Board of Directors, the executive
committee of its Board of Directors or a committee of its directors and/or Trust
Officers in good faith determines that withholding the notice is in the interest
of the Holders. The foregoing sentence of this Section 7.05 shall be in lieu of
the proviso to Section 315(b) of the TIA and such proviso to Section 315(b) of
the TIA is hereby
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expressly excluded from this Indenture and the Notes, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after September 15 of each year beginning with 1998,
the Trustee shall, to the extent that any of the events described in TIA Section
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Holder a brief report dated as of such date that complies with TIA Section
313(a). The Trustee also shall comply with TIA Sections 313(b), (c) and
(d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the Commission and each stock exchange, if
any, on which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes become
listed on any stock exchange and the Trustee shall comply with TIA Section
313(d).
SECTION 7.07. Compensation and Indemnity.
The Company and the Guarantors, jointly, shall pay to the Trustee
from time to time such compensation for its services as has been agreed to in
writing signed by the Company and the Trustee. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an express trust. The
Company and the Guarantors, jointly, shall reimburse the Trustee upon request
for all reasonable out-of-pocket disbursements, advances or expenses incurred or
made by it in connection with the performance of its duties under this
Indenture. Such expenses shall include the reasonable fees and expenses of the
Trustee's agents, counsel, accountants and experts.
The Company and the Guarantors, jointly, shall indemnify each of the
Trustee (or any predecessor Trustee) and its agents, employees, stockholders,
Affiliates and directors and officers for, and hold them each harmless against,
any and all loss, liability, damage, claim or expense (including reasonable fees
and expenses of counsel), including taxes (other than taxes based on the income
of the Trustee) incurred by any of them except for such actions to the extent
caused by any negligence, bad faith or willful misconduct on their part, arising
out of or in connection with the acceptance or administration of this trust
including the reasonable costs and expenses of defending themselves against any
claim or liability in connec-
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tion with the exercise or performance of any of their rights, powers or duties
hereunder. The Trustee shall notify the Company and the Guarantors promptly of
any claim asserted against the Trustee for which it may seek indemnity,
provided, however, that failure to so notify the Company and the Guarantors
shall not release the Company and the Guarantors of its obligations hereunder
unless and to the extent such failure results in the forfeiture by the Company
and the Guarantors of substantial rights and defenses. At the Trustee's sole
discretion, the Company and the Guarantors shall defend the claim and the
Trustee shall cooperate and may participate in the defense; provided, however,
that any settlement of a claim shall be approved in writing by the Trustee if
such settlement would result in an admission of liability by the Trustee or if
such settlement would not be accompanied by a full release of the Trustee for
all liability arising out of the events giving rise to such claim.
Alternatively, the Trustee may at its option have separate counsel of its own
choosing and the Company shall pay the reasonable fees and expenses of such
counsel; provided that the Company will not be required to pay such fees and
expenses if it assumes the Trustee's defense and there is no conflict of
interest between the Company and the Trustee in connection with such defense as
reasonably determined by the Trustee. The Company need not pay for any
settlement made without its written consent, which consent will not be
unreasonably withheld. The Company need not reimburse any expense or indemnify
against any loss or liability to the extent incurred by the Trustee through its
negligence, bad faith or willful misconduct.
To secure the Company and the Guarantors' payment obligations in
this Section 7.07, the Trustee shall have a lien prior to the Notes on all
assets or money held or collected by the Trustee, in its capacity as Trustee,
except assets or money held in trust to pay principal of or premium, if any, or
interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(vi) or (vii) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section 7.07 shall survive the termination of
this Indenture.
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SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in
writing at least 30 days in advance of such resignation; provided, however, that
no such resignation shall be effective until a successor Trustee has accepted
its appointment pursuant to this Section 7.08. The Holders of a majority in
principal amount of the outstanding Notes may remove the Trustee and appoint a
successor Trustee with the Company's consent, by so notifying the Company and
the Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in aggregate principal
amount of the outstanding Notes may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail notice of such successor Trustee's
appointment to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in aggregate principal amount of the outstanding Notes
may peti-
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tion any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding any resignation or replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
shall continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided, however, that
such corporation shall be otherwise qualified and eligible under this Article
Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Sections 310(a)(1), (2) and (5). The Trustee (or, in
the case of a Trustee that is a corporation included in a bank holding company
system, the related bank holding company) shall have a combined capital and
surplus of at least $100 million as set forth in its most recent published
annual report of condition, and have a Corporate Trust Office in the City of New
York. In addition, if the Trustee is a corporation included in a bank holding
company system, the Trustee, independently of such bank holding company, shall
meet the capital requirements of TIA Section 310(a)(2). The Trustee shall comply
with TIA Section 310(b); provided, however, that there shall be excluded from
the operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met. The provisions of TIA
Section 310 shall apply to the Company, as obligor of the Notes.
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SECTION 7.11. Preferential Collection of Claims Against the Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein. The provisions of TIA Section 311 shall apply to the Company, as
obligor of the Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Company's Obligations.
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Notes, as expressly provided for in this Indenture) as to all outstanding
Notes when (i) either (a) all Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Debt on the Notes not theretofore
delivered to the Trustee for cancellation, for principal of, premium, if any,
and interest on the Notes to the date of deposit together with irrevocable
instructions from the Company directing the Trustee to apply such funds to the
payment thereof at maturity or redemption, as the case may be; (ii) the Company
has paid all other sums payable under this Indenture by the Company; and (iii)
the Company has delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel stating that all conditions precedent under this Indenture relating
to the satisfaction and discharge of this Indenture have been complied with;
provided, however, that such counsel may rely, as to matters of fact, on a
certificate or certificates of officers of the Company.
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors
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discharged with respect to the outstanding Notes ("Legal Defeasance"). Such
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire Debt represented by the outstanding Notes, and satisfied
all of their obligations with respect to the Notes, except for (i) the rights of
Holders to receive payments in respect of the principal of, premium, if any, and
interest on the Notes when such payments are due, (ii) the Company's obligations
with respect to the Notes concerning issuing temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an
office or agency for payments, (iii) the rights, powers, trust, duties and
immunities of the Trustee and the Company's obligations in connection therewith
and (iv) the Legal Defeasance provisions of this Article Eight. In addition, the
Company may, at its option and at any time, elect to have the obligations of the
Company released with respect to covenants contained in Sections 4.04, 4.05,
4.06, 4.07, 4.08, 4.10 through 4.20 and Article Five ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event of Covenant
Defeasance, those events described under Section 6.01 (except those events
described in Section 6.01(i), (ii), (vi) and (vii)) will no longer constitute an
Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(i) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders cash in US dollars, non-callable U.S.
government obligations, or a combination thereof, in such amounts as will
be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
and interest on the Notes on the stated date for payment thereof or on the
applicable Redemption Date, as the case may be;
(ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of this Indenture, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders will not recognize income, gain or loss for federal income
<PAGE> 109
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tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default
under Section 6.01(vi) or (vii) are concerned, at any time in the period
ending on the 91st day after the date of deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under this Indenture or
any other material agreement or instrument to which the Company or any of
its Restricted Subsidiaries is a party or by which the Company or any of
its Restricted Subsidiaries is bound;
(vi) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company
or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company or others;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance, as the case may be, have been complied with; and
(viii) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Senior Debt, including, without limitation, those
arising under this Indenture and (B) after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorgani-
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zation or similar laws affecting creditors' rights generally.
SECTION 8.02. Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Section 8.01, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of the principal of
and interest on the Notes. The Trustee shall be under no obligation to invest
said U.S. Legal Tender or U.S. Government Obligations except as it may agree in
writing with the Company.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.01 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Notes.
SECTION 8.03. Repayment to the Company.
Subject to Section 8.01, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Company upon request any money held by them for the payment of
principal or interest that remains unclaimed for one year; provided, however,
that the Trustee or such Paying Agent, before being required to make any
payment, may at the expense of the Company cause to be published once in a
newspaper of general circulation in the City of New York or mail to each Holder
entitled to such money notice that such money remains unclaimed and that after a
date specified therein which shall be at least 30 days from the date of such
publication or mailing any unclaimed balance of such money then remaining will
be repaid to the Company. After payment to the Company, Holders entitled to such
money must look to the Company for payment as general creditors unless an
applicable law designates another Person.
SECTION 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance
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with Section 8.01 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.01 until such time as the Trustee or Paying Agent
is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations
in accordance with Section 8.01; provided, however, that if the Company has made
any payment of interest on or principal of any Notes because of the
reinstatement of their obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the U.S. Legal
Tender or U.S. Government Obligations held by the Trustee or Paying Agent.
SECTION 8.05. Acknowledgment of Discharge by Trustee.
After the conditions of Section 8.01 have been satisfied, the
Trustee upon request shall acknowledge in writing the discharge of the Company's
obligations under this Indenture except for those surviving obligations
specified in Section 8.01; provided the legal counsel delivering such Opinion of
Counsel may rely as to matters of fact on one or more Officers' Certificates of
the Company.
ARTICLE NINE
MODIFICATION OF THIS INDENTURE
SECTION 9.01. Without Consent of Holders.
Notwithstanding Section 9.02, the Company, the Guarantors and the
Trustee may amend, waive or supplement this Indenture without notice to or
consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b)
to comply with Article Five of this Indenture; (c) to provide for uncertificated
Notes in addition to certificated Notes; (d) to comply with any requirements of
the Commission in order to effect or maintain the qualification of this
Indenture under the TIA; (e) to make any change that would provide any
additional benefit or rights to the Holders or that does not adversely affect
the rights of any Holder in any material respect; or (f) to make any other
change that does not, in the opinion of the Trustee, adversely affect in any
material respect the rights of any Holder hereunder. Notwithstanding the
foregoing, the Trustee and the Com-
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pany may not make any change that adversely affects the rights of any Holder
under this Indenture without the consent of such Holder. In formulating its
opinion on such matters, the Trustee will be entitled to rely on such evidence
as it deems appropriate, including, without limitation, solely on an Opinion of
Counsel; provided, however, that in delivering such Opinion of Counsel, such
counsel may rely as to matters of fact, on a certificate or certificates of
officers of the Company.
SECTION 9.02. With Consent of Holders.
All other modifications, waivers and amendments of this Indenture
may be made with the consent of the Holders of a majority in principal amount of
the then outstanding Notes, except that, without the consent of each Holder of
the Notes affected thereby, no amendment or waiver may: (i) reduce the amount of
Notes whose Holders must consent to an amendment; (ii) reduce the rate of or
change or have the effect of changing the time for payment of interest,
including defaulted interest, on any Notes; (iii) reduce the principal of or
change or have the effect of changing the fixed maturity of any Notes, or change
the date on which any Notes may be subject to redemption or repurchase, or
reduce the redemption or repurchase price therefor; (iv) make any Notes payable
in money other than that stated in the Notes; (v) make any change in provisions
of this Indenture protecting the right of each Holder to receive payment of
principal of and interest on such Note on or after the due date thereof or to
bring suit to enforce such payment, or permitting Holders of a majority in
principal amount of Notes to waive Defaults or Events of Default; (vi) amend,
change or modify in any material respect the obligation of the Company to make
and consummate a Change of Control Offer in the event a Change of Control has
occurred or make and consummate a Net Proceeds Offer with respect to any Asset
Sale that has been consummated, or, following the occurrence or consummation of
a Change of Control or Asset Sale, modify any of the provisions or definitions
with respect thereto; (vii) modify or change any provision of this Indenture or
the related definitions affecting the subordination or ranking of the Notes or
any Guarantee in a manner which adversely affects the Holders; or (viii) release
any Guarantor from any of its obligations under its Guarantee or this Indenture
otherwise than in accordance with the terms of this Indenture.
After an amendment, supplement or waiver under this Section 9.02
becomes effective (as provided in Section 9.04), the Company shall mail to the
Holders affected thereby a notice briefly describing the amendment, supplement
or waiver. Any
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failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amendment,
supplement or waiver.
SECTION 9.03. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect; provided, however, that this
Section 9.03 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver. An amendment, supplement
or waiver becomes effective upon receipt by the Trustee of such Officers'
Certificate and evidence of consent by the Holders of the requisite percentage
in principal amount of outstanding Notes.
The Company may, but shall not be obligated to, fix a Record Date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which Record Date shall be at least 30 days prior to the
first solicitation of such consent. If a Record Date is fixed, then
notwithstanding the second sentence of the immediately preceding paragraph,
those Persons who were Holders at such Record Date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
Record Date. No such consent shall be valid or effective for more than 90 days
after such Record Date unless consents from Holders of the requisite percentage
in principal amount of outstanding Notes re-
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quired hereunder for the effectiveness of such consents shall have also been
given and not revoked within such 90 day period.
SECTION 9.05. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note,
the Trustee may require the Holder of such Note to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Note about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determine, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms.
SECTION 9.06. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided, however, that the Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture. In executing such supplement or waiver the Trustee shall be entitled
to receive indemnity reasonably satisfactory to it, and shall be fully protected
in relying upon an Opinion of Counsel and an Officers' Certificate of the
Company, stating that no event of default shall occur as a result of such
amendment, supplement or waiver and that the execution of any amendment,
supplement or waiver authorized pursuant to this Article Nine is authorized or
permitted by this Indenture; provided the legal counsel delivering such Opinion
of Counsel may rely as to matters of fact on one or more Officers' Certificates
of the Company. Such Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Debt.
The Company covenants and agrees, and each Holder of the Notes, by
its acceptance thereof, likewise covenants and agrees, that all Notes shall be
issued subject to the provisions of this Article Ten; and each Person holding
any Note, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees that the payment of all Ob-
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ligations on the Notes by the Company shall, to the extent and in the manner
herein set forth, be subordinated and junior in right of payment to the prior
payment in full in cash or in Cash Equivalents (other than clause (vii) in the
definition of Cash Equivalents) of all Obligations on Senior Debt, including,
without limitation, the Company's obligations under the Credit Agreement; that
the subordination is for the benefit of, and shall be enforceable directly by,
the holders of Senior Debt, and that each holder of Senior Debt whether now
outstanding or hereafter created, incurred, assumed or guaranteed shall be
deemed to have acquired Senior Debt in reliance upon the covenants and
provisions contained in this Indenture and the Notes.
SECTION 10.02. Suspension of Payment When Senior Debt Is in Default.
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees or commissions with respect to, any
Senior Debt, no payment or distribution of any kind or character shall be made
by or on behalf of the Company or any other Person on its or their behalf with
respect to any Obligations on the Notes or to acquire, repurchase, redeem or
defease any of the Notes for cash or property or otherwise. In addition, if any
other event of default occurs and is continuing with respect to any Designated
Senior Debt, as such event of default is defined in the instrument creating or
evidencing such Designated Senior Debt, permitting the holders of such
Designated Senior Debt then outstanding to accelerate the maturity thereof and
if the Representative for the respective issue of Designated Senior Debt gives
notice of the event of default to the Trustee (a "Default Notice"), then, unless
and until all events of default have been cured or waived or have ceased to
exist or the Trustee receives notice thereof from the Representative for the
respective issue of Designated Senior Debt terminating the Blockage Period (as
defined below), during the 180 days after the delivery of such Default Notice
(the "Blockage Period"), neither the Company nor any other Person on its behalf
shall (x) make any payment or distribution of any kind or character with respect
to any Obligations on the Notes or (y) acquire, repurchase, redeem or defease
any of the Notes for cash or property or otherwise. Notwithstanding anything
herein to the contrary, in no event will a Blockage Period extend beyond 180
days from the date the payment on the Notes was due and only one such Blockage
Period may be commenced within any 360 consecutive days. No event of default
which existed or was con-
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tinuing on the date of the commencement of any Blockage Period with respect to
the Designated Senior Debt shall be, or be made, the basis for commencement of a
second Blockage Period by the Representative of such Designated Senior Debt
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period that, in either case, would give rise to an
event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 10.02(a), such payment shall be held for the benefit of, and shall be
paid over or delivered to, the holders of Senior Debt (pro rata to such holders
on the basis of the respective amount of Senior Debt held by such holders) or
their respective Representatives, as their respective interests may appear. The
Trustee shall be entitled to rely on information regarding amounts then due and
owing on the Senior Debt, if any, received from the holders of such Senior Debt
(or their Representatives) or, if such information is not received from such
holders or their Representatives after written request therefor, from the
Company and only amounts included in the information provided to the Trustee
shall be paid to the holders of Senior Debt.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder; provided that all Senior Debt thereafter due or declared to be due
shall first be paid in full in cash or in Cash Equivalents (other than clause
(vii) in the definition of Cash Equivalents) before the Holders are entitled to
receive any payment of any kind or character with respect to Obligations on the
Notes.
SECTION 10.03. Notes Subordinated to Prior Payment of All Senior
Debt on Dissolution, Liquidation or Reorganization of
Company.
(a) Upon any direct or indirect payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to creditors upon any liquida-
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tion, dissolution, winding-up, reorganization, assignment for the benefit of
creditors or marshaling of assets of the Company or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
the Company or its property, whether voluntary or involuntary, all Obligations
due or to become due upon all Senior Debt shall first be paid in full in cash or
in Cash Equivalents (other than clause (vii) in the definition of Cash
Equivalents), or such payment duly provided for to the satisfaction of the
holders of Senior Debt, before any payment or distribution of any kind or
character is made on account of any Obligations on the Notes, or for the
acquisition, repurchase, redemption or defeasance of any of the Notes for cash
or property or otherwise. Upon any such dissolution, winding-up, liquidation,
reorganization, receivership or similar proceeding, any direct or indirect
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Holders of the Notes or
the Trustee under this Indenture would be entitled, except for the provisions
hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution,
or by the Holders or by the Trustee under this Indenture if received by them,
directly to the holders of Senior Debt (pro rata to such holders on the basis of
the respective amounts of Senior Debt held by such holders) or their respective
Representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of Senior Debt remaining
unpaid until all such Senior Debt has been paid in full in cash or in Cash
Equivalents (other than clause (vii) in the definition of Cash Equivalents),
after giving effect to any concurrent payment, distribution or provision
therefor to or for the holders of Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Debt or part thereof originally intended to
be satisfied shall be deemed to be reinstated and outstanding as if such payment
has not occurred.
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(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by this Section 10.03(c), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Debt (pro rata to such holders on the
basis of the respective amount of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash or in
Cash Equivalents (other than clause (vii) in the definition of Cash
Equivalents), after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt.
(d) The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance or transfer of all or substantially all of
its assets, to another corporation upon the terms and conditions provided in
Article Five hereof and as long as permitted under the terms of the Senior Debt
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, assume the Company's obligations
hereunder in accordance with Article Five hereof.
SECTION 10.04. Holders To Be Subrogated to Rights of Holders of
Senior Debt.
Subject to the payment in full in cash or in Cash Equivalents (other
than clause (vii) in the definition of Cash Equivalents) of all Senior Debt, the
Holders of the Notes shall be subrogated to the rights of the holders of Senior
Debt to receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Debt until the Notes shall be paid in full;
and, for the purposes of such subrogation, no such payments or distributions to
the holders of the Senior Debt by or on behalf of the Company or by or on behalf
of the Holders by virtue of this Article Ten which otherwise would have been
made to the Holders shall, as between the Company and the Holders of the Notes,
be deemed to be a payment by the Company to or on account of the Senior Debt, it
being understood that the provisions of this Article Ten are and are
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intended solely for the purpose of defining the relative rights of the Holders
of the Notes, on the one hand, and the holders of the Senior Debt, on the other
hand.
Each Holder by purchasing or accepting a Note waives any and all
notice of the creation, modification, renewal, extension or accrual of any
Senior Debt of the Company and notice of or proof of reliance by any holder or
owner of Senior Debt of the Company upon this Article Ten and the Senior Debt of
the Company shall conclusively be deemed to have been created, contracted or
incurred in reliance upon this Article Ten, and all dealings between the Company
and the holders and owners of the Senior Debt of the Company shall be deemed to
have been consummated in reliance upon this Article Ten.
SECTION 10.05. Obligations of the Company Unconditional.
Nothing contained in this Article Ten or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as between the Company and the
Holders, the obligation of the Company, which is absolute and unconditional, to
pay to the Holders the principal of and interest on the Notes as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the Holders and creditors of the
Company other than the holders of the Senior Debt, nor shall anything herein or
therein prevent the Trustee or any Holder from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article Ten of the holders of Senior Debt in respect
of cash, property or Notes of the Company received upon the exercise of any such
remedy. Upon any payment or distribution of assets or securities of the Company
referred to in this Article Ten, the Trustee, subject to the provisions of
Sections 7.01 and 7.02, and the Holders shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which any liquidation,
dissolution, winding-up or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee or agent
or other Person making any payment or distribution to the Trustee or to the
Holders for the purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of Senior Debt and other Indebtedness
of the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Article Ten. Nothing in this Article Ten shall apply to the claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
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The Trustee shall be entitled to rely on the delivery to it of a written notice
by a Person representing himself or itself to be a holder of any Senior Debt (or
a trustee on behalf of, or other representative of, such holder) to establish
that such notice has been given by a holder of such Senior Debt or a trustee or
representative on behalf of any such holder.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Ten, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 10.06. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Notes pursuant to the provisions of this
Article Ten. Regardless of anything to the contrary contained in this Article
Ten or elsewhere in this Indenture, the Trustee shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Debt or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing from the Company, or from a holder of Senior Debt or a
Representative therefor, together with proof satisfactory to the Trustee of such
holding of Senior Debt or of the authority of such Representative, and, prior to
the receipt of any such written notice, the Trustee shall be entitled to assume
(in the absence of actual knowledge to the contrary) that no such facts exist.
SECTION 10.07. Application by Trustee of Assets Deposited with It.
U.S. Legal Tender or U.S. Government Obligations deposited in trust
with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02 shall
be for the sole benefit of the Holders of the Notes and, to the extent allocated
for the
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payment of Notes, shall not from and after the time of such deposit be subject
to the subordination provisions of this Article Ten. Otherwise, any deposit of
assets or securities by or on behalf of the Company with the Trustee or any
Paying Agent (whether or not in trust) for the payment of principal of or
interest on any Notes shall be subject to the provisions of this Article Ten;
provided, however, that if prior to the second Business Day preceding the date
on which by the terms of this Indenture any such assets may become distributable
for any purpose (including, without limitation, the payment of either principal
of or interest on any Note) the Trustee or such Paying Agent shall not have
received with respect to such assets any notice provided for in Section 10.06,
then the Trustee or such Paying Agent shall have full power and authority to
receive such assets and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary received by it
on or after such date. The foregoing shall not apply to the Paying Agent if the
Company or any Subsidiary or Affiliate of the Company is acting as Paying Agent.
Nothing contained in this Section 10.07 shall limit the right of the holders of
Senior Debt to recover payments as contemplated by this Article Ten.
SECTION 10.08. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior Debt to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act by any such holder, or by any non-compliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting the generality of subsection (a) of this
Section 10.08, the holders of Senior Debt may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article Ten or the
obligations hereunder of the Holders of the Notes to the holders of Senior Debt,
do any one or more of the following: (1) change the manner, place, terms or time
of payment of, or renew, refinance, replace or alter, Senior Debt or any
instrument evidencing the same or any agreement under which Senior Debt is
outstanding; (2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt; (3) release any Person
liable in any man-
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ner for the collection or payment of Senior Debt; and (4) exercise or refrain
from exercising any rights against the Company and any other Person.
SECTION 10.09. Holders Authorize Trustee To Effectuate Subordination
of Notes.
Each Holder of the Notes by such Holder's acceptance thereof
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effect the subordination provisions
contained in this Article Ten, and appoints the Trustee such Holder's
attorney-in-fact for such purpose, including, in the event of any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of creditors
or marshaling of assets of the Company tending towards liquidation or
reorganization of the business and assets of the Company, the immediate filing
of a claim for the unpaid balance of such Holder's Notes in the form required in
said proceedings and cause said claim to be approved. If the Trustee does not
file a proper claim or proof of debt in the form required in such proceeding
prior to 30 days before the expiration of the time to file such claim or claims,
then any of the holders of the Senior Debt or their Representative is hereby
authorized to file an appropriate claim for and on behalf of the Holders of said
Notes. Nothing herein contained shall be deemed to authorize the Trustee or the
holders of Senior Debt or their Representative to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee or the holders of Senior Debt or their
Representative to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 10.10. Right of Trustee to Hold Senior Debt.
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article Ten with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its rights
as such holder.
Whenever a distribution is to be made or a notice given to holders
or owners of Senior Debt, the distribution may be made and the notice may be
given to their Representative, if any.
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SECTION 10.11. This Article Ten Not To Prevent Events of Default.
The failure to make a payment on account of principal of or interest
on the Notes by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Article Six or to pursue any rights or remedies hereunder
or under applicable law, subject to the rights, if any, under this Article Ten
of the holders, from time to time, of Senior Debt.
SECTION 10.12. No Fiduciary Duty of Trustee to Holders of Senior
Debt.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and it undertakes to perform or observe such of its
covenants and obligations as are specifically set forth in this Article Ten, and
no implied covenants or obligations with respect to the Senior Debt shall be
read into this Indenture against the Trustee. The Trustee shall not be liable to
any such holders (other than for its willful misconduct or gross negligence) if
it shall pay over or deliver to the Holders of Notes or the Company or any other
Person money or assets in compliance with the terms of this Indenture. Nothing
in this Section 10.12 shall affect the obligation of any Person other than the
Trustee to hold such payment for the benefit of, and to pay such payment over
to, the holders of Senior Debt or their Representative.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control; provided, however, that this Section
11.01 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is re-
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quired prior to the time this Indenture and the Trustee are required by the TIA
to be so qualified.
SECTION 11.02. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or overnight courier guaranteeing next-day delivery or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company or any Guarantor:
KINETIC CONCEPTS, INC.
8023 Vantage Drive
San Antonio, TX 78230
Telecopier Number: (210) 255-6998
Attn: Chief Executive Officer
with a copy to:
Cox & Smith
112 E. Pecan Street
San Antonio, TX 78205
Telecopier Number: (210) 226-8395
Attn: Stephen D. Seidel, Esq.
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if to the Trustee:
MARINE MIDLAND BANK
140 Broadway, 12th Floor
New York, New York 10005
Telecopier Number: (212) 658-6425
Attention: Corporate Trust Administration - KCI
Each of the Company and the Trustee by written notice to the other
may designate additional or different addresses for notices to such Person. Any
notice or communication to the Company or the Trustee shall be deemed to have
been given or made as of the date so delivered if hand delivered; when answered
back, if telexed; when receipt is acknowledged, if faxed; and five (5) calendar
days after mailing if sent by registered or certified mail, postage prepaid
(except that (i) the Trustee shall not be deemed to have knowledge of such
notice nor shall any time period within which the Trustee is required to act as
a result of such notice commence until the Trustee actually receives the notice
in question and (ii) a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed by
first class mail, certified or registered return receipt requested, or by
overnight courier guaranteeing next-day delivery to its address as it appears on
the registration books of the Registrar. Any notice or communication shall be
mailed to any Person as described in TIA Section 313(c), to the extent required
by the TIA.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and any other Person shall have the
protection of TIA Section 312(c).
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SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed by the Company, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action have
been complied with (which counsel, as to factual matters, may rely on an
Officers' Certificate).
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is reasonably necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
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SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 11.08. Governing Law.
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT THAT THE
APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Each
of the parties hereto agrees to submit to the jurisdiction of the courts of the
State of New York in any action or proceeding arising out of or relating to this
Indenture.
SECTION 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10. No Personal Liability.
No director, officer, employee or stockholder, as such, of the
Company or any Guarantor, as such, shall have any liability for any obligations
of the Company or any Guarantor under the Notes, this Indenture, the Guarantees
or the Registration Rights Agreement or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all
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such liability. The waiver and release are part of the consideration for the
issuance of the Notes.
SECTION 11.11. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind their successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture or in
the Notes shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
ARTICLE TWELVE
GUARANTEE OF NOTES
SECTION 12.01. Unconditional Guarantee.
Subject to the provisions of this Article Twelve, each Guarantor, if
any, hereby, jointly and severally, unconditionally and irrevocably guarantees,
on a senior subordinated basis (such guarantee to be referred to herein as a
"Guarantee") to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, the Notes or the obligations
of the Company hereunder or thereunder, that: (a) the principal of, premium, if
any, and interest on the Notes (and any Additional Interest payable thereon)
shall be duly and punctually paid in full when due, whether at maturity, upon
redemption at the option of Holders pursuant to the provisions of the Notes
relating thereto, by acceleration or otherwise, and interest on the overdue
principal and (to the extent permitted by law) interest, if any, on
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the Notes and all other obligations of the Company or the Guarantors to the
Holders or the Trustee hereunder or thereunder (including amounts due the
Trustee under Section 7.07) and all other obligations shall be promptly paid in
full or performed, all in accordance with the terms hereof and thereof; and (b)
in case of any extension of time of payment or renewal of any Notes or any of
such other obligations, the same shall be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed, or failing performance of any other obligation of the Company to
the Holders under this Indenture or under the Notes, for whatever reason, each
Guarantor shall be obligated to pay, or to perform or cause the performance of,
the same immediately. An Event of Default under this Indenture or the Notes
shall constitute an event of default under this Guarantee, and shall entitle the
Holders of Notes to accelerate the obligations of the Guarantors hereunder in
the same manner and to the same extent as the obligations of the Company.
Each of the Guarantors hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, any release of any other Guarantor, the
recovery of any judgment against the Company, any action to enforce the same,
whether or not a Guarantee is affixed to any particular Note, or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each of the Guarantors hereby waives the benefit of
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenants that its Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes, this Indenture and this
Guarantee. This Guarantee is a guarantee of payment and not of collection. If
any Holder or the Trustee is required by any court or otherwise to return to the
Company or to any Guarantor, or any custodian, trustee, liquidator or other
similar official acting in relation to the Company or such Guarantor, any amount
paid by the Company or such Guarantor to the Trustee or such Holder, this
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor further agrees that, as between it, on the one
hand, and the Holders of Notes and the Trustee, on the other hand, (a) subject
to this Article Twelve,
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the maturity of the obligations guaranteed hereby may be accelerated as provided
in Article Six hereof for the purposes of this Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (b) in the event of any acceleration of
such obligations as provided in Article Six hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Guarantee.
No stockholder, officer, director, employee or incorporator, past,
present or future, of any Guarantor, as such, shall have any personal liability
under this Guarantee by reason of his, her or its status as such stockholder,
officer, director, employee or incorporator.
Each Guarantor that makes a payment or distribution under its
Guarantee shall be entitled to a contribution from each other Guarantor in an
amount pro rata, based on the net assets of each Guarantor, determined in
accordance with GAAP.
SECTION 12.02. Limitations on Guarantees.
The obligations of each Guarantor under its Guarantee will be
limited to the maximum amount which, after giving effect to all other contingent
and fixed liabilities of such Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under this Indenture, will result in
the obligations of such Guarantor under its Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law.
SECTION 12.03. Execution and Delivery of Guarantee.
To further evidence the Guarantee set forth in Section 12.01, each
Guarantor hereby agrees that a notation of such Guarantee, substantially in the
form of Exhibit F hereto, shall be endorsed on each Note authenticated and
delivered by the Trustee. Such Guarantee shall be executed on behalf of each
Guarantor by either manual or facsimile signature of two Officers, or an Officer
and an Assistant Secretary, of each Guarantor, each of whom, in each case, shall
have been duly authorized to so execute by all requisite corporate action. The
validity and enforceability of any Guarantee shall not be affected by the fact
that it is not affixed to any particular Note.
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Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 12.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture or
a Guarantee no longer holds that office at the time the Trustee authenticates
the Note on which such Guarantee is endorsed or at any time thereafter, such
Guarantor's Guarantee of such Note shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of each Guarantor.
SECTION 12.04. Release of a Guarantor.
(a) If no Default exists or would exist under this Indenture, upon
the sale or disposition of all of the Capital Stock, or all or substantially all
of the assets, of a Guarantor by the Company or one or more Restricted
Subsidiaries of the Company in a transaction constituting an Asset Sale the Net
Cash Proceeds of which are applied in accordance with Section 4.16 and the
Guarantor is released from all of its obligations under the Credit Agreement, or
upon the consolidation or merger of a Guarantor with or into any Person in
compliance with Article Five (in each case, other than to the Company or a
Wholly-Owned Restricted Subsidiary), or if any Guarantor is dissolved or
liquidated in accordance with this Indenture, or if a Guarantor is designated an
Unrestricted Subsidiary in accordance with Section 4.14, such Guarantor and each
Subsidiary of such Guarantor that is also a Guarantor shall be automatically and
unconditionally released from all obligations under this Article Twelve without
any further action required on the part of the Trustee or any Holder; provided,
however, that each such Guarantor is sold or disposed of in accordance with this
Indenture. Any Guarantor not so released or the entity surviving such Guarantor,
as applicable, shall remain or be liable under its Guarantee as provided in this
Article Twelve.
(b) The Trustee shall deliver an appropriate instrument evidencing
the release of a Guarantor upon receipt of a request by the Company or such
Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel
certifying as to the compliance with this Section 12.04, provided the legal
counsel delivering such Opinion of Counsel may rely as to matters of fact on one
or more Officers' Certificates.
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The Trustee shall execute any documents reasonably requested by the
Company or a Guarantor in order to evidence the release of such Guarantor from
its obligations under its Guarantee endorsed on the Notes and under this Article
Twelve.
Except as set forth in Articles Four and Five and this Section
12.04, nothing contained in this Indenture or in any of the Notes shall prevent
any consolidation or merger of a Guarantor with or into the Company or another
Guarantor or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety to the Company or another
Guarantor.
SECTION 12.05. Waiver of Subrogation.
Until this Indenture is discharged and all of the Notes are
discharged and paid in full, each Guarantor hereby irrevocably waives and agrees
not to exercise any claim or other rights which it may now or hereafter acquire
against the Company that arise from the existence, payment, performance or
enforcement of the Company's obligations under the Notes or this Indenture and
such Guarantor's obligations under this Guarantee and this Indenture, in any
such instance including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, and any right to
participate in any claim or remedy of the Holders against the Company, whether
or not such claim, remedy or right arises in equity, or under contract, statute
or common law, including, without limitation, the right to take or receive from
the Company, directly or indirectly, in cash or other property or by set-off or
in any other manner, payment or security on account of such claim or other
rights. If any amount shall be paid to any Guarantor in violation of the
preceding sentence and any amounts owing to the Trustee or the Holders of Notes
under the Notes, this Indenture, or any other document or instrument delivered
under or in connection with such agreements or instruments, shall not have been
paid in full, such amount shall have been deemed to have been paid to such
Guarantor for the benefit of, and held in trust for the benefit of, the Trustee
or the Holders and shall forthwith be paid to the Trustee for the benefit of
itself or such Holders to be credited and applied to the obligations in favor of
the Trustee or the Holders, as the case may be, whether matured or unmatured, in
accordance with the terms of this Indenture. Each Guarantor acknowledges that it
will receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
12.05 is knowingly made in contemplation of such benefits.
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SECTION 12.06. No Set-Off.
Each payment to be made by a Guarantor hereunder in respect of the
Obligations shall be payable in the currency or currencies in which such
Obligations are denominated, and shall be made without set-off, counterclaim,
reduction or diminution of any kind or nature.
SECTION 12.07. Obligations Absolute.
The obligations of each Guarantor hereunder are and shall be
absolute and unconditional and any monies or amounts expressed to be owing or
payable by each Guarantor hereunder which may not be recoverable from such
Guarantor on the basis of a Guarantee shall be recoverable from such Guarantor
as a primary obligor and principal debtor in respect thereof.
SECTION 12.08. Obligations Continuing.
The obligations of each Guarantor hereunder shall be continuing and
shall remain in full force and effect until all the obligations have been paid
and satisfied in full. Each Guarantor agrees with the Trustee that, if
requested, it will from time to time deliver to the Trustee suitable
acknowledgments of this continued liability hereunder and under any other
instrument or instruments in such form as counsel to the Trustee may advise and
as will prevent any action brought against it in respect of any default
hereunder being barred by any statute of limitations now or hereafter in force
and, in the event of the failure of a Guarantor so to do, it hereby irrevocably
appoints the Trustee the attorney and agent of such Guarantor to make, execute
and deliver such written acknowledgment or acknowledgments or other instruments
as may from time to time become necessary or advisable, in the judgment of the
Trustee on the advice of counsel, to fully maintain and keep in force the
liability of such Guarantor hereunder.
SECTION 12.09. Obligations Not Reduced.
The obligations of each Guarantor hereunder shall not be satisfied,
reduced or discharged solely by the payment of such principal, premium, if any,
interest, fees and other monies or amounts as may at any time prior to discharge
of this Indenture pursuant to Article Eight be or become owing or payable under
or by virtue of or otherwise in connection with the Notes or this Indenture.
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SECTION 12.10. Obligations Reinstated.
The obligations of each Guarantor hereunder shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
which would otherwise have reduced the obligations of any Guarantor hereunder
(whether such payment shall have been made by or on behalf of the Company or by
or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders
upon the insolvency, bankruptcy, liquidation or reorganization of the Company or
any Guarantor or otherwise, all as though such payment had not been made. If
demand for, or acceleration of the time for, payment by the Company is stayed
upon the insolvency, bankruptcy, liquidation or reorganization of the Company,
all such Indebtedness otherwise subject to demand for payment or acceleration
shall nonetheless be payable by each Guarantor as provided herein.
SECTION 12.11. Obligations Not Affected.
The obligations of each Guarantor hereunder shall not be affected,
impaired or diminished in any way by any act, omission, matter or thing
whatsoever, occurring before, upon or after any demand for payment hereunder
(and whether or not known or consented to by any Guarantor or any of the
Holders) which, but for this provision, might constitute a whole or partial
defense to a claim against any Guarantor hereunder or might operate to release
or otherwise exonerate any Guarantor from any of its obligations hereunder or
otherwise affect such obligations, whether occasioned by default of any of the
Holders or otherwise, including, without limitation:
(a) any limitation of status or power, disability, incapacity or
other circumstance relating to the Company or any other person, including
any insolvency, bankruptcy, liquidation, reorganization, readjustment,
composition, dissolution, winding up or other proceeding involving or
affecting the Company or any other person;
(b) any irregularity, defect, unenforceability or invalidity in
respect of any Indebtedness or other obligation of the Company or any
other person under this Indenture, the Notes or any other document or
instrument;
(c) any failure of the Company, whether or not without fault on its
part, to perform or comply with any of the provisions of this Indenture or
the Notes, or to give notice thereof to a Guarantor;
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(d) the taking or enforcing or exercising or the refusal or neglect
to take or enforce or exercise any right or remedy from or against the
Company or any other Person or their respective assets or the release or
discharge of any such right or remedy;
(e) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the
Company or any other Person;
(f) any change in the time, manner or place of payment of, or in any
other term of, any of the Notes, or any other amendment, variation,
supplement, replacement or waiver of, or any consent to departure from,
any of the Notes or this Indenture, including, without limitation, any
increase or decrease in the principal amount of or premium, if any, or
interest on any of the Notes;
(g) any change in the ownership, control, name, objects, businesses,
assets, capital structure or constitution of the Company or a Guarantor;
(h) any merger or amalgamation of the Company or a Guarantor with
any Person or Persons;
(i) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, any
of the Obligations or the obligations of a Guarantor under its Guarantee;
and
(j) any other circumstance (other than by complete, irrevocable
payment or a release made pursuant to Section 12.04) that might otherwise
constitute a legal or equitable discharge or defense of the Company under
this Indenture or the Notes or of a Guarantor in respect of its Guarantee
hereunder.
SECTION 12.12. Waiver.
Without in any way limiting the provisions of Section 12.01 hereof,
each Guarantor hereby waives notice of acceptance hereof, notice of any
liability of any Guarantor hereunder, notice or proof of reliance by the Holders
upon the obligations of any Guarantor hereunder, and diligence, presentment,
demand for payment on the Company, protest, notice of
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dishonor or non-payment of any of the Obligations, or other notice or
formalities to the Company or any Guarantor of any kind whatsoever.
SECTION 12.13. No Obligation To Take Action Against the Company.
Neither the Trustee nor any other Person shall have any obligation
to enforce or exhaust any rights or remedies or to take any other steps under
any security for the Obligations or against the Company or any other Person or
any Property of the Company or any other Person before the Trustee is entitled
to demand payment and performance by any or all Guarantors of their liabilities
and obligations under their Guarantees or under this Indenture.
SECTION 12.14. Dealing with the Company and Others.
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of any Guarantor
hereunder and without the consent of or notice to any Guarantor, may
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Company or any
other Person;
(b) take or abstain from taking security or collateral from the
Company or from perfecting security or collateral of the Company;
(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security given
by the Company or any third party with respect to the obligations or
matters contemplated by this Indenture or the Notes;
(d) accept compromises or arrangements from the Company;
(e) apply all monies at any time received from the Company or from
any security upon such part of the Obligations as the Holders may see fit
or change any such application in whole or in part from time to time as
the Holders may see fit; and
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(f) otherwise deal with, or waive or modify their right to deal
with, the Company and all other Persons and any security as the Holders or
the Trustee may see fit.
SECTION 12.15. Default and Enforcement.
If any Guarantor fails to pay in accordance with Section 12.01
hereof, the Trustee may proceed in its name as trustee hereunder in the
enforcement of the Guarantee of any such Guarantor and such Guarantor's
obligations thereunder and hereunder by any remedy provided by law, whether by
legal proceedings or otherwise, and to recover from such Guarantor the
obligations.
SECTION 12.16. Amendment, Etc.
No amendment, modification or waiver of any provision of this
Indenture relating to any Guarantor or consent to any departure by any Guarantor
or any other Person from any such provision will in any event be effective
unless it is signed by such Guarantor and the Trustee.
SECTION 12.17. Acknowledgment.
Each Guarantor hereby acknowledges communication of the terms of
this Indenture and the Notes and consents to and approves of the same.
SECTION 12.18. Costs and Expenses.
Each Guarantor shall pay on demand by the Trustee any and all costs,
fees and expenses (including, without limitation, legal fees on a solicitor and
client basis) incurred by the Trustee, its agents, advisors and counsel or any
of the Holders in enforcing any of their rights under any Guarantee in the same
manner as the Company shall be requested to pay the Trustee's fees.
SECTION 12.19. No Merger or Waiver; Cumulative Remedies.
No Guarantee shall operate by way of merger of any of the
obligations of a Guarantor under any other agreement, including, without
limitation, this Indenture. No failure to exercise and no delay in exercising,
on the part of the Trustee or the Holders, any right,
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remedy, power or privilege hereunder or under this Indenture or the Notes, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder or under this Indenture or the Notes
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
in the Guarantee and under this Indenture, the Notes and any other document or
instrument between a Guarantor and/or the Company and the Trustee are cumulative
and not exclusive of any rights, remedies, powers and privileges provided by
law.
SECTION 12.20. Survival of Obligations.
Without prejudice to the survival of any of the other obligations of
each Guarantor hereunder, the obligations of each Guarantor under Section 12.01
shall survive the payment in full of the Obligations and shall be enforceable
against such Guarantor without regard to and without giving effect to any
defense, right of offset or counterclaim available to or which may be asserted
by the Company or any Guarantor.
SECTION 12.21. Guarantee in Addition to Other Obligations.
The obligations of each Guarantor under its Guarantee and this
Indenture are in addition to and not in substitution for any other obligations
to the Trustee or to any of the Holders in relation to this Indenture or the
Notes and any guarantees or security at any time held by or for the benefit of
any of them.
SECTION 12.22. Severability.
Any provision of this Article Twelve which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction
unless its removal would substantially defeat the basic intent, spirit and
purpose of this Indenture and this Article Twelve.
SECTION 12.23. Successors and Assigns.
Each Guarantee shall be binding upon and inure to the benefit of
each Guarantor and the Trustee and the other Holders and their respective
successors and permitted assigns, except that no Guarantor may assign any of its
obligations hereunder or thereunder.
<PAGE> 139
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ARTICLE THIRTEEN
SUBORDINATION OF GUARANTEE
SECTION 13.01. Obligations of Guarantors Subordinated to Guarantor
Senior Debt.
Anything herein to the contrary notwithstanding, each of the
Guarantors, for itself and its successors, and each Holder, by his or her
acceptance of Guarantees, agrees that the payment of all Obligations owing to
the Holders in respect of its Guarantee (collectively, as to any Guarantor, its
"Guarantee Obligations") is subordinated, to the extent and in the manner
provided in this Article Thirteen, to the prior payment in full in cash or in
Cash Equivalents (other than clause (vii) of the definition of Cash
Equivalents), or such payment duly provided for to the satisfaction of the
holders of Guarantor Senior Debt, of all Obligations on Guarantor Senior Debt of
such Guarantor, including without limitation, the Guarantors' obligations under
the Credit Agreement; that the subordination is for the benefit of, and shall be
enforceable directly by, any holder of Guarantor Senior Debt, and that each
holder of Guarantor Senior Debt whether now outstanding or hereafter created,
incurred, assumed or guaranteed shall be deemed to have acquired Guarantor
Senior Debt in reliance upon the covenants and provisions contained in this
Indenture and the Notes.
This Article Thirteen shall constitute a continuing offer to all
Persons who become holders of, or continue to hold, Guarantor Senior Debt, and
such provisions are made for the benefit of the holders of Guarantor Senior Debt
and such holders are made obligees hereunder and any one or more of them may
enforce such provisions.
SECTION 13.02. Suspension of Guarantee Obligations When Guarantor
Senior Debt Is in Default.
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal or interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees or commissions with respect to, any
Guarantor Senior Debt of a Guarantor or guaranteed by a Guarantor, no payment or
distribution of any kind or character shall be made by or on behalf of such
Guarantor or any other Person
<PAGE> 140
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on its or their behalf with respect to any Obligations on the Notes or to
acquire, repurchase, redeem or defease any of the Notes for cash or property or
otherwise. In addition, if any other event of default occurs and is continuing
with respect to any Designated Guarantor Senior Debt of any Guarantor, as such
event of default is defined in the instrument creating or evidencing such
Designated Guarantor Senior Debt, permitting the holders of such Designated
Guarantor Senior Debt then outstanding to accelerate the maturity thereof and if
the Representative for the respective issue of Designated Guarantor Senior Debt
gives a Default Notice, then, unless and until all events of default have been
cured or waived or have ceased to exist or the Trustee receives notice from the
Representative for the respective issue of Designated Guarantor Senior Debt
terminating the Blockage Period, during the Blockage Period, neither said
Guarantor nor any other Person on its behalf shall (x) make any payment or
distribution of any kind or character with respect to any Obligations on the
Notes or (y) acquire, repurchase, redeem or defease any of the Notes for cash or
property or otherwise. Notwithstanding anything herein to the contrary, in no
event will a Blockage Period extend beyond 180 days from the date the payment on
the Notes was due and only one such Blockage Period may be commenced within any
360 consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Designated
Guarantor Senior Debt shall be, or be made, the basis for commencement of a
second Blockage Period by the Representative of such Designated Guarantor Senior
Debt whether or not within a period of 360 consecutive days, unless such event
of default shall have been cured or waived for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period, that in either case, would give rise to an
event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
(b) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder from such Guarantor when such
payment is prohibited by Section 13.02(a), such payment shall be held for the
benefit of, and shall be paid over or delivered to, the holders of Guarantor
Senior Debt with respect to such Guarantor (pro rata to such holders on the
basis of the respective amount of such Guarantor Senior Debt held by such
holders) or their respective Representatives, as their respective interests may
appear. The Trustee shall be entitled to rely on information regarding amounts
then
<PAGE> 141
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due and owing on the Guarantor Senior Debt, if any, received from the holders of
such Guarantor Senior Debt (or their Representatives) or, if such information is
not received from such holders or their Representatives after written request
therefor, from the Company and only amounts included in the information provided
to the Trustee shall be paid to the holders of such Guarantor Senior Debt.
Nothing contained in this Article Thirteen shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Section 6.02 or to pursue any rights or
remedies hereunder; provided that all Guarantor Senior Debt thereafter due or
declared to be due shall first be paid in full in cash or Cash Equivalents
(other than clause (vii) in the definition of Cash Equivalents) before the
Holders are entitled to receive any payment of any kind or character with
respect to Obligations on the Notes.
SECTION 13.03. Guarantee Obligations Subordinated to Prior Payment
of All Guarantor Senior Debt on Dissolution,
Liquidation or Reorganization of Such Guarantor.
(a) Upon any direct or indirect payment or distribution of assets of
any Guarantor of any kind or character, whether in cash, property or securities,
to creditors upon any liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of such
Guarantor or in a bankruptcy, reorganization, insolvency, receivership or other
similar proceeding relating to such Guarantor or its property, whether voluntary
or involuntary, all Obligations due or to become due upon all Guarantor Senior
Debt shall first be paid in full in cash or in Cash Equivalents (other than
clause (vii) in the definition of Cash Equivalents), or such payment duly
provided for to the satisfaction of the holders of Guarantor Senior Debt, before
any payment or distribution of any kind or character is made on account of any
Obligations on the Guarantee of such Guarantor, or for the acquisition,
repurchase, redemption or defeasance of the Guarantee of such Guarantor for cash
or property or otherwise. Upon any such dissolution, winding-up, liquidation,
reorganization, receivership or similar proceeding, any direct or indirect
payment or distribution of assets of such Guarantor of any kind or character,
whether in cash, property or securities, to which the Holders of the Guarantee
of such Guarantor or the Trustee under this Indenture would be entitled, except
for the provi-
<PAGE> 142
- 134 -
sions hereof, shall be paid by the Guarantor or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the Holders or by the Trustee under this Indenture if
received by them, directly to the holders of Guarantor Senior Debt (pro rata to
such holders on the basis of the respective amounts of Guarantor Senior Debt
held by such holders) or their respective Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Guarantor Senior Debt
may have been issued, as their respective interests may appear, for application
to the payment of Guarantor Senior Debt remaining unpaid until all such
Guarantor Senior Debt has been paid in full in cash or in Cash Equivalents
(other than clause (vii) in the definition of Cash Equivalents) after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of Guarantor Senior Debt.
(b) To the extent any payment of Guarantor Senior Debt (whether by
or on behalf of any Guarantor, as proceeds of security or enforcement of any
right of setoff or otherwise) is declared to be fraudulent or preferential, set
aside or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then, if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person, the Guarantor Senior Debt or part
thereof originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment has not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of any Guarantor of any kind or character, whether in
cash, property or securities, shall be received by any Holder when such payment
or distribution is prohibited by this Section 13.03(c), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders
on the basis of the respective amount of Guarantor Senior Debt held by such
holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Guarantor Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of Guarantor Senior Debt remaining unpaid until all such Guarantor
Senior Debt has been paid in full in cash or in Cash Equivalents (other than
clause (vii) in the definition of Cash Equivalents), after giving effect to any
concurrent payment, distri-
<PAGE> 143
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bution or provision therefor to or for the holders of such Guarantor Senior
Debt.
(d) The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another corporation or the liquidation or dissolution of
any Guarantor following the conveyance or transfer of all or substantially all
of its assets, to another corporation upon the terms and conditions provided in
Article Five hereof and as long as permitted under the terms of the Guarantor
Senior Debt shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section if such other corporation shall,
as a part of such consolidation, merger, conveyance or transfer, assume such
Guarantor's obligations hereunder in accordance with Article Five hereof.
SECTION 13.04. Holders of Guarantee Obligations To Be Subrogated to
Rights of Holders of Guarantor Senior Debt.
Subject to the payment in full in cash or Cash Equivalents (other
than clause (vii) in the definition of Cash Equivalents), or such payment duly
provided for to the satisfaction of the holders of Guarantor Senior Debt, of all
Guarantor Senior Debt, the Holders of Guarantee Obligations of a Guarantor shall
be subrogated to the rights of the holders of Guarantor Senior Debt of such
Guarantor to receive payments or distributions of assets of such Guarantor
applicable to such Guarantor Senior Debt until all amounts owing on or in
respect of the Guarantee Obligations shall be paid in full in cash or Cash
Equivalents (other than clause (vii) in the definition of Cash Equivalents), and
for the purpose of such subrogation no payments or distributions to the holders
of such Guarantor Senior Debt by or on behalf of such Guarantor, or by or on
behalf of the Holders by virtue of this Article Thirteen, which otherwise would
have been made to the Holders shall, as between such Guarantor and the Holders,
be deemed to be payment by such Guarantor to or on account of such Guarantor
Senior Debt, it being understood that the provisions of this Article Thirteen
are and are intended solely for the purpose of defining the relative rights of
the Holders, on the one hand, and the holders of such Guarantor Senior Debt, on
the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Thirteen shall have
been applied, pursuant to the provisions of this Article Thirteen, to the
payment of all amounts payable under such Guarantor Senior Debt, then the
<PAGE> 144
- 136 -
Holders shall be entitled to receive from the holders of such Guarantor Senior
Debt any such payments or distributions received by such holders of such
Guarantor Senior Debt in excess of the amount sufficient to pay all amounts
payable under or in respect of such Guarantor Senior Debt in full in cash or
Cash Equivalents (other than clause (vii) in the definition of Cash
Equivalents), or such payment duly provided for to the satisfaction of the
holders of Guarantor Senior Debt.
Each Holder by purchasing or accepting a Note waives any and all
notice of the creation, modification, renewal, extension or accrual of any
Guarantor Senior Debt of the Guarantors and notice of or proof of reliance by
any holder or owner of Guarantor Senior Debt of the Guarantors upon this Article
Thirteen and the Guarantor Senior Debt of the Guarantors shall conclusively be
deemed to have been created, contracted or incurred in reliance upon this
Article Thirteen, and all dealings between the Guarantors and the holders and
owners of the Guarantor Senior Debt of the Guarantors shall be deemed to have
been consummated in reliance upon this Article Thirteen.
SECTION 13.05. Obligations of the Guarantors Unconditional.
Nothing contained in this Article Thirteen or elsewhere in this
Indenture or in the Guarantees is intended to or shall impair, as between the
Guarantors and the Holders, the obligation of the Guarantors, which is absolute
and unconditional, to pay to the Holders all amounts due and payable under the
Guarantees as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders and creditors of the Guarantors other than the holders of the Guarantor
Senior Debt, nor shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
Thirteen, of the holders of Guarantor Senior Debt in respect of cash, property
or securities of the Guarantors received upon the exercise of any such remedy.
Upon any payment or distribution of assets of any Guarantor referred to in this
Article Thirteen, the Trustee, subject to the provisions of Sections 7.01 and
7.02, and the Holders shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which any liquidation, dissolution,
winding-up or reorganization proceedings are pending, or a certificate of the
receiver, trustee in bankruptcy, liquidating trustee or agent or other Person
making any payment or distribution to the Trustee or to the Holders for
<PAGE> 145
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the purpose of ascertaining the Persons entitled to participate in such payment
or distribution, the holders of Guarantor Senior Debt and other Indebtedness of
any Guarantor, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
Thirteen. Nothing in this Article Thirteen shall apply to the claims of, or
payments to, the Trustee under or pursuant to Section 7.07. The Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself or itself to be a holder of any Guarantor Senior Debt (or a
trustee on behalf of, or other representative of, such holder) to establish that
such notice has been given by a holder of such Guarantor Senior Debt or a
trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Debt to participate in any payment or distribution pursuant to
this Article Thirteen, the Trustee may request such Person to furnish evidence
to the reasonable satisfaction of the Trustee as to the amount of Guarantor
Senior Debt held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article Thirteen, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 13.06. Trustee Entitled To Assume Payments Not Prohibited in
Absence of Notice.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Notes pursuant to the provisions of this
Article Thirteen. Regardless of anything to the contrary contained in this
Article Thirteen or elsewhere in this Indenture. The Trustee shall not be
charged with knowledge of the existence of any default or event of default with
respect to any Guarantor Senior Debt or of any other facts which would prohibit
the making of any payment to or by the Trustee unless and until the Trustee
shall have received notice in writing from the Company or the Guarantor, or from
a holder of Guarantor Senior Debt or a Representative therefor, together with
proof satisfactory to the Trustee of such holding of Guarantor Senior Debt or of
the authority of such Representative, and, prior to the receipt of any such
written notice, the Trustee shall be entitled to assume (in the
<PAGE> 146
- 138 -
absence of actual knowledge to the contrary) that no such facts exist.
SECTION 13.07. Application by Trustee of Assets Deposited with It.
U.S. Legal Tender or U.S. Government Obligations deposited in trust
with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02 shall
be for the sole benefit of Holders of the Notes and, to the extent allocated for
the payment of Notes, shall not from and after the time of such deposit be
subject to the subordination provisions of this Article Thirteen. Otherwise, any
deposit of assets or securities by or on behalf of a Guarantor with the Trustee
or any Paying Agent (whether or not in trust) for payment of the Guarantees
shall be subject to the provisions of this Article Thirteen; provided, however,
that if prior to the second Business Day preceding the date on which by the
terms of this Indenture any such assets may become distributable for any purpose
(including, without limitation, the payment of either principal of or interest
on any Note) the Trustee or such Paying Agent shall not have received with
respect to such assets any notice provided for in Section 13.06, then the
Trustee or such Paying Agent shall have full power and authority to receive such
assets and to apply the same to the purpose for which they were received, and
shall not be affected by any notice to the contrary received by it on or after
such date. The foregoing shall not apply to the Paying Agent if the Company or
any Subsidiary or Affiliate of the Company is acting as Paying Agent. Nothing
contained in this Section 13.07 shall limit the right of the holders of
Guarantor Senior Debt to recover payments as contemplated by this Article
Thirteen.
SECTION 13.08. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Guarantor Senior
Debt to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any Guarantor
or by any act or failure to act, by any such holder, or by any non-compliance by
any Guarantor with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting the generality of subsection (a) of this
Section 13.08, the holders of Guarantor Senior Debt may, at any time and from
time to time, without the consent of
<PAGE> 147
- 139 -
or notice to the Trustee or the Holders of the Notes, without incurring
responsibility to the Holders of the Notes and without impairing or releasing
the subordination provided in this Article Thirteen or the obligations hereunder
of the Holders of the Notes to the holders of Guarantor Senior Debt, do any one
or more of the following: (1) change the manner, place, terms or time of payment
of, or renew, refinance, replace or alter, Guarantor Senior Debt or any
instrument evidencing the same or any agreement under which Guarantor Senior
Debt is outstanding; (2) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Guarantor Senior Debt; (3)
release any Person liable in any manner for the collection or payment of
Guarantor Senior Debt; and (4) exercise or refrain from exercising any rights
against the Guarantors and any other Person.
SECTION 13.09. Holders Authorize Trustee To Effectuate Subordination
of Guarantee Obligations.
Each Holder of the Guarantee Obligations by its acceptance thereof
authorizes and expressly directs the Trustee on its behalf to take such action
as may be necessary or appropriate to effect the subordination provisions
contained in this Article Thirteen, and appoints the Trustee its
attorney-in-fact for such purpose, including, in the event of any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of creditors
or marshaling of assets of any Guarantor tending towards liquidation or
reorganization of the business and assets of any Guarantor, the immediate filing
of a claim for the unpaid balance under its or his Guarantee Obligations in the
form required in said proceedings and cause said claim to be approved. If the
Trustee does not file a proper claim or proof of debt in the form required in
such proceeding prior to 30 days before the expiration of the time to file such
claim or claims, then any of the holders of the Guarantor Senior Debt or their
Representative is hereby authorized to file an appropriate claim for and on
behalf of the Holders of said Guarantee Obligations. Nothing herein contained
shall be deemed to authorize the Trustee or the holders of Guarantor Senior Debt
or their Representative to authorize or consent to or accept or adopt on behalf
of any holder of Guarantee Obligations any plan of reorganization, arrangement,
adjustment or composition affecting the Guarantee Obligations or the rights of
any Holder thereof, or to authorize the Trustee or the holders of Guarantor
Senior Debt or their Representative to vote in respect of the claim of any
holder of Guarantee Obligations in any such proceeding.
<PAGE> 148
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SECTION 13.10. Right of Trustee To Hold Guarantor Senior Debt.
The Trustee shall be entitled to all of the rights set forth in this
Article Thirteen in respect of any Guarantor Senior Debt at any time held by it
to the same extent as any other holder of Guarantor Senior Debt, and nothing in
this Indenture shall be construed to deprive the Trustee of any of its rights as
such holder.
SECTION 13.11. No Suspension of Remedies.
The failure to make a payment in respect of the Guarantees by reason
of any provision of this Article Thirteen shall not be construed as preventing
the occurrence of a Default or an Event of Default under Section 6.01.
Nothing contained in this Article Thirteen shall limit the right of
the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article Six or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article Thirteen of the holders, from time to time, of Guarantor Senior
Debt.
SECTION 13.12. No Fiduciary Duty of Trustee to Holders of Guarantor
Senior Debt.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Guarantor Senior Debt, and it undertakes to perform or observe such
of its covenants and obligations as are specifically set forth in this Article
Thirteen, and no implied covenants or obligations with respect to the Guarantor
Senior Debt shall be read into this Indenture against the Trustee. The Trustee
shall not be liable to any such holders (other than for its willful misconduct
or gross negligence) if it shall pay over or deliver to the holders of Guarantee
Obligations or the Guarantors or any other Person, money or assets in compliance
with the terms of this Indenture. Nothing in this Section 13.12 shall affect the
obligation of any Person other than the Trustee to hold such payment for the
benefit of, and to pay such payment over to, the holders of Guarantor Senior
Debt or their Representative.
<PAGE> 149
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
KINETIC CONCEPTS, INC.
By: Dennis E. Noll
_____________________________________
Name:
Title:
KCI HOLDING COMPANY, INC., as Guarantor
By: Dennis E. Noll
_____________________________________
Name:
Title:
KCI PROPERTIES LIMITED,
as Guarantor
By: Dennis E. Noll
_____________________________________
Name:
Title:
KCI REAL PROPERTY LIMITED,
as Guarantor
By: Dennis E. Noll
_____________________________________
Name:
Title:
<PAGE> 150
- 2 -
KCI THERAPEUTIC SERVICES, INC.,
as Guarantor
By: Dennis E. Noll
_____________________________________
Name:
Title:
KCI NEW TECHNOLOGIES, INC.
as Guarantor
By: Dennis E. Noll
_____________________________________
Name:
Title:
KCI INTERNATIONAL, INC.,
as Guarantor
By: Dennis E. Noll
_____________________________________
Name:
Title:
KCI AIR, INC., as Guarantor
By: Dennis E. Noll
_____________________________________
Name:
Title:
KCI-RIK ACQUISITION CORP., as Guarantor
By: Dennis E. Noll
_____________________________________
Name:
Title:
PLEXUS ENTERPRISES, INC.
By: Dennis E. Noll
_____________________________________
Name:
Title:
<PAGE> 151
- 3 -
MEDICAL RETRO DESIGN, INC.
By: Dennis E. Noll
_____________________________________
Name:
Title:
MARINE MIDLAND BANK, as Trustee
By: Frank Godino
_____________________________________
Name: Frank Godino
Title: Assistant Vice President
<PAGE> 152
EXHIBIT A
[FORM OF SERIES A NOTE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, PRIOR TO THE DATE THAT IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE OF THIS SECURITY AND THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS
SECURITY, RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY
OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
A - 1
<PAGE> 153
CUSIP No.:
KINETIC CONCEPTS, INC.
9 5/8% SENIOR SUBORDINATED NOTE DUE 2007, SERIES A
No. $
KINETIC CONCEPTS, INC., a Texas corporation (the "Company," which
term includes any successor entities), for value received promises to pay to
or registered assigns the principal sum of Dollars on November 1,
2007.
Interest Payment Dates: May 1 and November 1, commencing May 1,
1998.
Record Dates: April 15 and October 15.
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
KINETIC CONCEPTS, INC.
By: _____________________________________
Name:
Title:
By: _____________________________________
Name:
Title:
Dated: November , 1997
A - 2
<PAGE> 154
Certificate of Authentication
This is one of the 9 5/8% Senior Subordinated Notes due 2007, Series
A, referred to in the within-mentioned Indenture.
MARINE MIDLAND BANK, as Trustee
By: _____________________________________
Authorized Signatory
Date of Authentication: November , 1997
A - 3
<PAGE> 155
(REVERSE OF SECURITY)
9 5/8% Senior Subordinated Note due 2007, Series A
Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Indenture, dated as of November 5, 1997
(the "Indenture"), and as amended from time to time, by and among Kinetic
Concepts, Inc., a Texas corporation (the "Company"), the Guarantors named
therein and Marine Midland Bank, as trustee (the "Trustee").
(1) Interest. The Company promises to pay interest on the principal
amount of this Note at the rate per annum shown above. Interest on the Notes
will accrue from the most recent date on which interest has been paid or, if no
interest has been paid, from November 5, 1997. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing May 1, 1998.
Interest will be computed on the basis of a 360-day year of twelve 30-day months
and, in the case of a partial month, the actual number of days elapsed.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
(2) Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange (including pursuant to an Exchange Offer (as defined in the
Registration Rights Agreement)) after such Record Date. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Company shall pay
principal and premium, if any, and interest in money of the United States that
at the time of payment is legal tender for payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay principal and premium, if
any, and interest by check payable in such U.S. Legal Tender. The Company may
deliver any such interest payment to the Paying Agent or to a Holder at the
Holder's registered address.
(3) Paying Agent and Registrar. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders.
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(4) Indenture. The Company issued the Notes under the Indenture.
This Note is one of a duly authorized issue of Notes of the Company designated
as its 9 5/8% Senior Subordinated Notes due 2007, Series A (the "Initial
Notes"), limited (except as otherwise provided in the Indenture) in aggregate
principal amount to $300,000,000 which may be issued under the Indenture. The
Notes include the Initial Notes, the Private Exchange Notes and the Unrestricted
Notes, as defined below, issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement. The Initial Notes, the Private Exchange Notes
and the Unrestricted Notes are treated as a single class of securities under the
Indenture. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date
of the Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the TIA for a statement of such terms. The Notes are general unsecured
obligations of the Company. Payment on each Note is guaranteed on a senior
subordinated basis by the Guarantors pursuant to Articles Twelve and Thirteen of
the Indenture. Each Holder, by accepting a Note, agrees to be bound by all of
the terms and provisions of the Indenture, as the same may be amended from time
to time in accordance with its terms.
(5) Special Redemption. Section 4.22 of the Indenture provides that
on the Special Redemption Date, the Notes will be subject to mandatory
redemption at a redemption price equal to 100% of the principal amount of the
Notes, plus accrued interest to the date of redemption, if the Tender Offer is
not consummated on or prior to November 6, 1997.
(6) Redemption. The Notes are redeemable, at the Company's option,
in whole at any time or in part from time to time, on and after November 1,
2002, upon not less than 30 nor more than 60 days' notice, at the following
Redemption Prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on November 1 of the years
set forth below, plus, in each case, accrued and unpaid interest thereon, if
any, to the date of redemption:
Year Percentage
---- ----------
2002 104.813%
2003 103.208%
2004 101.604%
2005 and thereafter 100.000%
Notwithstanding the foregoing, at any time, or from time to time, on
or prior to November 1, 2000, the Company may,
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at its option on one or more occasions use all or a portion of the net cash
proceeds of one or more Equity Offerings to redeem the Notes issued under the
Indenture at a redemption price equal to 109.625% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the date of
redemption, provided that at least 65% of the aggregate principal amount of the
Notes originally issued remain outstanding immediately following any such
redemption. In order to effect the foregoing redemption with the proceeds of any
Equity Offering, the Company shall make such redemption not more than 120 days
after the consummation of any such Equity Offering.
(7) Notice of Redemption. Notice of redemption will be mailed at
least 30 but not more than 60 days before the Redemption Date (other than with
respect to a Special Redemption) to each Holder of Notes to be redeemed at its
registered address. Notes in denominations larger than $1,000 may be redeemed in
part.
Except as set forth in the Indenture, if monies for the redemption
of the Notes called for redemption shall have been deposited with the Paying
Agent for redemption on such Redemption Date, then, unless the Company defaults
in the payment of such Redemption Price plus accrued interest, if any, the Notes
called for redemption will cease to bear interest from and after such Redemption
Date and the only right of the Holders of such Notes will be to receive payment
of the Redemption Price plus accrued interest, if any.
(8) Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales and upon the occurrence of a Change of
Control, and subject to further limitations contained therein, the Company will
make an offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
(9) Registration Rights. Pursuant to the Registration Rights
Agreement among the Company, the Guarantors and the Initial Purchasers, the
Company and the Guarantors will be obligated to consummate an exchange offer
pursuant to which the Holder of this Note shall have the right to exchange this
Note for the Company's 9 5/8% Senior Subordinated Notes due 2007, Series B (the
"Unrestricted Notes"), which will be registered under the Securities Act, in
like principal amount and having terms identical in all material respects as the
Initial Notes. The Holders of the Initial Notes shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in accordance
with the terms of the Registration Rights Agreement.
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(10) Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, and (except Notes issued as payment of Interest) in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange of Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as required by law or as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange of any Notes or portions thereof selected for redemption except for the
unredeemed portion of any Note being redeemed in part.
(11) Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
(12) Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
(13) Discharge Prior to Redemption or Maturity. If the Company at
any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but including, under
certain circumstances, their obligation to pay the principal of and interest on
the Notes but without affecting the rights of the Holders to receive such
amounts from such deposits).
(14) Amendment; Supplement; Waiver. Subject to certain exceptions
set forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of not less than a majority
in aggregate principal amount of the Notes then outstanding, and any past
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Notes in addition to or in place of certificated
Notes, comply with any requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the TIA or comply with Article
Five of the Indenture or make any other change that does
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<PAGE> 159
not adversely affect the rights of any Holder of a Note in any material respect.
(15) Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and the Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain Indebtedness, make certain Investments, create or
incur liens, enter into transactions with Affiliates, create dividend or other
payment restrictions affecting Restricted Subsidiaries, issue Preferred Stock of
its Restricted Subsidiaries, and on the ability of the Company to merge or
consolidate with any other Person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the Company's and its
Restricted Subsidiaries' assets or adopt a plan of liquidation. Such limitations
are subject to a number of important qualifications and exceptions. Pursuant to
Section 4.06 of the Indenture, the Company must annually report to the Trustee
on compliance with such limitations.
(16) Subordination. The Notes are subordinated in right of payment,
in the manner and to the extent set forth in the Indenture, to the prior payment
in full in cash or Cash Equivalents of all Obligations on Senior Debt of the
Company, whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees to
be bound by such provisions and authorizes and expressly directs the Trustee, on
its behalf, to take such action as may be necessary or appropriate to effectuate
the subordination provided for in the Indenture and appoints the Trustee its
attorney-in-fact for such purposes.
(17) Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
(18) Defaults and Remedies. Except as set forth in the Indenture, if
an Event of Default occurs and is continuing, the Trustee or the Holders of not
less than 25% in principal amount of Notes then outstanding may declare all the
Notes to be due and payable in the manner, at the time and with the effect
provided in the Indenture. Holders of Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Notes unless it has received indemnity reasonably
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of any continuing
Default
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<PAGE> 160
or Event of Default (except a Default in payment of principal or interest when
due, including defaults in payments to be made pursuant to a Change of Control
Offer or Net Proceeds Offer, for any reason or a Default in compliance with
Article Five of the Indenture) if it determines that withholding notice is in
their interest.
(19) Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
(20) No Recourse Against Others. No partner, director, officer,
employee or stockholder, as such, of the Company or any Guarantor, as such,
shall have any liability for any obligations of the Company or any Guarantor
under the Notes, the Indenture, the Guarantees or the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
(21) Guarantees. This Note will be entitled to the benefits of
certain Guarantees, if any, made for the benefit of the Holders. Reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the Guarantors, the
Trustee and the Holders.
(22) Authentication. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
(23) Governing Law. This Note and the Indenture shall be governed by
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto and the Holders agree
to submit to the jurisdiction of the courts of the State of New York in any
action or proceeding arising out of or relating to this Note.
(24) Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
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<PAGE> 161
(25) CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note. Requests may be made to: KINETIC CONCEPTS, INC., 8023 Vantage Drive, San
Antonio, Texas 78230.
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<PAGE> 162
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _______________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute another
to act for him.
Dated: _____________________ Signed:___________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:____________________________________________________________
Signature must be guaranteed by an "eligible guarantor institution,"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
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<PAGE> 163
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$___________________
Dated: _________________ ________________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Note in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee: _________________________________
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<PAGE> 164
EXHIBIT B
CUSIP No.:
KINETIC CONCEPTS, INC.
9 5/8% SENIOR SUBORDINATED NOTE DUE 2007, SERIES B
No. $
KINETIC CONCEPTS, INC., a Texas corporation (the "Company," which
term includes any successor entities), for value received promises to pay to
or registered assigns the principal sum of Dollars on November 1,
2007.
Interest Payment Dates: May 1 and November 1, commencing May 1,
1998.
Record Dates: April 15 and October 15.
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
KINETIC CONCEPTS, INC.
By: _____________________________________
Name:
Title:
By: _____________________________________
Name:
Title:
Dated:
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<PAGE> 165
Certificate of Authentication
This is one of the 9 5/8% Senior Subordinated Notes due 2007, Series
B, referred to in the within-mentioned Indenture.
MARINE MIDLAND BANK,
as Trustee
By: _____________________________________
Authorized Signatory
Date of Authentication:
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<PAGE> 166
(REVERSE OF SECURITY)
9 5/8% Senior Subordinated Note due 2007, Series B
Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Indenture, dated as of November 5, 1997
(the "Indenture"), and as amended from time to time, by and among Kinetic
Concepts, Inc., a Texas corporation (the "Company"), the Guarantors named
therein and Marine Midland Bank, as trustee (the "Trustee").
(1) Interest. The Company promises to pay interest on the principal
amount of this Note at the rate per annum shown above. Interest on the Notes
will accrue from the most recent date on which interest has been paid or, if no
interest has been paid, from November 5, 1997. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing May 1, 1998.
Interest will be computed on the basis of a 360-day year of twelve 30-day months
and, in the case of a partial month, the actual number of days elapsed.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
(2) Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Company shall pay principal and
premium, if any, and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal and premium, if any, and
interest by check payable in such U.S. Legal Tender. The Company may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.
(3) Paying Agent and Registrar. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or Co-Registrar without notice to the Holders.
(4) Indenture. The Company issued the Notes under the Indenture.
This Note is one of a duly authorized issue of Exchange Notes of the Company
designated as its 9 5/8% Senior Subordinated Notes due 2007, Series B (the
"Unrestricted Notes"), limited (except as otherwise provided in the Indenture)
in aggregate principal amount to $300,000,000, which may be issued under the
Indenture. The Notes include the 9 5/8%
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<PAGE> 167
Senior Subordinated Notes due 2007, Series A (the "Initial Notes"), the Private
Exchange Notes, and the Unrestricted Notes, issued in exchange for the Initial
Notes pursuant to the Registration Rights Agreement. The Initial Notes, the
Private Exchange Notes and the Unrestricted Notes are treated as a single class
of securities under the Indenture. The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of such terms. The Notes
are general unsecured obligations of the Company. Payment on each Note is
guaranteed on a senior subordinated basis by the Guarantors pursuant to Articles
Twelve and Thirteen of the Indenture. Each Holder, by accepting a Note, agrees
to be bound by all of the terms and provisions of the Indenture, as the same may
be amended from time to time in accordance with its terms.
(5) Redemption. The Notes are redeemable, at the Company's option,
in whole at any time or in part from time to time, on and after November 1,
2002, upon not less than 30 nor more than 60 days' notice, at the following
Redemption Prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on November 1 of the years
set forth below, plus, in each case, accrued and unpaid interest thereon, if
any, to the date of redemption:
Year Percentage
---- ----------
2002 104.813%
2003 103.208%
2004 101.604%
2005 and thereafter 100.000%
Notwithstanding the foregoing, at any time, or from time to time, on
or prior to November 1, 2000, the Company may, at its option on one or more
occasions use all or a portion of the net cash proceeds of one or more Equity
Offerings to redeem the Notes issued under the Indenture at a redemption price
equal to 109.625% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the date of redemption, provided, that at least 65%
of the aggregate principal amount of the Notes originally issued remain
outstanding immediately following any such redemption. In order to effect the
foregoing redemption with the proceeds of any Equity Offering, the Company shall
make such redemption not more than 120 days after the consummation of any such
Equity Offering.
(6) Notice of Redemption. Notice of redemption will be mailed at
least 30 but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at its registered address. Notes in denominations larger
than $1,000 may be redeemed in part.
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<PAGE> 168
Except as set forth in the Indenture, if monies for the redemption
of the Notes called for redemption shall have been deposited with the Paying
Agent for redemption on such Redemption Date, then, unless the Company defaults
in the payment of such Redemption Price plus accrued interest, if any, the Notes
called for redemption will cease to bear interest from and after such Redemption
Date and the only right of the Holders of such Notes will be to receive payment
of the Redemption Price plus accrued interest, if any.
(7) Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales and upon the occurrence of a Change of
Control, and subject to further limitations contained therein, the Company will
make an offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
(8) Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, and (except Notes issued as payment of Interest) in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange of Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or similar
governmental charges payable in connection therewith as required by law or as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange of any Notes or portions thereof selected for redemption, except for
the unredeemed portion of any Note being redeemed in part.
(9) Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
(10) Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
(11) Discharge Prior to Redemption or Maturity. If the Company at
any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, including, under certain
circumstances, their obligation to pay the principal of and interest on the
Notes but without affecting the rights of the Holders to receive such amounts
from such deposit).
(12) Amendment; Supplement; Waiver. Subject to certain exceptions
set forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of not less than a majority
in aggregate
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<PAGE> 169
principal amount of the Notes then outstanding, and any past Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of not less than a majority in aggregate principal amount
of the Notes then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, comply
with any requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the TIA or comply with Article V of the
Indenture or make any other change that does not adversely affect the rights of
any Holder of a Note in any material respect.
(13) Restrictive Covenants. The Indenture imposes certain
limitations on the ability of the Company and the Restricted Subsidiaries to,
among other things, incur additional Debt, make payments in respect of its
Capital Stock or certain Debt, make certain Investments, create or incur liens,
enter into transactions with Affiliates, create dividend or other payment
restrictions affecting Restricted Subsidiaries, issue Preferred Stock of its
Restricted Subsidiaries, and on the ability of the Company to merge or
consolidate with any other Person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the Company's and its
Restricted Subsidiaries' assets or adopt a plan of liquidation. Such limitations
are subject to a number of important qualifications and exceptions. Pursuant to
Section 4.06 of the Indenture, the Company must annually report to the Trustee
on compliance with such limitations.
(14) Subordination. The Notes are subordinated in right of payment,
in the manner and to the extent set forth in the Indenture, to the prior payment
in full in cash or Cash Equivalents of all Obligations on Senior Debt of the
Company, whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees to
be bound by such provisions and authorizes and expressly directs the Trustee, on
its behalf, to take such action as may be necessary or appropriate to effectuate
the subordination provided for in the Indenture and appoints the Trustee its
attorney-in-fact for such purposes.
(15) Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
(16) Defaults and Remedies. Except as set forth in the Indenture, if
an Event of Default occurs and is continuing, the Trustee or the Holders of not
less than 25% in principal amount of Notes then outstanding may declare all the
Notes to be due and payable in the manner, at the time and with the effect
provided in the Indenture. Holders of Notes may not en-
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<PAGE> 170
force the Indenture or the Notes except as provided in the Indenture. The
Trustee is not obligated to enforce the Indenture or the Notes unless it has
received indemnity reasonably satisfactory to it. The Indenture permits, subject
to certain limitations therein provided, Holders of a majority in aggregate
principal amount of the Notes then outstanding to direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of Notes
notice of any continuing Default or Event of Default (except a Default in
payment of principal or interest when due, including defaults in payments to be
made pursuant to a Change of Control Offer or Net Proceeds Offer, for any reason
or a Default in compliance with Article Five of the Indenture) if it determines
that withholding notice is in their interest.
(17) Trustee Dealings with Company. The Trustee under the Indenture,
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
(18) No Recourse Against Others. No partner, director, officer,
employee or stockholder, as such, of the Company or any Guarantor, as such,
shall have any liability for any obligations of the Company or any Guarantor
under the Notes, the Indenture, the Guarantees or the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
(19) Guarantees. This Note will be entitled to the benefits of
certain Guarantees, if any, made for the benefit of the Holders. Reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations thereunder of the Guarantors, the
Trustee and the Holders.
(20) Authentication. This Note shall not be valid until the Trustee
or Authenticating Agent manually signs the certificate of authentication on this
Note.
(21) Governing Law. This Note and the Indenture shall be governed by
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto and the Holders agree
to submit to the jurisdiction of the courts of the State of New York in any
action or proceeding arising out of or relating to this Note.
(22) Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (=
B - 7
<PAGE> 171
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
(23) CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note. Requests may be made to: KINETIC CONCEPTS, INC., 8023 Vantage Drive, San
Antonio, Texas 78230.
B - 8
<PAGE> 172
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _______________________________________, agent to
transfer this Note on the books of the Company. The agent may substitute another
to act for him.
Dated: _____________________ Signed:___________________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:____________________________________________________________
Signature must be guaranteed by an "eligible guarantor institution,"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
B - 9
<PAGE> 173
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate
box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$___________________
Dated: _________________ ________________________________________________
NOTICE: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Note in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee: ___________________________________
B - 10
<PAGE> 174
EXHIBIT C
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.17 OF THE INDENTURE.
C - 1
<PAGE> 175
EXHIBIT D
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
__________ __, ____
Marine Midland Bank, as Registrar
140 Broadway, 12th Floor
New York, New York 10005
Attn.: Corporate Trust Department - KCI
Ladies and Gentlemen:
In connection with our proposed purchase of 9 5/8% Senior
Subordinated Notes due 2007 (the "Notes") of KINETIC CONCEPTS, INC. (the
"Company"), we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Notes (the "Indenture") and the undersigned agrees to be
bound by, and not to resell, pledge or otherwise transfer the Notes except
in compliance with, such restrictions and conditions and the Securities
Act of 1933, as amended (the "Securities Act"), and all applicable State
securities laws.
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act or any other applicable securities
law, and that the Notes may not be offered or sold within the United
States or to, or for the account or benefit of, U.S. persons except as
permitted in the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter stated, that
if we should sell any Notes, we will do so only (i) to the Company or any
subsidiary thereof, (ii) inside the United States in accordance with Rule
144A under the Securities Act to a person who we reasonably believe is a
"qualified institutional buyer" (as defined in Rule 144A promulgated under
the Securities Act), (iii) inside the United States to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the
Trustee (as defined in the Indenture) a signed letter containing certain
representations and agreements relating to the restrictions
D - 1
<PAGE> 176
on transfer of the Notes (the form of which letter can be obtained from
the Trustee), (iv) outside the United States in accordance with Rule 904
of Regulation S promulgated under the Securities Act, (v) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act
(if available), or (vi) pursuant to an effective registration statement
under the Securities Act, and we further agree to provide to any person
purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we will
be required to furnish to the Trustee, the Company such certification,
legal opinions and other information as the Trustee and the Company may
reasonably require to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that the Notes purchased by
us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
5. We are acquiring the Notes purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
6. We acknowledge that we have had access to such financial and
other information, have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers thereto as
we deem necessary in connection with our decision to purchase the Notes
and we have reviewed the "Transfer Restrictions" section from the
Company's Final Offering Memorandum dated October 29, 1997.
D - 2
<PAGE> 177
You, the Company, the Trustee, the Initial Purchasers and others are
entitled to rely upon this letter and are irrevocably authorized to produce this
letter or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:_______________________________________
Name:
Title:
D - 3
<PAGE> 178
EXHIBIT E
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
__________ __, ____
Marine Midland Bank, as Registrar
140 Broadway, 12th Floor
New York, New York 10005
Attn: Corporate Trust Department - KCI
Re: KINETIC CONCEPTS, INC. (the "Company")
9 5/8% Senior Subordinated Notes due 2007
(the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $__________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
E - 1
<PAGE> 179
You, the Company and counsel for the Company are entitled to rely
upon this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferee]
By: _____________________________________
Authorized Signature
E - 2
<PAGE> 180
EXHIBIT F
GUARANTEE
For value received, the undersigned hereby unconditionally
guarantees, as principal obligor and not only as a surety, to the Holder of this
Note the cash payments in United States dollars of principal of, premium, if
any, and interest on this Note (and including Additional Interest payable
thereon) in the amounts and at the times when due and interest on the overdue
principal, premium, if any, and interest, if any, of this Note, if lawful, and
the payment or performance of all other obligations of the Company under the
Indenture or the Notes, to the Holder of this Note and the Trustee, all in
accordance with and subject to the terms and limitations of this Note, Articles
Twelve and Thirteen of the Indenture and this Guarantee. This Guarantee will
become effective in accordance with Article Twelve of the Indenture and its
terms shall be evidenced therein. The validity and enforceability of any
Guarantee shall not be affected by the fact that it is not affixed to any
particular Note.
Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Indenture dated as of November 5, 1997, among
Kinetic Concepts, Inc., a Texas corporation, the Guarantors named therein and
Marine Midland Bank, as trustee (the "Trustee"), as amended or supplemented (the
"Indenture").
The obligations of the undersigned to the Holders of Notes and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in Article Twelve and Thirteen of the Indenture and reference is hereby made to
the Indenture for the precise terms of the Guarantee and all of the other
provisions of the Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW. Each Guarantor hereby agrees to submit to the jurisdiction of
the courts of the State of New York in any action or proceeding arising out of
or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
F - 1
<PAGE> 181
IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to be
duly executed.
Date: ____________________
[NAME OF GUARANTOR],
as Guarantor
By: ____________________________________
Name:
Title:
By: ____________________________________
Name:
Title:
F - 2
<PAGE> 182
EXHIBIT G
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 9 5/8% Senior Notes due 2007, Series A,
and 9 5/8% Senior Notes due 2007, Series B
(the "Notes"), of Kinetic Concepts, Inc.
This Certificate relates to $________ principal amount of Notes held
in the form of *_________ a beneficial interest in a Global Note or *_________
Physical Notes by ___________ (the "Transferor").
The Transferor:*
[ ] has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Note held by the Depositary a
Physical Note or Physical Notes in definitive, registered form of authorized
denominations and an aggregate number equal to its beneficial interest in such
Global Note (or the portion thereof indicated above); or
[ ] has requested by written order that the Registrar exchange or
register the transfer of a Physical Note or Physical Notes.
In connection with such request and in respect of each such Note,
the Transferor does hereby certify that the Transferor is familiar with the
Indenture relating to the above-captioned Notes and the restrictions on
transfers thereof as provided in Section 2.17 of such Indenture, and that the
transfer of this Note does not require registration under the Securities Act of
1933, as amended (the "Act"), because*:
[ ] Such Note is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.17(a)(II)(A) or Section
2.17(d)(i)(A) of the Indenture).
[ ] Such Note is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
[ ] Such Note is being transferred to an institutional "accredited
investor" (within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Act).
G - 1
<PAGE> 183
[ ] Such Note is being transferred in reliance on Regulation S under
the Act.
[ ] Such Note is being transferred in reliance on Rule 144 under the
Act.
Such Note is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act other
than Rule 144A or Rule 144 or Regulation S under the Act to a person other than
an institutional "accredited investor."
___________________________
[INSERT NAME OF TRANSFEROR]
By: ______________________
[Authorized Signatory]
Date: ___________________
*Check applicable box.
G - 2
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
Dated as of November 5, 1997
Among
KINETIC CONCEPTS, INC.
and
THE GUARANTORS NAMED HEREIN
as Issuers
and
BT ALEX. BROWN INCORPORATED,
and
BANCAMERICA ROBERTSON STEPHENS,
as Initial Purchasers
9 5/8% Senior Subordinated Notes due 2007
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated as of
November 5, 1997, among KINETIC CONCEPTS, INC., a Texas corporation (the
"Company"), as issuer, each of the Company's domestic subsidiaries listed on the
signature pages hereof, as guarantors (the "Guarantors" and, together with the
Company, the "Issuers"), and BT Alex. Brown and BancAmerica Robertson Stephens,
as initial purchasers (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of October 29, 1997, among the Issuers and the Initial
Purchasers (the "Purchase Agreement"), which provides for the sale by the
Company to the Initial Purchasers of $200,000,000 aggregate principal amount of
the Company's 9 5/8% Senior Subordinated Notes due 2007 (the "Notes"),
guaranteed by the Guarantors (the "Guarantees"). In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Issuers have agreed to
provide the registration rights set forth in this Agreement for the benefit of
the Initial Purchasers and any subsequent holder or holders of the Notes. The
execution and delivery of this Agreement is a condition to the Initial
Purchasers' obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4 hereof.
Advice: See the last paragraph of Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2(b) hereof.
Effectiveness Date: The 150th day after the Issue Date; provided,
however, that with respect to any Shelf Registration, the Effectiveness Date
shall be the 105th day after the Filing Date with respect thereto.
Effectiveness Period: See Section 3(a) hereof.
<PAGE> 3
-2-
Event Date: See Section 4 hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2 hereof.
Exchange Offer: See Section 2 hereof.
Exchange Offer Registration Statement: See Section 2 hereof.
Filing Date: (A) If no Exchange Offer Registration Statement has
been filed by the Issuers pursuant to this Agreement, the 45th day after the
Issue Date; provided, however, that if a Shelf Notice is given within 10 days of
the Filing Date, then the Filing Date with respect to the Initial Shelf
Registration shall be the 45th calendar day after the date of the giving of such
Shelf Notice; and (B) in each other case (which may be applicable
notwithstanding the consummation of the Exchange Offer), the 45th day after the
delivery of a Shelf Notice.
Holder: Any holder of a Registrable Note or Registrable Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of November 5, 1997, by and among
the Issuers and Marine Midland Bank, as Trustee, pursuant to which the Notes and
the Guarantees are being issued, as the same may be amended or supplemented from
time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraphs hereto.
Initial Shelf Registration: See Section 3(a) hereof.
Inspectors: See Section 5(n) hereof.
Issue Date: November 5, 1997, the date of original issuance of the
Notes.
Issuers: See the introductory paragraphs hereto.
<PAGE> 4
-3-
NASD: See Section 5(s) hereof.
Offering Memorandum: The final offering memorandum of the Company
dated October 29, 1997, in respect of the offering of the Notes.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2 hereof.
Person: An individual, trustee, corporation, partnership, joint
stock company, trust, unincorporated association, union, business association,
firm or other legal entity.
Private Exchange: See Section 2 hereof.
Private Exchange Notes: See Section 2 hereof.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act and any term sheet filed pursuant to Rule
434 under the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
Records: See Section 5(n) hereof.
Registrable Notes: Each Note upon its original issuance and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective
<PAGE> 5
-4-
Registration Statement, (ii) such Note has been exchanged pursuant to the
Exchange Offer for an Exchange Note or Exchange Notes that may be resold without
restriction under state and federal securities laws, (iii) such Note, Exchange
Note or Private Exchange Note, as the case may be, ceases to be outstanding for
purposes of the Indenture or (iv) such Note, Exchange Note or Private Exchange
Note, as the case may be, is resold pursuant to Rule 144 under the Securities
Act.
Registration Statement: Any registration statement of the Company
and/or the Guarantors that covers any of the Notes, the Exchange Notes or the
Private Exchange Notes (and the related Guarantees) filed with the SEC under the
Securities Act, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2 hereof.
Shelf Registration: See Section 3(b) hereof.
<PAGE> 6
-5-
Subsequent Shelf Registration: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and the trustee (if any)
under any indenture governing the Exchange Notes and Private Exchange Notes.
Underwritten registration or underwritten offering: A registration
in which securities of one or more of the Issuers are sold to an underwriter for
reoffering to the public.
2. Exchange Offer
(a) The Issuers shall file with the SEC, no later than the Filing
Date, a Registration Statement (the "Exchange Offer Registration Statement") on
an appropriate registration form with respect to a registered offer (the
"Exchange Offer") to exchange any and all of the Registrable Notes for a like
aggregate principal amount of notes of the Company, guaranteed by the
Guarantors, that are identical in all material respects to the Notes, except
that the Exchange Notes shall have been registered pursuant to an effective
Registration Statement under the Securities Act and shall contain no restrictive
legend thereon (the "Exchange Notes"), and which are entitled to the benefits of
the Indenture or a trust indenture which is identical in all material respects
to the Indenture (other than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with the TIA) and which, in either
case, has been qualified under the TIA. The Exchange Offer shall comply with all
applicable tender offer rules and regulations under the Exchange Act and other
applicable law. The Issuers shall use their best efforts to (x) cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer
open for at least 20 days (or longer if required by applicable law) after the
date that notice of the Exchange Offer is mailed to Holders; and (z) consummate
the Exchange Offer on or prior to the 180th day following the Issue Date. If,
after the Exchange Offer Registration Statement is initially declared effective
by the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder
is interfered with by any stop order, injunction or other order or requirement
of the SEC or any other governmental agency or court, the Exchange Offer
Registration Statement shall be deemed not to have become effective for purposes
of this Agreement.
<PAGE> 7
-6-
Each Holder that participates in the Exchange Offer will be
required, as a condition to its participation in the Exchange Offer, to
represent to the Company in writing (which may be contained in the applicable
letter of transmittal) that any Exchange Notes to be received by it will be
acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the Exchange
Notes in violation of the provisions of the Securities Act, and that such Holder
is not an affiliate of the Company within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Registrable Notes that are Private Exchange
Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and Exchange
Notes held by Participating Broker-Dealers (as defined), and the Issuers shall
have no further obligation to register Registrable Notes (other than Private
Exchange Notes and other than in respect of any Exchange Notes as to which
clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof.
No securities other than the Exchange Notes and Guarantees shall be
included in the Exchange Offer Registration Statement.
(b) The Issuers shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "Participating
Broker-Dealer"), whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies represent the
prevailing views of the staff of the SEC. Such "Plan of Distribution" section
shall also expressly permit, to the extent permitted by applicable policies and
regulations of the SEC, the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including, to the extent
permitted by applicable policies and regulations of the SEC, all Participating
Broker-Dealers, and include a statement describing the means by which
<PAGE> 8
-7-
Participating Broker-Dealers may resell the Exchange Notes in compliance with
the Securities Act.
The Issuers shall use their best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the Prospectus
contained therein in order to permit such Prospectus to be lawfully delivered by
all Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as is necessary to comply with applicable law in
connection with any resale of the Exchange Notes covered thereby; provided,
however that such period shall not exceed 180 days after such Exchange Offer is
declared effective (or such longer period if extended pursuant to the last
paragraph of Section 5 hereof) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, any Initial
Purchaser holds any Notes acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Initial Purchaser, the Company upon the request of any such
Initial Purchaser shall simultaneously with the delivery of the Exchange Notes
in the Exchange Offer, issue and deliver to any such Initial Purchaser, in
exchange (the "Private Exchange") for such Notes held by any such Initial
Purchaser, a like principal amount of notes (the "Private Exchange Notes") of
the Company, guaranteed by the Guarantors, that are identical in all material
respects to the Exchange Notes except for the placement of a restrictive legend
on such Private Exchange Notes. The Private Exchange Notes shall be issued
pursuant to the same indenture as the Exchange Notes and bear the same CUSIP
number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (ii) if the
Notes are surrendered for exchange on a date in a period which includes the
record date for an interest payment date to occur on or after the date of such
exchange and as to which interest will be paid, the date of such interest
payment date or (B) if no interest has been paid on the Notes, from the date of
the original issuance of the Notes.
In connection with the Exchange Offer, the Issuers shall:
(1) mail, or cause to be mailed, to each Holder entitled to
participate in the Exchange Offer a copy of the
<PAGE> 9
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Prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related documents;
(2) keep the Exchange Offer open for not less than 20 days after the
date that notice of the Exchange Offer is mailed to Holders (or longer if
required by applicable law);
(3) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York which may be
the Trustee or an affiliate thereof;
(4) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which
the Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer and the
Private Exchange, if any, the Issuers shall:
(1) accept for exchange all Registrable Notes validly tendered and
not validly withdrawn pursuant to the Exchange Offer and the Private
Exchange, if any;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or Private Exchange, as
the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Issuers to proceed with the Exchange
Offer or the Private Exchange, and no material adverse development shall have
occurred in any exist-
<PAGE> 10
-9-
ing action or proceeding with respect to the Issuers and (iii) all governmental
approvals shall have been obtained, which approvals the Issuers deem necessary
for the consummation of the Exchange Offer or Private Exchange.
The Exchange Notes and the Private Exchange Notes shall be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture and which, in either case, has been qualified under the TIA or
is exempt from such qualification and shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or such indenture shall provide that the Exchange Notes, the
Private Exchange Notes and the Notes shall vote and consent together on all
matters as one class and that none of the Exchange Notes, the Private Exchange
Notes or the Notes will have the right to vote or consent as a separate class on
any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Issuers are not permitted to effect
the Exchange Offer, (ii) the Exchange Offer is not consummated within 180 days
of the Issue Date, (iii) any holder of Private Exchange Notes so requests in
writing to the Company within 120 days after the consummation of the Exchange
Offer, or (iv) in the case of any Holder that participates in the Exchange
Offer, such Holder does not receive Exchange Notes on the date of the exchange
that may be sold without restriction under state and federal securities laws
(other than due solely to the status of such Holder as an affiliate of the
Company within the meaning of the Securities Act) and such Holder so notifies
the Company within 90 days after such Holder first becomes aware of such event,
then in the case of each of clauses (i) to and including (iv) of this sentence,
the Company shall promptly deliver to the Holders and the Trustee written notice
thereof (the "Shelf Notice") and shall file a Shelf Registration pursuant to
Section 3 hereof.
3. Shelf Registration
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) Shelf Registration. The Issuers shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange
Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv)
<PAGE> 11
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is applicable (the "Initial Shelf Registration"). The Issuers shall use their
best efforts to file with the SEC the Initial Shelf Registration on or before
the applicable Filing Date. The Initial Shelf Registration shall be on Form S-1
or another appropriate form permitting registration of such Registrable Notes
for resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Issuers shall not
permit any securities other than the Registrable Notes to be included in the
Initial Shelf Registration or any Subsequent Shelf Registration (as defined
below).
The Issuers shall use their best efforts to cause the Initial Shelf
Registration to be declared effective under the Securities Act on or prior to
the Effectiveness Date and to keep the Initial Shelf Registration continuously
effective under the Securities Act until the date which is two years from the
Issue Date (the "Effectiveness Period"), or such shorter period ending when (i)
all Registrable Notes covered by the Initial Shelf Registration have been sold
in the manner set forth and as contemplated in the Initial Shelf Registration or
(ii) a Subsequent Shelf Registration covering all of the Registrable Notes
covered by and not sold under the Initial Shelf Registration or an earlier
Subsequent Shelf Registration has been declared effective under the Securities
Act; provided, however, that the Effectiveness Period in respect of the Initial
Shelf Registration shall be extended to the extent required to permit dealers to
comply with the applicable prospectus delivery requirements of Rule 174 under
the Securities Act and as otherwise provided herein.
No holder of Registrable Notes may include any of its Registrable
Notes in any Shelf Registration Statement pursuant to this Agreement unless and
until such holder furnishes to the Issuers in writing, within 30 days after
receipt of a request therefor, such information as the Issuers may reasonably
request for use in connection with any Shelf Registration Statement or
Prospectus or preliminary prospectus included therein. No holder of Registrable
Notes shall be entitled to Additional Interest pursuant to Section 4 hereof
unless and until such holder shall have provided all such reasonably requested
information. Each holder of Registrable Notes as to which any Shelf Registration
Statement is being effected agrees to furnish promptly to the Issuers all
information required to be disclosed in order to make information previously
furnished to the Issuers by such Holder not materially misleading.
<PAGE> 12
-11-
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), the Issuers shall use
their best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 45 days of such cessation
of effectiveness amend the Initial Shelf Registration in a manner to obtain the
withdrawal of the order suspending the effectiveness thereof, or file an
additional "shelf" Registration Statement pursuant to Rule 415 covering all of
the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Issuers
shall use their best efforts to cause the Subsequent Shelf Registration to be
declared effective under the Securities Act as soon as practicable after such
filing and to keep such subsequent Shelf Registration continuously effective for
a period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration or any
Subsequent Shelf Registration was previously continuously effective. As used
herein the term "Shelf Registration" means the Initial Shelf Registration and
any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers shall promptly
supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
4. Additional Interest
(a) The Issuers and the Initial Purchasers agree that the Holders
will suffer damages if the Issuers fail to fulfill their obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Company agrees to pay,
as liquidated damages, without duplication, additional interest on the Notes
("Additional Interest") under the circumstances and to the extent set forth
below (each of which shall be given independent effect):
<PAGE> 13
-12-
(i) if neither the Exchange Offer Registration Statement nor the Initial
Shelf Registration has been filed on or prior to the applicable Filing
Date then, commencing on the day after any such Filing Date, Additional
Interest shall accrue on the principal amount of the Notes at a rate of
0.50% per annum for the first 90 days immediately following each such
Filing Date, and such Additional Interest rate shall increase by an
additional 0.50% per annum at the beginning of each subsequent 90-day
period; or
(ii) if neither the Exchange Offer Registration Statement nor the Initial
Shelf Registration is declared effective by the SEC on or prior to the
relevant Effectiveness Date then, commencing on the day after such
Effectiveness Date, Additional Interest shall accrue on the principal
amount of the Notes at a rate of 0.50% per annum for the first 90 days
immediately following the day after such Effectiveness Date, and such
Additional Interest rate shall increase by an additional 0.50% per annum
at the beginning of each subsequent 90-day period; or
(iii) if (A) the Issuers have not exchanged Exchange Notes for all Notes
validly tendered in accordance with the terms of the Exchange Offer on or
prior to the 180th day after the Issue Date or (B) if applicable, a Shelf
Registration has been declared effective and such Shelf Registration
ceases to be effective at any time during the Effectiveness Period, then
Additional Interest shall accrue on the principal amount of the Notes at a
rate of 0.50% per annum for the first 90 days commencing on the (x) 181st
day after the Issue Date, in the case of (A) above, or (y) the day such
Shelf Registration ceases to be effective in the case of (B) above, and
such Additional Interest rate shall increase by an additional 0.50% per
annum at the beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may not exceed
at any one time in the aggregate 1.50% per annum; provided, further, however,
that (1) upon the filing of the applicable Exchange Offer Registration Statement
or the applicable Shelf Registration as required hereunder (in the case of
clause (i) above of this Section 4), (2) upon the effectiveness of the Exchange
Offer Registration Statement or the applicable Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 4), or (3) upon
the exchange of the applicable Exchange Notes for all Notes tendered (in the
case of clause (iii)(A) of this Section 4), or upon the
<PAGE> 14
-13-
effectiveness of the applicable Shelf Registration Statement which had ceased to
remain effective (in the case of (iii)(B) of this Section 4), Additional
Interest on the Notes in respect of which such events relate as a result of such
clause (or the relevant subclause thereof), as the case may be, shall cease to
accrue.
(b) The Company shall notify the Trustee within three business days
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable in cash semiannually on each May 1 and November 1 (to the
holders of record on the April 15 and October 15 immediately preceding such
dates), commencing with the first such date occurring after any such Additional
Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
principal amount of the Registrable Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Issuers shall effect such registrations to permit
the sale of the securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Registration Statement filed by the Issuers hereunder each of the
Issuers shall:
(a) Prepare and file with the SEC prior to the applicable Filing
Date, a Registration Statement or Registration Statements as prescribed by
Sections 2 or 3 hereof, and use its best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein; provided,
however, that, if (1) such filing is pursuant to Section 3 hereof, or (2) a
Prospectus contained in the Exchange Offer Registration Statement filed pursuant
to Section 2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period relating thereto, before filing any Registration Statement or
Prospectus or any amendments or
<PAGE> 15
-14-
supplements thereto, the Issuers shall furnish to and afford the Holders of the
Registrable Notes included in such Registration Statement or each such
Participating Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if any, a reasonable opportunity to review copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed (in each case at least
five days prior to such filing, or such later date as is reasonable under the
circumstances). The Issuers shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto if the Holders of a majority
in aggregate principal amount of the Registrable Notes included in such
Registration Statement, or any such Participating Broker-Dealer, as the case may
be, their counsel, or the managing underwriters, if any, shall reasonably
object; provided, however, that if the Issuers are advised by their counsel or
their independent auditors that an amendment or supplement is necessary or
advisable, the Issuers may file such amendment or supplement notwithstanding
such reasonable objection.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented by
any Prospectus supplement required by applicable law, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act applicable to each of them with respect to
the disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus. The Issuers shall be deemed not to have used
their best efforts to keep a Registration Statement effective during the
Effectiveness Period or the Applicable Period, as the case may be, relating
thereto if any Issuer voluntarily takes any action that would result in selling
Holders of the Registrable Notes covered thereby or Participating Broker-Dealers
seeking to sell Exchange Notes not being able to sell such Registrable Notes or
such Exchange Notes during that period unless such action is (i) required by
applicable law or permitted by this Agreement or (ii) such Issuers comply with
the provisions of the last sentence of Section 5(k) or the last paragraph of
this Section 5.
<PAGE> 16
-15-
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period relating thereto from whom the Company has
received written notice that it will be a Participating Broker-Dealer in the
Exchange Offer, notify the selling Holders of Registrable Notes, or each such
Participating Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if any, promptly (but in any event within one day), and confirm
such notice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective
under the Securities Act (including in such notice a written statement that any
Holder may, upon request, obtain, at the sole expense of the Issuers, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or deemed
to be incorporated by reference and exhibits), (ii) of the issuance by the SEC
of any stop order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of any preliminary prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time when a
prospectus is required by the Securities Act to be delivered in connection with
sales of the Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of the Issuers contained in
any agreement (including any underwriting agreement) contemplated by Section
5(m) hereof cease to be true and correct in all material respects, (iv) of the
receipt by any Issuer of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or any
of the Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event, the existence of any condition or any information becoming known that
makes any statement made in such Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes in or
amendments or supplements to such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and
<PAGE> 17
-16-
that in the case of the Prospectus, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (vi) of the Issuers' determination
that a post-effective amendment to a Registration Statement would be
appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use its best efforts to prevent the issuance
of any order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable Notes
or the Exchange Notes to be sold by any Participating Broker-Dealer, for sale in
any jurisdiction, and, if any such order is issued, to use its best efforts to
obtain the withdrawal of any such order at the earliest possible moment.
(e) Subject to the provisions of the last sentence of Section 5(k)
if a Shelf Registration is filed pursuant to Section 3 and if requested by the
managing underwriter or underwriters (if any), the Holders of a majority in
aggregate principal amount of the Registrable Notes being sold in connection
with an underwritten offering or any Participating Broker-Dealer, (i) as
promptly as practicable incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters (if any),
such Holders, any Participating Broker-Dealer or counsel for any of them
reasonably request to be included therein, (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
practicable after an Issuer has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment, and
(iii) supplement or make amendments to such Registration Statement; provided,
however, that the Issuers shall not be required to take any action pursuant to
this Section 5(e) that would violate applicable law.
(f) Subject to the provisions of the last sentence of Section 5(k),
if (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a
Prospectus contained in the Exchange Offer Registration Statement filed pursuant
to Section 2 hereof is required to be delivered under the Securities Act by
<PAGE> 18
-17-
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, furnish to each selling Holder of Registrable Notes and to
each such Participating Broker-Dealer who so requests and to their respective
counsel and each managing underwriter, if any, at the sole expense of the
Issuers, one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including financial
statements and schedules, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, deliver to each selling Holder of
Registrable Notes, or each such Participating Broker-Dealer, as the case may be,
their respective counsel, and the underwriters, if any, at the sole expense of
the Issuers, as many copies of the Prospectus or Prospectuses (including each
form of preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Issuers
hereby consent to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers (if any), in connection with the offering and sale of the
Registrable Notes covered by, or the sale by Participating Broker-Dealers of the
Exchange Notes pursuant to, such Prospectus and any amendment or supplement
thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Offer Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its best efforts to register or qualify, and to cooperate
with the selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, the managing underwriter or underwriters, if
any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Notes for offer and sale under the securities or Blue Sky laws of
such jurisdictions within the United States as any selling Holder, Participating
Broker-Dealer, or the managing underwriter or underwriters reasonably request in
writing; pro-
<PAGE> 19
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vided, however, that where Exchange Notes held by Participating Broker-Dealers
or Registrable Notes are offered other than through an underwritten offering,
the Issuers agree to cause their counsel to perform Blue Sky investigations and
file registrations and qualifications required to be filed pursuant to this
Section 5(h), keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of the
Exchange Notes held by Participating Broker-Dealers or the Registrable Notes
covered by the applicable Registration Statement; provided, however, that no
Issuer shall be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or (C) subject itself to taxation in any such jurisdiction
where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may request.
(j) Use its best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to enable
the seller or sellers thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Registrable Notes, except as may be required
solely as a consequence of the nature of such selling Holder's business, in
which case the Issuers will cooperate in all reasonable respects with the filing
of such Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as
<PAGE> 20
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promptly as practicable prepare and (subject to Section 5(a) hereof) file with
the SEC, at the sole expense of the Issuers, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Notes being sold thereunder or to the
purchasers of the Exchange Notes to whom such Prospectus will be delivered by a
Participating Broker-Dealer, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, the Issuers shall not be required to amend or supplement a
Registration Statement, any related Prospectus or any document incorporated
therein by reference, in the event that, and for a period not to exceed an
aggregate of 60 days in any calendar year if, (i) an event occurs and is
continuing as a result of which the Shelf Registration, any related prospectus
or any document incorporated therein by reference as then amended or
supplemented would, in the Company's good faith judgment, contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, and (ii) (a) the Company determines in its good
faith judgment that the disclosure of such event at such time would have a
material adverse effect on the business, operations or prospects of the Company
or (b) the disclosure otherwise relates to a pending material business
transaction that has not yet been publicly disclosed.
(l) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates for
the Registrable Notes in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes.
(m) In connection with any underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the Notes
in form and substance reasonably satisfactory to the Company and take all such
other actions as are reasonably requested by the managing underwriter or
underwriters in order to expedite or facilitate the registration or the
disposition of such Registrable Notes and, in such connection, (i) make such
representations and war-
<PAGE> 21
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ranties to, and covenants with, the underwriters with respect to the business of
the Company and the subsidiaries of the Company and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings of debt securities similar to the Notes,
and confirm the same in writing if and when requested in form and substance
reasonably satisfactory to the Company; (ii) obtain the written opinions of
counsel to the Company and written updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters, addressed
to the underwriters covering the matters customarily covered in opinions
reasonably requested in underwritten offerings and such other matters as may be
reasonably requested by the managing underwriter or underwriters; (iii) use its
best efforts to obtain "cold comfort" letters and updates thereof in form, scope
and substance reasonably satisfactory to the managing underwriter or
underwriters from the independent public accountants of the Company (and, if
necessary, any other independent public accountants of the Company, any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be, included or
incorporated by reference in the Registration Statement), addressed to each of
the underwriters, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes and such other
matters as reasonably requested by the managing underwriter or underwriters as
permitted by the Statement on Auditing Standards No. 72; and (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the sellers and underwriters, if
any, than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement and the managing
underwriter or underwriters or agents, if any). The above shall be done at each
closing under such underwriting agreement, or as and to the extent required
thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, make available for inspection by any selling
Holder of such Registrable Notes being sold, or
<PAGE> 22
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each such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and instruments of the Company and subsidiaries of the Company
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise any applicable due diligence responsibilities, and cause the officers,
directors and employees of the Company and any of its subsidiaries to supply all
information reasonably requested by any such Inspector in connection with such
Registration Statement and Prospectus. Each Inspector shall agree in writing
that it will keep the Records confidential and that it will not disclose any of
the Records unless (i) the disclosure of such Records is necessary to avoid or
correct a material misstatement or material omission in such Registration
Statement or Prospectus, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction, or (iii) the
information in such Records has been made generally available to the public
other than as a result of the disclosure or failure to safeguard by such
Inspector; provided, however, that prior notice shall be provided as soon as
practicable to the Company of the potential disclosure of any information by
such Inspector pursuant to clauses (i) or (ii) of this sentence to permit the
Company to obtain a protective order (or waive the provisions of this paragraph
(n)) and that such Inspector shall take such actions as are reasonably necessary
to protect the confidentiality of such information (if practicable) to the
extent such action is otherwise not inconsistent with, an impairment of or in
derogation of the rights and interests of the Holder or any Inspector.
Each selling Holder of such Registrable Notes and each such
Participating Broker-Dealer will be required to agree that information obtained
by it as a result of such inspections shall be deemed confidential and shall not
be used by it as the basis for any market transactions in the securities of the
Issuers unless and until such information is made generally available to the
pubic. Each selling Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to further agree that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Issuers and allow the Issuers to
<PAGE> 23
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undertake appropriate action to prevent disclosure of the Records deemed
confidential at the Issuers' expense.
(o) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the Holders
of the Registrable Notes, to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use its best efforts to cause such trustee to execute,
all documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders with regard to any applicable
Registration Statement, a consolidated earnings statement satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later than 60 days
after the end of any fiscal quarter (or 120 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to underwriters in
such an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(q) Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, that the Exchange Notes or Private Exchange Notes,
as the case may be, and the related indenture constitute legal, valid and
binding obligations of the Company and the related Guarantees, the legal, valid
and binding obligations of each Guarantor, enforceable against them in
accordance with their respective terms, subject to customary exceptions and
qualifications.
<PAGE> 24
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(r) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the Company
(or to such other Person as directed by the Issuer) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Company shall mark,
or cause to be marked, on such Registrable Notes that such Registrable Notes are
being canceled in exchange for the Exchange Notes or the Private Exchange Notes,
as the case may be; in no event shall such Registrable Notes be marked as paid
or otherwise satisfied.
(s) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings required to be made with the National Association of Securities
Dealers, Inc. (the "NASD").
(t) Use its best efforts to take all other steps reasonably
necessary to effect the registration of the Exchange Notes and/or Registrable
Notes covered by a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Notes as the
Company may, from time to time, reasonably request. The Company may exclude from
such registration the Registrable Notes of any seller so long as such seller
fails to furnish such information within a reasonable time after receiving such
request. Each seller as to which any Shelf Registration is being effected agrees
to furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such seller
not materially misleading.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the securities covered thereby and that
such holding does not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that such reference
to such Holder by name or otherwise is not required by the Securities Act or any
similar federal
<PAGE> 25
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statute then in force, the deletion of the reference to such Holder in any
amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange
Notes to be sold by such Participating Broker-Dealer, as the case may be, that,
upon actual receipt of any notice from the Company of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi)
hereof, such Holder will forthwith discontinue disposition of such Registrable
Notes covered by such Registration Statement or Prospectus or Exchange Notes to
be sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event that the Company shall give any such
notice, the Applicable Period shall be extended by the number of days during
such periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y)
the Advice.
6. Registration Expenses
All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers (other than any underwriting discounts or
commissions) shall be borne by the Company whether or not the Exchange Offer
Registration Statement or any Shelf Registration is filed or becomes effective
or the Exchange Offer is consummated, including, without limitation, (i) all
registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the holders of Registrable Notes are located,
<PAGE> 26
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in the case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in
the case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for Registrable Notes or
Exchange Notes in a form eligible for deposit with The Depository Trust Company
and of printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Notes included in any Registration
Statement or in respect of Registrable Notes or Exchange Notes to be sold by any
Participating Broker-Dealer during the Applicable Period, as the case may be,
(iii) reasonable messenger, telephone and delivery expenses incurred in
connection with the Exchange registration statement or shelf registration, (iv)
fees and disbursements of counsel for the Company and reasonable fees and
disbursements of one special counsel for all of the sellers of Registrable Notes
(exclusive of any counsel retained pursuant to Section 7 hereof), (v) fees and
disbursements of all independent certified public accountants referred to in
Section 5(m)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (vi) Securities Act liability insurance, if the Company desires
such insurance, (vii) fees and expenses of all other Persons retained by the
Issuer, (viii) internal expenses of the Company (including, without limitation,
all salaries and expenses of officers and employees of the Company performing
legal or accounting duties), (ix) the expense of any annual audit, (x) any fees
and expenses incurred in connection with the listing of the securities to be
registered on any securities exchange, and the obtaining of a rating of the
securities, in each case, if applicable, (xi) the expenses relating to printing,
word processing and distributing all Registration Statements, underwriting
agreements, indentures and any other documents necessary in order to comply with
this Agreement, and (xii) the fees and expenses of the Trustee and any exchange
agent and the fees and expenses of their counsel.
7. Indemnification
(a) Each of the Issuers, jointly and severally, agrees to indemnify
and hold harmless each Holder of Registrable Notes and each Participating
Broker-Dealer selling Exchange Notes during the Applicable Period, the
affiliates, officers, directors, representatives, employees and agents of each
such Person, and each Person, if any, who controls any such Person within the
meaning of either Section 15 of the Securities Act
<PAGE> 27
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or Section 20 of the Exchange Act (each, a "Participant"), from and against any
and all losses, claims, damages, judgments, liabilities and expenses (including,
without limitation, the reasonable legal fees and other reasonable expenses
actually incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) or Prospectus (as amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) or
any preliminary prospectus, or caused by, arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the case of the
Prospectus in light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
any Participant furnished to the Company in writing by such Participant
expressly for use therein; provided, however, that the Company will not be
liable if such untrue statement or omission or alleged untrue statement or
omission was contained in the Prospectus or any amendment or supplement thereto
and the Prospectus does not contain any other untrue statement or omission of a
material fact that was the subject matter of the related proceeding and any such
loss, liability, claim, damage or expense suffered or incurred by the
Participants resulted from any action, claim or suit by any Person who purchased
Registrable Notes or Exchange Notes which are the subject thereof from such
Participant and it is established in the related proceeding that such
Participant failed to deliver or provide a copy of the Prospectus (as amended or
supplemented) to such Person with or prior to the confirmation of the sale of
such Registratable Notes or Exchange Notes sold to such Person if required by
applicable law unless such failure to deliver or provide a copy of the
Prospectus (as amended or supplemented) was a result of noncompliance by the
Company with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Issuers, their respective affiliates, officers, directors,
representatives, employees and agents of each Issuer and each Person who
controls each Issuer within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent (but on a several, and not
joint, basis) as the foregoing indemnity from the Issuers to each Participant,
but only with reference
<PAGE> 28
-27-
to information relating to such Participant furnished to the Company in writing
by such Participant expressly for use in any Registration Statement or
Prospectus, any amendment or supplement thereto, or any preliminary prospectus.
The liability of any Participant under this paragraph shall in no event exceed
the proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Persons against whom such indemnity may be sought (the "Indemnifying
Persons") in writing, and the Indemnifying Persons, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Persons may reasonably designate in such proceeding and shall pay
the fees and expenses actually incurred by such counsel related to such
proceeding; provided, however, that the failure to so notify the Indemnifying
Persons will not relieve it from any liability which it may have hereunder or
otherwise. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Persons and
the Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Persons shall have failed within a reasonable period of time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both any Indemnifying Person and the Indemnified Person or any affiliate thereof
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that, unless there exists a conflict among Indemnified persons, the Indemnifying
Persons shall not, in connection with such proceeding or separate but
substantially similar related proceeding in the same jurisdiction arising out of
the same general allegations, be liable for the fees and expenses of more than
one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed promptly as
they are incurred. Any such separate firm for the Participants and such control
Persons of Participants shall be designated in writing by Participants who sold
a majority in interest of Registrable Notes and Exchange Notes sold by all such
Participants and shall be reasonably accept-
<PAGE> 29
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able to the Company, and any such separate firm for the Issuers, their
affiliates, officers, directors, representatives, employees and agents and such
control Persons of such Issuer shall be designated in writing by such Issuer and
shall be reasonably acceptable to the representatives of the Holders.
The Indemnifying Persons shall not be liable for any settlement of
any proceeding effected without its prior written consent (which consent shall
not be unreasonably withheld or delayed), but if settled with such consent or if
there be a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
each of the Indemnifying Persons agrees to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. No Indemnifying Person shall, without the prior written
consent of the Indemnified Persons (which consent shall not be unreasonably
withheld or delayed), effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, or indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional written
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of such
Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the offering of
the Notes or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims,
<PAGE> 30
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damages or liabilities (or actions in respect thereof) as well as any other
relevant equitable considerations.
The relative benefits received by the Issuers on the one hand and
the Participants on the other shall be deemed to be in the same proportion as
the total proceeds from the offering (net of discounts and commissions but
before deducting expenses) of the Notes received by the Issuers bears to the
total proceeds received by such Participant from the sale of Registrable Notes
or Exchange Notes, as the case may be, in each case as set forth in the table on
the cover page of the Offering Memorandum in respect of the sale of the Notes.
The relative fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Issuers on the one hand or such Participant or such
other Indemnified Person, as the case may be, on the other, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages, judgments, liabilities and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
<PAGE> 31
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(f) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the Indemnifying Person to the Indemnified Person as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Issuers set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any person who controls a
Holder, the Issuer, its directors, officers, employees or agents or any person
controlling an Issuer, and (ii) any termination of this Agreement.
(g) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
Each of the Issuers covenants and agrees that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
in accordance with the requirements of the Securities Act and the Exchange Act
and, if at any time such Issuer is not required to file such reports, such
Issuer will, upon the request of any Holder or beneficial owner of Registrable
Notes, make available such information necessary to permit sales pursuant to
Rule 144A under the Securities Act. Each of the Issuers further covenants and
agrees, for so long as any Registrable Notes remain outstanding that it will
make available to any Holder of Registrable Notes, all to the extent required
from time to time to enable such holder to sell Registrable Notes without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144(k) and Rule 144A under the Securities Act, as such
Rules may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf Registration
are to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
<PAGE> 32
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Notes included in such offering and shall be reasonably acceptable to the
Issuer.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. The Issuers have not, as of the date
hereof, and the Issuers shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Issuers' other issued and outstanding
securities under any such agreements. The Issuers will not enter into any
agreement with respect to any of their securities which will grant to any Person
piggy-back registration rights with respect to any Registration Statement.
(b) Adjustments Affecting Registrable Notes. The Issuers shall not,
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (I) the Company and (II)(A) the Holders of not less than a majority
in aggregate principal amount of the then outstanding Registrable Notes and (B)
in circumstances that would adversely affect the Participating Broker-Dealers,
the Participating Broker-Dealers holding not less than a majority in aggregate
principal amount of the Exchange Notes held by all Participating Broker-Dealers;
provided, however, that Section 7 and this Section 10(c) may not be amended,
modified or supplemented without the prior written consent of each Holder and
each Participating
<PAGE> 33
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Broker-Dealer (including any person who was a Holder or Participating
Broker-Dealer of Registrable Notes or Exchange Notes, as the case may be,
disposed of pursuant to any Registration Statement) affected by any such
amendment, modification or supplement. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Notes being sold pursuant to such
Registration Statement.
(d) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture.
(ii) if to the Issuers, at the address as follows:
c/o Kinetic Concepts, Inc.
8023 Vantage Drive
P.O. Box 659508
San Antonio, Texas 78285-9502
Facsimile No.: (210) 524-6998
Attention: Chief Financial Officer
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
<PAGE> 34
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(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers.
(f) Release of Subsidiary Guarantors. If any Subsidiary Guarantor
becomes a party to this Agreement and is subsequently released from its
obligations under the Indenture in accordance with the terms thereof then such
Subsidiary Guarantor shall be released from its obligations hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(j) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(k) Securities Held by the Company or Its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder,
<PAGE> 35
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Registrable Notes held by the Company or its affiliates (as such term is defined
in Rule 405 under the Securities Act) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(l) Third-Party Beneficiaries. Holders of Registrable Notes
and Participating Broker-Dealers are intended third-party beneficiaries of
this Agreement, and this Agreement may be enforced by such Persons.
(m) Entire Agreement. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Holders on the one hand
and the Issuers on the other, or between or among any agents, representatives,
parents, subsidiaries, affiliates, predecessors in interest or successors in
interest with respect to the subject matter hereof and thereof are merged herein
and replaced hereby.
<PAGE> 36
-35-
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
The Company:
KINETIC CONCEPTS, INC.
By: Dennis E. Noll
____________________________
Name:
Title:
The Guarantors:
KCI HOLDING COMPANY, INC.
By: Dennis E. Noll
____________________________
Name:
Title:
PLEXUS ENTERPRISES, INC.
By: Dennis E. Noll
____________________________
Name:
Title:
MEDICAL RETRO DESIGN, INC.
By: Dennis E. Noll
____________________________
Name:
Title:
KCI PROPERTIES LTD.
By: Dennis E. Noll
____________________________
Name:
Title:
<PAGE> 37
-36-
KCI REAL PROPERTY LTD.
By: Dennis E. Noll
____________________________
Name:
Title:
KCI THERAPEUTIC SERVICES, INC.
By: Dennis E. Noll
____________________________
Name:
Title:
KCI NEW TECHNOLOGIES, INC.
By: Dennis E. Noll
____________________________
Name:
Title:
KCI INTERNATIONAL, INC.
By: Dennis E. Noll
____________________________
Name:
Title:
KCI AIR, INC.
By: Dennis E. Noll
____________________________
Name:
Title:
KCI-RIK ACQUISITION CORP.
By: Dennis E. Noll
____________________________
Name:
Title:
<PAGE> 38
-37-
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
BT ALEX. BROWN INCORPORATED,
BANCAMERICA ROBERTSON STEPHENS,
as Initial Purchasers
By: BT Alex. Brown Incorporated
By: Kate W. Cook
____________________________
Name: Kate W. Cook
Title: Managing Director
<PAGE> 1
EXHIBIT 4.8
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED.
FORM OF LETTER OF TRANSMITTAL
TO ACCOMPANY 9 5/8% SENIOR NOTES DUE 2007,
SERIES A (CUSIP NO. ) OF
KINETIC CONCEPTS, INC.
(A TEXAS CORPORATION)
TENDERED PURSUANT TO THE PROSPECTUS
DATED , 1998
(PLEASE READ THE INSTRUCTIONS CAREFULLY)
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF) AND ALL OTHER
DOCUMENTS AND INSTRUMENTS REQUIRED HEREBY SHOULD BE SENT OR DELIVERED TO THE
EXCHANGE AGENT AT THE ADDRESS SET FORTH BELOW. TENDERS MUST BE RECEIVED BY THE
EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS THE EXCHANGE OFFER IS EXTENDED (THE "EXPIRATION DATE").
THE EXCHANGE AGENT
MARINE MIDLAND BANK
<TABLE>
<CAPTION>
By Mail: By Courier or By Hand:
<S> <C>
Marine Midland Bank Marine Midland Bank
Attn: Corporate Trust Department Attn: Corporate Trust Operations
140 Broadway, Level A 140 Broadway, Level A
New York, New York 10005-1180 New York, New York 10005-1180
</TABLE>
By Facsimile: (212) 658-2292
Attn: Paulette Shaw
Telephone: (212) 658-5931
------------------------
DELIVERY TO ANY ADDRESS OTHER THAN AS SET FORTH
HEREIN WILL NOT CONSTITUTE VALID DELIVERY.
------------------------
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE
READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Series A Notes
(as defined below) only (a) if Series A Notes are to be forwarded herewith or
(b) if delivery of such Series A Notes is to be made by book-entry transfer to
the account maintained by the Exchange Agent at The Depository Trust Company
(DTC) pursuant to the procedures set forth under the caption "The Exchange
Offer -- How to Tender" in the Prospectus (as defined below). DELIVERY OF
DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
<PAGE> 2
Holders of Series A Notes who cannot deliver their Series A Notes or
deliver confirmation of the book-entry transfer of their Series A Notes into the
Exchange Agent's account at DTC and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date must tender their Series A
Notes pursuant to the guaranteed delivery procedure set forth under the caption
"The Exchange Offer -- How to Tender" in the Prospectus. See Instruction 2
herein.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution
------------------------------------------------------------------------------
DTC Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED SERIES A NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name of Registered Owner(s)
------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-------------------------------------------------------
Name of Institution which Guaranteed delivery
------------------------------------------------------------
If Delivered By Book-Entry Transfer:
Name of Tendering Institution
------------------------------------------------------------------------------
DTC Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERING BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED SERIES A
NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH
ABOVE.
<PAGE> 3
DESCRIPTION OF SERIES A NOTES TENDERED
SERIES A NOTES TENDERED
---------------------------------------------------------------------------
IF BLANK, PRINT NAME AND ADDRESS OF REGISTERED HOLDER.
- --------------------------------------------------------------------------------
(ATTACH ADDITIONAL LIST IF NECESSARY)
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL PRINCIPAL AMOUNT OF
SERIES A AMOUNT OF SERIES A NOTES
NOTES NUMBER(S)* SERIES A NOTES TENDERED**
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Totals:
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Book-Entry Holders.
** The aggregate principal amount of all Series A Notes held shall be deemed
tendered unless a lesser principal amount is specified in this column. See
Instruction 4.
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Pursuant to the terms and subject to the conditions of the Exchange Offer
(as described below) of Kinetic Concepts, Inc., a Texas corporation (the
"Company" or "KCI"), to holders of the Company's 9 5/8% Senior Subordinated
Notes due 2007, Series A issued pursuant to the Prospectus dated October 29,
1997 (the "Series A Notes"), as set forth in the Prospectus dated
, 1998 (the "Prospectus") and this Letter of Transmittal
(which, together with the Prospectus, constitute the Exchange Offer), the signer
of this Letter of Transmittal (the "Holder") hereby accepts the Exchange Offer
and tenders the Series A Notes listed on this Letter of Transmittal in exchange
for a like principal amount of 9 5/8% Senior Subordinated Notes due 2007, Series
B (the "Exchange Notes"). The Exchange Notes will be substantially identical to
the Series A Notes except that the resale of the Exchange Notes will not be
subject to the restrictions of Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act"), and the Exchange Notes will not be subject to
certain interest rate increase provisions which were applicable to the Series A
Notes in certain circumstances relating to the timing of the Exchange Offer. The
Holder hereby acknowledges receipt of the Prospectus. Capitalized terms used but
not defined herein have the respective meanings given such terms in the
Prospectus.
Accordingly, subject to, and effective upon, acceptance for exchange of the
Series A Notes tendered herewith in accordance with the terms and conditions of
the Exchange Offer, the Holder hereby sells, assigns and transfers to the
Company all right, title and interest in and to all of the Series A Notes that
are being tendered for exchange hereby, and hereby irrevocably constitutes and
appoints the Exchange Agent the true and lawful agent and attorney-in-fact of
the Holder with respect to such securities, with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver Series A Notes tendered hereby or transfer ownership
of such securities on the account books maintained by DTC together, in either
such case, with the accompanying evidences of transfer and authority, to the
Company upon the receipt by the Exchange Agent, as the Holder's agent, of the
consideration therefor pursuant to the Exchange Offer, and (ii) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Series A Notes.
THE HOLDER HEREBY REPRESENTS AND WARRANTS THAT THE HOLDER HAS FULL POWER
AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE SERIES A NOTES
TENDERED HEREBY AND TO ACQUIRE THE EXCHANGE NOTES ISSUABLE UPON THE EXCHANGE OF
SUCH TENDERED SECURITIES, THAT THE EXCHANGE AGENT, AS AGENT OF THE COMPANY, WILL
ACQUIRE GOOD AND UNENCUMBERED TITLE TO SUCH TENDERED SERIES A NOTES, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THE SERIES A
NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIM OR ENCUMBRANCE WHEN
THE SAME ARE ACCEPTED BY THE COMPANY. THE HOLDER WILL, UPON REQUEST, EXECUTE AND
DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO
BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, SALE, ASSIGNMENT AND
TRANSFER OF THE SERIES A NOTES TENDERED HEREBY.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the Holder, and any
obligation of the Holder hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the Holder. Except as stated in the
Prospectus, this tender is irrevocable.
A tender of Series A Notes pursuant to the procedures described in the
Prospectus and in the instructions hereto will constitute the Holder's
acceptance of the terms and conditions of the Exchange Offer and a binding
agreement between the tendering Holder of Series A Notes and the Company upon
the terms and subject to the conditions of the Exchange Offer. The Holder
recognizes that, under certain circumstances set forth in the Prospectus, the
Company may not be required to accept any of the Series A Notes tendered for
exchange
<PAGE> 5
hereby. The Holder hereby directs that the Exchange Notes and/or any Series A
Notes representing any principal amount of such securities not exchanged be
issued in the name of the Holder. The Holder understands that Holders who tender
Series A Notes by book-entry transfer ("Book-Entry Holders") will receive their
Exchange Notes and any principal amount of Series A Notes not exchanged will be
returned to such Book-Entry Holder by crediting in the name of such Book-Entry
Holder the account maintained by DTC. The Holder recognizes that the Company has
no obligation to transfer any Series A Notes from the name(s) of the registered
holder(s) thereof.
BY TENDERING SERIES A NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
HOLDER IS DEEMED TO REPRESENT AND AGREE, AND HEREBY REPRESENTS AND AGREES, THAT
(I) IT IS ACQUIRING EXCHANGE NOTES ISSUABLE IN EXCHANGE THEREFOR IN THE ORDINARY
COURSE OF ITS BUSINESS, (II) UNLESS IT IS A BROKER-DEALER REFERRED TO IN THE
NEXT SENTENCE, IT IS NOT ENGAGING AND DOES NOT INTEND TO ENGAGE IN THE
DISTRIBUTION OF THE EXCHANGE NOTES, (III) AT THE TIME OF CONSUMMATION OF THE
EXCHANGE OFFER THE HOLDER WILL HAVE NO ARRANGEMENT OR UNDERSTANDING WITH ANY
PERSON TO PARTICIPATE IN THE DISTRIBUTION OF THE EXCHANGE NOTES IN VIOLATION OF
THE PROVISIONS OF THE SECURITIES ACT, (IV) THE HOLDER IS NOT AN AFFILIATE OF THE
COMPANY OR ANY OF THE GUARANTORS WITHIN THE MEANING OF RULE 405 UNDER THE
SECURITIES ACT AND (V) IF IT PARTICIPATES IN THE EXCHANGE OFFER FOR THE PURPOSE
OF DISTRIBUTING THE EXCHANGE NOTES IT MUST COMPLY WITH THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY
RESALE OF THE EXCHANGE NOTES. EACH HOLDER WHO IS A PARTICIPATING BROKER-DEALER
(AS DEFINED IN THE PROSPECTUS) HOLDING SERIES A NOTES ACQUIRED FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES THAT WILL
RECEIVE EXCHANGE NOTES IN EXCHANGE FOR SUCH SERIES A NOTES PURSUANT TO THE
EXCHANGE OFFER FURTHER REPRESENTS AND AGREES THAT IT WILL DELIVER A PROSPECTUS
(WHICH MAY BE THE PROSPECTUS) IN CONNECTION WITH ANY RESALE OF SUCH EXCHANGE
NOTES DURING THE PERIOD REQUIRED BY THE SECURITIES ACT. BY ACKNOWLEDGING THAT IT
WILL DELIVER AND BY DELIVERING A PROSPECTUS, A PARTICIPATING BROKER-DEALER WILL
NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE
SECURITIES ACT.
<PAGE> 6
HOLDER SIGN HERE
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
(Signature(s) of Owner(s))
Dated
- --------------------------------------------------------------------- , 1995
Holder's Telephone Number
- -----------------------------------------------------
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
Series A Notes. If signature is by an attorney, executor, administrator,
trustee, guardian or others acting in a fiduciary capacity, please set forth
full title and see Instruction 5.)
SIGNATURE(S) GUARANTEED
(SEE INSTRUCTION 1)
- --------------------------------------------------------------------------------
(Firm -- Please Print)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Date)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5 AND 6)
To be completed ONLY by registered holders and ONLY if Exchange Notes or
Series A Notes representing any principal amount of such securities not
exchanged are to be sent to the Holder at an address other than that shown
above.
Mail Exchange Notes (or Series A Notes) to:
(Name -- Please Print)
- --------------------------------------------------------------------------------
(Address)(Include Zip Code)
- ---------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR PARTICIPATING BROKER-DEALERS ONLY
(SEE INSTRUCTION 11)
Please send
- ------------------------ copies of the Prospectus and any supplements or
amendments thereto to the following address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on Letters of Transmittal need not
be guaranteed, except as provided in this Instruction 1. In cases where
Series A Notes are tendered for exchange by a registered holder of
Series A Notes who has completed the box entitled "Special Delivery
Instructions" on the Letter of Transmittal, signatures on Letters of
Transmittal (or facsimiles thereof) must be guaranteed by a firm that
is a bank, broker, dealer, credit union, savings association or other
entity which is a member in good standing of the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program, the Stock Exchange Medallion Program, or
by any other bank, broker, dealer, credit union, savings association or
other entity which is an "eligible guarantor institution," as such term
is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934,
as amended (each of the foregoing constituting an "Eligible
Institution").
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. In order to
participate in the Exchange Offer and receive Exchange Notes, a holder
must properly complete and duly execute (with signatures guaranteed if
required by Instruction 1) the Letter of Transmittal (or a facsimile
thereof) and mail or deliver it, together with the Series A Notes to be
tendered for exchange (or the Exchange Agent must receive a timely
confirmation of a book-entry transfer of such Series A Notes into the
Exchange Agent's account at DTC as described in the Prospectus) and any
other required documents, to the Exchange Agent. The Exchange Agent
must receive the foregoing documents and instruments on or prior to the
Expiration Date. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.
If a holder desires to tender Series A Notes pursuant to the Exchange
Offer and such holder's Series A Notes are not immediately available,
or if the procedure for book-entry transfer cannot be completed on a
timely basis, or such holder cannot deliver the Series A Notes and all
other required documents to the Exchange Agent prior to the Expiration
Date, such Series A Notes may be tendered if all of the following
guaranteed delivery procedures are complied with: (i) such tenders are
made by or through an Eligible Institution; (ii) a properly completed
and duly executed Notice of Guaranteed Delivery, in substantially the
form provided by the Company, is received by the Exchange Agent on or
prior to the Expiration Date; and (iii) the Series A Notes, in proper
form for transfer (or confirmation of book-entry transfer of such
Series A Notes into the Exchange Agent's account at DTC as described in
the Prospectus), together with a properly completed and duly executed
Letter of Transmittal and all other documents required by this Letter
of Transmittal, are received by the Exchange Agent within three New
York Stock Exchange, Inc. trading days after the date of execution of
such Notice of Guaranteed Delivery, all as provided under the caption
"The Exchange Offer -- How to Tender" in the Prospectus.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptability of Series A Notes tendered will be
determined by the Company in its sole discretion, and such
determinations will be final and binding. The Company reserves the
right to reject any and all tenders determined by it not to be in
proper form or otherwise not valid or the acceptance for exchange of
which may, in the opinion of the Company's counsel, be unlawful or to
waive any irregularities or conditions. The Company's interpretation of
the terms and conditions of the Exchange Offer (including the Letter of
Transmittal and Instructions thereto) will also be final and binding.
The Company and the Exchange Agent are not under any duty to give
notification of any irregularities or defects and shall not incur any
liability for failure to give any such notification. Tenders will not
be deemed to have been made until such irregularities or defects have
been cured or waived. Any tender (including the Letter of Transmittal
and Series A Notes) that is not properly completed and executed, and as
to which irregularities or defects are not cured or waived, will be
returned by the Exchange Agent to the tendering holder promptly after
the Expiration Date without cost to the tendering holder (or, in the
<PAGE> 8
case of Series A Notes delivered by book-entry transfer within DTC, the
tendered Series A Notes will be credited to the account maintained
within DTC by the participant).
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE SERIES A
NOTES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH DTC,
IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER AND, EXCEPT AS
OTHERWISE PROVIDED IN THIS INSTRUCTION 2, THE DELIVERY ARE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY
MAIL, REGISTERED MAIL, WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted. All
tendering holders, by execution of this Letter of Transmittal or
facsimile hereof, waive any rights to receive any notice of the
acceptance of their tender.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
Series A Note numbers and the principal amount of Series A Notes should
be listed on a separate signed schedule attached hereto.
4. PARTIAL TENDERS. If less than all of the principal amount represented
by any Series A Note submitted is to be tendered, the principal amount
of the Series A Notes which are to be tendered should be stated in the
box entitled "Principal Amount of Series A Notes Tendered." New Series
A Notes for the remaining principal amount of the old Series A Note(s)
will either be sent to the registered holder of the Series A Note(s)
tendered as soon as practicable after the tender has been accepted or
credited to the holder's account in accordance with appropriate
book-entry procedures. The aggregate principal amount of all Series A
Notes listed will be deemed to have been tendered unless otherwise
indicated. Partial tenders of all Series A Notes may be made only if
(i) the principal amount tendered is equal to $1,000 or an integral
multiple thereof; and (ii) the remaining untendered portion of such
Series A Note is in a principal amount of $250,000, or any integral
multiple of $1,000 in excess of such amount.
5. SIGNATURES ON LETTER OF TRANSMITTAL. This Letter of Transmittal must
be signed by the registered holder of the Series A Note(s) tendered
hereby and if the Series A Notes are registered the signature must
correspond exactly with the name as written on the face of the Series A
Note(s) with alteration, enlargement or any change whatsoever.
If the Series A Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of
Transmittal.
If this Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations
or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence
satisfactory to the Company of their authority to so act must be
submitted.
6. DELIVERY OF EXCHANGE NOTES. Delivery of Exchange Notes will be made
promptly after the Expiration Date for all Series A Notes properly
tendered and accepted for exchange by the Company. The Exchange Notes
of registered holders will be issued in the name of the registered
holder(s) of the Series A Notes and will either be mailed to such
holder(s) or credited to such holder's account in accordance with
appropriate book-entry procedures. In the case of tenders by Notice of
Guaranteed Delivery, Exchange Notes will not be delivered until the
Letter of Transmittal, the Series A Notes relating to such Notice of
Guaranteed Delivery (or a timely confirmation of a book-entry transfer
of such Series A Notes into the Exchange Agent's account of DTC) and
all other required documents have been received by the Exchange Agent.
7. SECURITY TRANSFER TAXES. The Company will pay all security transfer
taxes, if any, applicable to the exchange of Series A Notes tendered
and accepted pursuant to the Exchange Offer.
<PAGE> 9
8. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W9. Under the
federal income tax laws, payments that may be made by the Company on
account of Exchange Notes issued pursuant to the Exchange Offer may be
subject to backup withholding at the rate of 31%. In order to avoid
such backup withholding, each tendering holder should complete and sign
the Substitute Form W-9 included in this Letter of Transmittal and
either (a) provide the correct taxpayer identification number ("TIN")
and certify, under penalties of perjury, that the TIN provided is
correct and that (i) the holder has not been notified by the Internal
Revenue Service (the "IRS") that the holder is subject to backup
withholding as a result of failure to report all interest or dividends
or (ii) the IRS has notified the holder that the holder is no longer
subject to backup withholding; or (b) provide an adequate basis for
exemption. If the tendering holder has not been issued a TIN and has
applied for one, or intends to apply for one in the near future, such
holder should write "Applied For" in the space provided for the TIN in
Part I of the Substitute Form W-9, sign and date the Substitute Form
W-9 and sign the Certificate of Payee Awaiting Taxpayer Identification
Number. If "Applied For" is written in Part I, the Company (or the
Paying Agent under the Indenture governing the Exchange Notes) shall
retain 31% of payments made to the tendering holder during the sixty
day period following the date of the Substitute Form W-9. If the holder
furnishes the Exchange Agent or the Company with its TIN within sixty
days after the date of the Substitute Form W-9, the Company (or the
Paying Agent) shall remit such amounts retained during the sixty day
period to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the
holder has not provided the Exchange Agent or the Company with its TIN
within such sixty day period, the Company (or the Paying Agent) shall
remit such previously retained amounts to the IRS as backup
withholding. In general, if a holder is an individual, the TIN is the
Social Security number of such individual. If the Exchange Agent or the
Company is not provided with the correct TIN, the holder may be subject
to a $50 penalty imposed by the IRS. Certain holders (including, among
others, all corporations and certain foreign individuals) are not
subject to these backup withholding and reporting requirements. In
order for a foreign individual to qualify as an exempt recipient, such
holder must submit a statement (generally, IRS Form W-8), signed under
penalties of perjury, attesting to that individual's exempt status.
Such statements can be obtained from the Exchange Agent.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Notes to be deemed invalidly tendered, but may require the Company (or
the Paying Agent) to withhold 31% of the amount of any payment made on
account of the Exchange Notes. Backup withholding is not an additional
federal income tax. Rather, the federal income tax liability of a
person subject to backup withholding will be reduced by the amount of
tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the IRS.
9. WAIVER OF CONDITIONS. Subject to limitations set forth in the
Prospectus, the conditions of the Exchange Offer may be waived by the
Company, in whole or in part, at any time or from time to time, in the
Company's sole discretion in the case of any Series A Notes tendered.
10. LOST, DESTROYED OR STOLEN NOTES. If any Series A Note has been lost,
stolen, mutilated or destroyed, the holder should promptly notify the
Trustee, Marine Midland Bank, of such fact in writing, or call (212)
658-6433. The holder will then be directed as to the steps that must be
taken in order to replace the Series A Note. The Letter of Transmittal
and related documents cannot be processed until the procedures for
replacing lost, stolen, mutilated or destroyed Series A Notes have been
followed.
11. REQUEST FOR ADDITIONAL COPIES. Questions and requests for additional
copies of the Prospectus and this Letter of Transmittal may be obtained
from the Exchange Agent at the address and telephone number set forth
in the Prospectus.
12. PARTICIPATING BROKER-DEALERS. Each Holder which is a Participating
Broker-Dealer must advise the Exchange Agent as to the number of copies
of the Prospectus (including supplements and amendments thereto) it
will require in order to satisfy the prospectus delivery
<PAGE> 10
requirements for resales of Exchange Notes which are exchanged for
Series A Notes acquired by it for its own account as a result of
market-making or other trading activities.
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CERTIFICATE EXISTING NOTES EXISTING NOTES
SURRENDERED TENDERED ACCEPTED
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Dated Received
- ------------------------------------------------------------------------------------------------------------------
Accepted by
- ------------------------------------------------------------------------------------------------------------------
Checked by
- ------------------------------------------------------------------------------------------------------------------
Delivery Prepared by
- ------------------------------------------------------------------------------------------------------------------
Checked by
- ------------------------------------------------------------------------------------------------------------------
Date
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a holder whose tendered Series A Notes are
accepted for payment is required to provide the Exchange Agent (as payor) with
such holder's correct TIN on Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such holder is an individual,
the TIN is his social security number. If the Exchange Agent is not provided
with the correct TIN, a $50 penalty may be imposed by the Internal Revenue
Service.
Certain holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed Internal Revenue Service Form W-8,
signed under penalties of perjury, attesting to that holder's exempt status. A
Form W-8 can be obtained from the Exchange Agent.
If backup withholding applies, the Exchange Agent is required to withhold
20% of any payments made to the holder or other payee. Backup withholding is not
an additional federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
<PAGE> 11
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to the Exchange
Offer, the holder is required to provide the Exchange Agent with either: (i) the
holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder is awaiting a
TIN) and that (A) the holder has been notified by the Internal Revenue Service
that the holder is subject to backup withholding as a result of failure to
report all interest or dividends or (B) the Internal Revenue Service has
notified the holder that the holder is no longer subject to backup withholding,
or (ii) an adequate basis for exemption.
<TABLE>
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<S> <C> <C>
PAYER'S NAME: MARINE MIDLAND BANK
- ------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1-PLEASE PROVIDE YOUR TIN IN THE Social Security Number
FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND OR
DEPARTMENT OF THE DATING BELOW ----------------------------
TREASURY Employer Identification
INTERNAL REVENUE SERVICE Number
---------------------------------------------------------------------
PAYER'S REQUEST FOR Part 2-Certification-Under penalties of perjury, I certify that:
TAXPAYER (1) The number shown on this form is my correct Taxpayer
IDENTIFICATION NUMBER Identification Number (or I am waiting for a number to be issued
("TIN") for me), and
(2) I am not subject to backup withholding because: (a) I am
exempt from backup withholding, or (b) I have not been notified
by the Internal Revenue Service (the "IRS") that I am subject
to backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I
am no longer subject to backup withholding.
Certification Instructions-You must cross out item (2) above if
you have been notified by the IRS that you are currently subject
to backup withholding because of underreporting interest or
dividends on your tax return. However, if after being notified by
the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject
to backup withholding, do not cross out such Item (2).
------------------------------------------------------------------
SIGN HERE SIGNATURE ------------------ DATE----------- Part 3 - Awaiting TIN [ ]
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31 PERCENT OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9.
<PAGE> 12
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld,
but that such amounts will be refunded to me if I then provide a Taxpayer
Identification Number within sixty (60) days.
Signature
--------------------------------------------- Date
--------------------------------------------, 19
----
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<PAGE> 1
EXHIBIT 10.24
------------------------
TRANSACTION AGREEMENT
AMONG
FREMONT PURCHASER II, INC.,
RCBA PURCHASER I, L.P.
AND
KINETIC CONCEPTS, INC.
DATED AS OF OCTOBER 2, 1997
------------------------
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<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
THE OFFER
SECTION 1.01 The Offer.............................................................. I-7
SECTION 1.02 Company Action......................................................... I-8
ARTICLE II
PURCHASE AND SALE
SECTION 2.01 Purchase and Sale of the Shares........................................ I-9
SECTION 2.02 Purchase Price......................................................... I-9
SECTION 2.03 Closing................................................................ I-9
SECTION 2.04 Closing Deliveries by the Company...................................... I-9
SECTION 2.05 Closing Deliveries by Purchasers....................................... I-9
ARTICLE III
THE MERGER
SECTION 3.01 The Merger............................................................. I-10
SECTION 3.02 Effective Time; Closing................................................ I-10
SECTION 3.03 Effect of the Merger................................................... I-10
SECTION 3.04 Articles of Incorporation; By-laws..................................... I-10
SECTION 3.05 Directors and Officers................................................. I-10
SECTION 3.06 Conversion of Securities............................................... I-10
SECTION 3.07 Employee Stock Options and Other Equity Awards......................... I-11
SECTION 3.08 Dissenting Shares...................................................... I-11
SECTION 3.09 Surrender of Shares; Stock Transfer Books.............................. I-12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01 Organization and Qualification......................................... I-13
SECTION 4.02 Capitalization......................................................... I-13
SECTION 4.03 Authorization and Validity of Agreement................................ I-14
SECTION 4.04 Consents and Approvals................................................. I-14
SECTION 4.05 No Violation........................................................... I-14
SECTION 4.06 SEC Reports; Financial Statements...................................... I-15
SECTION 4.07 Company Statement; Schedule 13E-3; Schedule 13E-4...................... I-15
SECTION 4.08 Compliance with Law.................................................... I-15
SECTION 4.09 Absence of Certain Changes............................................. I-16
SECTION 4.10 No Undisclosed Liabilities............................................. I-16
SECTION 4.11 Litigation............................................................. I-16
SECTION 4.12 Employee Benefit Matters............................................... I-16
SECTION 4.13 Taxes.................................................................. I-18
SECTION 4.14 Intellectual Property.................................................. I-18
SECTION 4.15 Other Interests........................................................ I-19
SECTION 4.16 Labor Matters.......................................................... I-20
SECTION 4.17 Brokers and Finders.................................................... I-20
SECTION 4.18 Opinions of Financial Advisors......................................... I-20
</TABLE>
I-2
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SECTION 4.19 Real Property and Leases............................................... I-20
SECTION 4.20 Material Contracts..................................................... I-20
SECTION 4.21 Certain Business Practices............................................. I-22
SECTION 4.22 Accounting Treatment................................................... I-22
SECTION 4.23 Stock Retention Agreements............................................. I-22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
SECTION 5.01 Organization and Qualification......................................... I-22
SECTION 5.02 Authorization and Validity of Agreement................................ I-22
SECTION 5.03 Consents and Approvals................................................. I-22
SECTION 5.04 No Violation........................................................... I-23
SECTION 5.05 Offer Documents; Company Statement; Schedule 13E-3; Schedule 13E-4..... I-23
SECTION 5.06 Financing.............................................................. I-23
SECTION 5.07 Brokers and Finders.................................................... I-24
SECTION 5.08 Operations of Purchasers............................................... I-24
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of the Business of the Company Pending the Merger.............. I-24
SECTION 6.02 Access; Confidentiality................................................ I-25
SECTION 6.03 Preparation of Company Statement; Shareholders' Meeting; Further I-25
Actions................................................................
SECTION 6.04 Public Announcements................................................... I-26
SECTION 6.05 Recapitalization....................................................... I-26
SECTION 6.06 Acquisition Proposals.................................................. I-26
SECTION 6.07 D&O Indemnification and Insurance...................................... I-27
SECTION 6.08 Employee Benefits...................................................... I-28
SECTION 6.09 Fees and Expenses...................................................... I-28
SECTION 6.10 Debt Financing......................................................... I-28
SECTION 6.11 Headquarters of the Company............................................ I-29
SECTION 6.12 Available Cash......................................................... I-29
SECTION 6.13 Options................................................................ I-29
ARTICLE VII
CONDITIONS
SECTION 7.01 Conditions to the Stock Purchase....................................... I-29
SECTION 7.02 Conditions to the Merger............................................... I-30
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination............................................................ I-31
SECTION 8.02 Effect of Termination.................................................. I-32
SECTION 8.03 Fees................................................................... I-32
SECTION 8.04 Amendment.............................................................. I-32
SECTION 8.05 Waiver................................................................. I-32
</TABLE>
I-3
<PAGE> 4
<TABLE>
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ARTICLE X
GENERAL PROVISIONS
SECTION 9.01 Non-Survival of Representations, Warranties and Agreements............. I-33
SECTION 9.02 Notices................................................................ I-33
SECTION 9.03 Certain Definitions.................................................... I-34
SECTION 9.04 Severability........................................................... I-34
SECTION 9.05 Entire Agreement; Assignment........................................... I-35
SECTION 9.06 Parties in Interest.................................................... I-35
SECTION 9.07 Specific Performance................................................... I-35
SECTION 9.08 Governing Law.......................................................... I-35
SECTION 9.09 Joint and Several Obligations.......................................... I-35
SECTION 9.10 Headings............................................................... I-35
SECTION 9.11 Counterparts........................................................... I-35
ANNEX A Conditions to the Offer
EXHIBIT A Amended and Restated Articles of Incorporation of Kinetic Concepts,
Inc.
EXHIBIT B Amended and Restated By-Laws of Kinetic Concepts, Inc.
EXHIBIT C Agreement Among Shareholders
</TABLE>
I-4
<PAGE> 5
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM LOCATION OF DEFINITION
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<S> <C>
1987 Plan................................................................. Section 3.07(a)
1995 Plan................................................................. Section 3.07(a)
1997 Plan................................................................. Section 3.07(a)
Acquisition Proposal...................................................... Section 6.07
Action.................................................................... Section 6.08(e)
affiliate................................................................. Section 9.03(a)
Agreement................................................................. Preamble
Agreement Among Shareholders.............................................. Section 2.04(d)
BT Alex. Brown............................................................ Section 1.02(a)
Articles of Merger........................................................ Section 3.02
beneficial owner.......................................................... Section 9.03(b)
B Purchase Price.......................................................... Section 2.02(b)
B Purchaser............................................................... Preamble
B Shares.................................................................. Section 2.01(b)
Board..................................................................... Preamble
business day.............................................................. Section 9.03(c)
Certificate of Merger..................................................... Section 3.02
Certificates.............................................................. Section 3.09(b)
Closing................................................................... Section 2.03
Closing Date.............................................................. Section 2.03
Code...................................................................... Section 4.12(a)
Company................................................................... Preamble
Company Benefit Plans..................................................... Section 4.12(a)
Company Disclosure Schedule............................................... Section 4.01
Company SEC Documents..................................................... Section 4.06
Company Statement......................................................... Section 4.07
control................................................................... Section 9.03(d)
Costs..................................................................... Section 6.08(a)
Debt Financing............................................................ Section 5.06
Delaware Law.............................................................. Recitals
Directors Plan............................................................ Section 3.07(a)
Dissenting Shares......................................................... Section 3.08(a)
D&O Insurance............................................................. Section 6.08(c)
Effective Time............................................................ Section 3.02
Environmental Laws........................................................ Section 4.08
Equity Financing.......................................................... Section 6.09
EP Date................................................................... Section 3.07(a)
ERISA..................................................................... Section 4.12(a)
ESPP...................................................................... Section 4.12(f)
Exchange Act.............................................................. Section 3.07(a)
Expenses.................................................................. Section 8.03(b)
Fee....................................................................... Section 8.03(a)
F Purchase Price.......................................................... Section 2.02(a)
F Purchaser............................................................... Preamble
F Shares.................................................................. Section 2.01(a)
Foreign Benefit Plan...................................................... Section 4.12(e)
Governmental Entity....................................................... Section 6.03(d)
Governmental Order........................................................ Section 4.08
HMO....................................................................... Section 4.12(d)
Houlihan Lokey............................................................ Section 1.02(a)
</TABLE>
I-5
<PAGE> 6
<TABLE>
<CAPTION>
DEFINED TERM LOCATION OF DEFINITION
- -------------------------------------------------------------------------- ----------------------
<S> <C>
HSR Act................................................................... Section 4.04
Indemnified Parties....................................................... Section 6.08(a)
Intellectual Property..................................................... Section 4.14(d)
IRS....................................................................... Section 4.12(a)
Knowledge................................................................. Section 9.03(e)
Law....................................................................... Section 4.08
Licensed Intellectual Property............................................ Section 4.14(a)
Liens..................................................................... Section 4.19(b)
Material Adverse Effect................................................... Section 9.03(f)
Material Contracts........................................................ Section 4.20(a)
Maximum Number............................................................ Recitals
Merger.................................................................... Recitals
Merger Consideration...................................................... Section 3.06(a)
Minimum Condition......................................................... Section 1.01(a)
Notice Date............................................................... Section 3.07(a)
Offer..................................................................... Recitals
Offer Documents........................................................... Section 1.01(c)
Offer to Purchase......................................................... Section 1.01(c)
Option Plans.............................................................. Section 3.07(a)
Options................................................................... Section 3.07(a)
Original Expiration Date.................................................. Section 1.01(b)
Owned Intellectual Property............................................... Section 4.14(b)
Paying Agent.............................................................. Section 3.10(a)
Permits................................................................... Section 4.08
Permitted Liens........................................................... Section 4.19(b)
Per Share Amount.......................................................... Recitals
Person.................................................................... Section 9.03(g)
Preferred Stock........................................................... Section 4.02(a)
Purchase Date............................................................. Section 4.12(f)
Purchaser Disclosure Schedule............................................. Section 5.04
Purchaser Parties......................................................... Section 6.08(e)
Purchasers................................................................ Preamble
Schedule 13E-3............................................................ Section 1.01(c)
Schedule 13E-4............................................................ Section 1.01(c)
Scheduled Intellectual Property........................................... Section 4.14(a)
SEC....................................................................... Section 1.01(c)
Securities Act............................................................ Section 4.06(a)
Shareholder............................................................... Recitals
Shareholder Support Agreement............................................. Recitals
Shares.................................................................... Recitals
Shareholders' Meeting..................................................... Section 6.03(c)
Stock Purchase............................................................ Recitals
Stock Retention Agreement................................................. Section 4.23
subsidiary................................................................ Section 9.03(h)
Surviving Corporation..................................................... Section 3.01
Tax....................................................................... Section 4.13(a)
Texas Law................................................................. Recitals
Transactions.............................................................. Section 1.01(c)
</TABLE>
I-6
<PAGE> 7
TRANSACTION AGREEMENT, dated as of October 2, 1997 (this "Agreement"),
among FREMONT PURCHASER II, INC., a Delaware corporation ("F Purchaser"), RCBA
PURCHASER I, L.P., a Delaware limited partnership ("B Purchaser" and, together
with F Purchaser, "Purchasers") and KINETIC CONCEPTS, INC., a Texas corporation
(the "Company").
WHEREAS, the Board of Managers or Directors, as the case may be, of each
Purchaser and the Company has each determined that it is in the best interests
of its members or shareholders, as the case may be, for Purchasers to acquire
the Company upon the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance of such acquisition, it is proposed that the
Company shall make a cash tender offer (the "Offer") to acquire all of the
shares of Common Stock, par value $.001 per share, of the Company (shares of
Common Stock of the Company being collectively referred to as "Shares") for
$19.25 per Share (such amount, or any greater amount per Share paid pursuant to
the Offer, being referred to herein as the "Per Share Amount") net to the seller
in cash, upon the terms and subject to the conditions of this Agreement and the
Offer; and
WHEREAS, the Board of Directors of the Company (the "Board") has
unanimously approved the making of the Offer and resolved and agreed to
recommend that holders of Shares tender their Shares pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Board of Managers or
Directors, as the case may be, of each Purchaser and the Company has each
approved the purchase by Purchasers and the sale by the Company (the "Stock
Purchase") of 8,083,712 Shares for the Per Share Amount immediately prior to the
consummation of the Offer; and
WHEREAS, also in furtherance of such acquisition, the Board of Managers or
Directors, as the case may be, of each Purchaser and the Company has each
approved the merger (the "Merger") of Purchasers with and into the Company in
accordance with the General Corporation Law and the Revised Uniform Limited
Partnership Act of the State of Delaware ("Delaware Law") and the Texas Business
Corporation Act ("Texas Law") following the consummation of the Offer and upon
the terms and subject to the conditions set forth herein; and
WHEREAS, F Purchaser and B Purchaser have entered into a support agreement
with James Leininger (the "Shareholder"), dated as of the date hereof (the
"Shareholder Support Agreement"), providing, subject to certain conditions, for
(i) the grant by the Shareholder to F Purchaser of an option on up to 2,529,197
Shares at the Per Share Amount, subject to the conditions set forth therein,
(ii) the grant by the Shareholder to B Purchaser of an option on up to 1,670,803
Shares at the Per Share Amount, subject to the conditions set forth therein,
(iii) the tender of 13,792,211 Shares owned or controlled by the Shareholder
pursuant to the Offer and (iv) the voting by the Shareholder of all Shares owned
or controlled by the Shareholder at the time of the Shareholders' Meeting in
favor of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Purchasers and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. The Offer. (a) Provided that this Agreement shall not have
been terminated in accordance with Section 8.01 and none of the events set forth
in Annex A hereto shall have occurred or be existing, the Company shall commence
the Offer as promptly as reasonably practicable after the date hereof. The
obligation of the Company to accept for payment and pay for Shares tendered
pursuant to the Offer shall be subject to the condition (the "Minimum
Condition") that at least 27,500,000 Shares shall have been validly tendered and
not withdrawn prior to the expiration of the Offer and also shall be subject to
the satisfaction of the other conditions set forth in Annex A hereto. The Per
Share Amount shall, subject to applicable withholding of taxes, be net to the
seller in cash, upon the terms and subject to the conditions of the
I-7
<PAGE> 8
Offer. Subject to the terms and conditions of the Offer (including, without
limitation, the Minimum Condition), the Company shall pay, as promptly as
practicable after expiration of the Offer, for all Shares validly tendered and
not withdrawn.
(b) Notwithstanding any other provision contained herein, including,
without limitation, Section 1.01(a), the Company shall, at the direction of
Purchasers, extend the Offer one or more times for a period not to exceed 10
business days in aggregate.
(c) As soon as reasonably practicable on the date of commencement of the
Offer, the Company shall file with the Securities and Exchange Commission (the
"SEC") an Issuer Tender Offer Statement on Schedule 13E-4 (together with all
amendments and supplements thereto, the "Schedule 13E-4") with respect to the
Offer, and the Company, the Shareholder and Purchasers shall file with the SEC a
Rule 13e-3 Transaction Statement on Schedule 13E-3 (together with all amendments
and supplements thereto, the "Schedule 13E-3") with respect to the Offer, the
Stock Purchase, the Merger and the other transactions contemplated by this
Agreement (collectively, the "Transactions"). The Schedule 13E-4 and the
Schedule 13E-3 shall contain or shall incorporate by reference an offer to
purchase (the "Offer to Purchase") and forms of the related letter of
transmittal, any related summary advertisement and any other documents related
to the Offer (the Schedule 13E-4, the Schedule 13E-3, the Offer to Purchase and
such other documents, together with all supplements and amendments thereto,
being referred to herein collectively as the "Offer Documents"). Each Purchaser
and the Company agree to correct promptly any information provided by it for use
in the Offer Documents which shall have become false or misleading, and
Purchasers and the Company further agree to take all steps necessary to cause
the Schedule 13E-4 and the Schedule 13E-3 as so corrected to be filed with the
SEC and the other Offer Documents as so corrected to be disseminated to holders
of Shares, in each case as and to the extent required by applicable federal
securities laws.
SECTION 1.02. Company Action. (a) The Company hereby approves of and
agrees to undertake the Offer and represents that (i) the Board, at a meeting
duly called and held on October 1, 1997, has unanimously (A) determined that
this Agreement and the Transactions are fair to and in the best interests of the
holders of Shares, (B) approved and adopted this Agreement and the Merger and
(C) recommended that the shareholders of the Company accept the Offer and
approve and adopt this Agreement and the Merger, (ii) BT Alex. Brown
Incorporated ("BT Alex. Brown") has delivered to the Board an opinion to the
effect that, as of the date of this Agreement, the cash consideration to be
received in the Offer and the Merger by the holders of Shares (other then B
Purchaser and its affiliates and any other holders of Shares who will retain
Shares following consummation of the Offer and the Merger) is fair from a
financial point of view to such holders and (iii) Houlihan Lokey Howard & Zukin
("Houlihan Lokey") has delivered to the Board and Purchasers an opinion that the
Company will be solvent following the purchase of Shares pursuant to the Offer
and related matters. The Company agrees to include in the Offer Documents the
recommendation of the Board described in the immediately preceding sentence. The
Company has been advised by each of its directors and executive officers (other
than the Shareholder and as otherwise provided in any Stock Retention Agreement)
that they intend either to tender all Shares beneficially owned by them to the
Company pursuant to the Offer or to vote such Shares in favor of the approval
and adoption by the shareholders of the Company of this Agreement and the
Merger. The Company has been advised by the Shareholder that the Shareholder
intends to tender 13,792,211 Shares pursuant to the Offer and to vote any Shares
then owned or controlled by him in favor of approval and adoption of this
Agreement and the Merger.
(b) The Company shall take all action as may be necessary to effect the
Offer as contemplated by this Agreement, including, without limitation, promptly
mailing the Offer Documents to the record holders and beneficial owners of the
Shares.
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<PAGE> 9
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. (a) Upon the terms and
subject to the conditions of this Agreement, at the Closing, the Company shall
sell to F Purchaser, and F Purchaser shall purchase from the Company, 7,179,066
Shares (the "F Shares").
(b) Upon the terms and subject to the conditions of this Agreement, at the
Closing, the Company shall sell to B Purchaser, and B Purchaser shall purchase
from the Company, 904,646 Shares (the "B Shares").
(c) In the event the Equity Financing is reduced pursuant to Section 5.06,
the number of F Shares and B Shares to be purchased at the Closing shall be
adjusted accordingly.
SECTION 2.02. Purchase Price. (a) The aggregate purchase price for the F
Shares shall be the number of F Shares multiplied by the Per Share Amount (the
"F Purchase Price").
(b) The aggregate purchase price for the B Shares shall be the number of B
Shares multiplied by the Per Share Amount (the "B Purchase Price").
SECTION 2.03. Closing. Upon the terms and subject to the conditions of
this Agreement, the sale and purchase of the F Shares and the B Shares
contemplated by this Agreement shall take place at a closing (the "Closing") to
be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York,
New York at 10:00 A.M. New York time on the day the Offer is scheduled to
expire, or at such other place or at such other time or on such other date as
the Company and Purchasers may mutually agree upon in writing (the day on which
the Closing takes place being the "Closing Date").
SECTION 2.04. Closing Deliveries by the Company. At the Closing, the
Company shall deliver or cause to be delivered to Purchasers:
(a) stock certificates evidencing the F Shares and the B Shares,
respectively;
(b) a receipt for the F Purchase Price and the B Purchase Price;
(c) the certificates and other documents required to be delivered
pursuant to Section 7.01(c)(iii); and
(d) an executed copy of the Agreement Among Shareholders in the form
attached as Exhibit C (the "Agreement Among Shareholders").
SECTION 2.05. Closing Deliveries by Purchasers. (a) At the Closing, F
Purchaser shall deliver to the Company:
(i) the F Purchase Price by wire transfer in immediately available
funds as directed in writing by the by the Company at least three business
day prior to the Closing;
(ii) the certificates and other documents required to be delivered
pursuant to Section 7.01(b)(iii); and
(iii) an executed copy of the Agreement Among Shareholders.
(b) At the Closing, B Purchaser shall deliver to the Company:
(i) the B Purchase Price by wire transfer in immediately available
funds as directed in writing by the Company at least three business day
prior to the Closing;
(ii) the certificates and other documents required to be delivered
pursuant to Section 7.01(b)(iii); and
(iii) an executed copy of the Agreement Among Shareholders.
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<PAGE> 10
ARTICLE III
THE MERGER
SECTION 3.01. The Merger. Upon the terms and subject to the conditions
set forth in Article VII, and in accordance with Delaware Law and Texas Law, at
the Effective Time (as hereinafter defined), each Purchaser shall be merged with
and into the Company. As a result of the Merger, the separate corporate
existence of Purchasers shall cease and the Company shall continue as the
surviving corporation of the Merger (the "Surviving Corporation").
SECTION 3.02. Effective Time; Closing. As promptly as practicable after
the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "Certificate of Merger") with the Secretary
of State of the State of Delaware and articles of merger (the "Articles of
Merger") with the Secretary of the State of Texas, in such form or forms as is
required by, and executed in accordance with the relevant provisions of,
Delaware Law and Texas Law, respectively (the date and time of the later of such
filings being the "Effective Time"). Prior to such filing, a closing shall be
held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New
York, 10022, or such other place as the parties shall agree, for the purpose of
confirming the satisfaction or waiver, as the case may be, of the conditions set
forth in Article VII.
SECTION 3.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Delaware Law and
Texas Law, including, without limitation, Article 5.06 of Texas Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of the Company
and each Purchaser shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of the Company
and Purchasers shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
SECTION 3.04. Articles of Incorporation; By-laws. (a) At the Effective
Time, the Articles of Incorporation attached hereto as Exhibit A shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation.
(b) At the Effective Time, the By-laws attached hereto as Exhibit B shall
be the By-laws of the Surviving Corporation until thereafter amended as provided
by law and such By-laws.
SECTION 3.05. Directors and Officers. The directors of the Company
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 3.06. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of either Purchaser, the
Company or the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to Section
3.06(b), any Shares to remain outstanding pursuant to Section 3.06(c) and
any Dissenting Shares) shall be cancelled and shall be converted
automatically into the right to receive an amount equal to the Per Share
Amount in cash (the "Merger Consideration") payable, without interest, to
the holder of such Share, upon surrender, in the manner provided in Section
3.08, of the certificate that formerly evidenced such Share;
(b) (i) Each Share held in the treasury of the Company and each Share
owned by any direct or indirect wholly owned subsidiary of the Company and
each Share owned by the Purchasers immediately prior to the Effective Time
shall be cancelled without any conversion thereof and no payment or
distribution shall be made with respect thereto;
(ii) Each (A) share of common stock of the F Purchaser outstanding
immediately prior to the Effective Time shall be converted and exchanged
for a number of validly issued, fully paid and
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nonassessable shares of Common Stock, par value $.001 per share, of the
Surviving Corporation equal to the quotient obtained by dividing the
number of F Shares by the number of outstanding shares of common stock
of the F Purchaser and (B) limited or general partnership interest of B
Purchaser shall be converted and exchanged for a number of validly
issued, fully paid and nonassessable shares of common stock, par value
$.001 per share, of the Surviving Corporation equal to the quotient
obtained by dividing the number of B Shares by the number of partnership
interests; and
(c) The 6,064,155 of the Shares held by and registered in the name of
the Shareholder at the Effective Time, 3,837,890 of the Shares held by and
registered in the names of Stinson Capital Partners, L.P., BK Capital
Partners IV, L.P., the Carpenters Pension Trust for Southern California,
United Brotherhood of Carpenters and Joiners of America Local Unions and
Councils Pension Fund, Insurance Company Supported Organizations Pension
Plan, Richard C. Blum & Associates, L.P., Richard C. Blum & Associates,
Inc., Richard C. Blum, Prism Partners I, L.P., Weintraub Capital
Management, Fremont Partners L.P., FP Advisors, L.L.C., Fremont Group,
L.L.C., and Fremont Investors Inc. and the aggregate number of Shares owned
by senior management pursuant to Stock Retention Agreements, shall not be
cancelled as provided above, but shall remain outstanding.
SECTION 3.07. Employee Stock Options and Other Equity Awards. (a) Except
to the extent payment has been made as provided in Section 6.13 or as may
otherwise be agreed by Purchasers and any holder of any outstanding employee or
director options to purchase Shares, including any tandem stock appreciation
right ("Options"), granted under the Company's 1997 Stock Incentive Plan, (the
"1997 Plan"), 1995 Senior Executive Stock Option Plan (the "1995 Plan"), 1988
Directors Stock Option Plan (the "Directors Plan") the 1987 Key Contributor
Stock Option Plan (the "1987 Plan") and, together with the 1997 Plan, the 1995
Plan and the Directors Plan, the "Option Plans"), (i) each of such holder's
Options under the Option Plans shall become fully exercisable, according to its
terms, as of the time provided in the notice from the Company, (ii) each of such
holder's Options under the Options Plans shall be exercisable until the last day
provided in such notice (the "Notice Date"), which will be prior to the last day
of the Offer, (iii) each of such holder's Options may be surrendered prior to
the Notice Date for the right to receive cash in an amount determined in
accordance with the applicable Option Plan, provided, however, that Options
granted under the 1997 Plan may be so surrendered on or prior to the last day in
the applicable 90 day Change of Control Exercise Period, as defined in the 1997
Plan (the "EP Date"), and (iv) all Options remaining unexercised that have not
been surrendered as of the Effective Time (or, in the case of Options granted
under the 1997 Plan, the EP Date) shall be canceled provided, further, that with
respect to any Person subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Company shall use its reasonable
efforts to ensure that any such amount shall be paid as soon as practicable
after the first date payment can be made without liability to such Person under
Section 16(b) of the Exchange Act but in no event shall Purchasers or the
Company be required to indemnify such Person for any loss, cost or damages
sustained by such Person as a result of Section 16(b) of the Exchange Act. All
applicable withholding taxes attributable to payments made hereunder or to
distributions contemplated hereby shall be deducted from the amounts payable
under this Section 3.07 and all such taxes attributable to the exercise of
Options shall be withheld from the proceeds received in respect of the Shares
issuable upon such exercise.
(b) Except as provided herein or as otherwise agreed to by the parties and
to the extent permitted by the Option Plans, the Option Plans shall terminate as
of the Effective Time and any rights under any provisions in any other plan,
program or arrangement providing for the issuance or grant by the Company of any
interest in respect of the capital stock of the Company shall be cancelled as of
the Effective Time.
SECTION 3.08. Dissenting Shares. (a) Notwithstanding any provision of
this Agreement to the contrary, Shares that are outstanding immediately prior to
the Effective Time and that are held by shareholders who shall not have voted in
favor of the Merger or consented thereto in writing and who shall have properly
perfected dissenter's rights for such Shares in accordance with Article 5.12 of
Texas Law (collectively, the "Dissenting Shares") shall not be converted into or
represent the right to receive the Merger Consideration unless and until such
shareholders shall have withdrawn or lost such shareholder's dissenter's rights.
Such shareholders shall be entitled to receive payment of the appraised value of
such Shares held by
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them in accordance with the provisions of Article 5.12 of Texas Law, except that
all Dissenting Shares held by shareholders who shall have withdrawn or lost such
dissenter's rights under Article 5.12 of Texas Law shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration, without any
interest thereon, upon surrender, in the manner provided in Section 3.08, of the
certificate or certificates that formerly evidenced such Shares.
(b) The Company shall give Purchasers (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any other
instruments served pursuant to Texas Law and received by the Company and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under Texas Law. The Company shall not, except with the
prior written consent of each Purchaser (which consent shall not be unreasonably
withheld), make any payment with respect to Dissenting Shares or offer to settle
or settle any claims or demands with respect to Dissenting Shares.
SECTION 3.09. Surrender of Shares; Stock Transfer Books. (a) Prior to the
Effective Time, Purchasers shall designate a bank or trust company (which bank
or trust company shall be reasonably acceptable to the Company) to act as agent
(the "Paying Agent") for the holders of Shares in connection with the Merger to
receive the funds to which holders of Shares shall become entitled pursuant to
Section 3.06(a). Such funds shall be invested by the Paying Agent as directed by
the Surviving Corporation, provided that such investments shall be in
obligations of or guaranteed by the United States of America or of any agency
thereof and backed by the full faith and credit of the United States of America,
in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors
Services, Inc. or Standard & Poor's Corporation, respectively, or in deposit
accounts, certificates of deposit or banker's acceptances of, repurchase or
reverse repurchase agreements with, or Eurodollar time deposits purchased from,
commercial banks with capital, surplus and undivided profits aggregating in
excess of $1.0 billion (based on the most recent financial statements of such
bank which are then publicly available at the SEC or otherwise).
(b) Promptly after the Effective Time, the Surviving Corporation or the
Company, as the case may be, shall cause to be mailed to each Person who was, at
the Effective Time, a holder of record of Shares entitled to receive the Merger
Consideration pursuant to Section 3.06(a), a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the certificates evidencing Shares (the "Certificates") shall pass, only upon
proper delivery of the Certificates to the Paying Agent) and instructions for
use in effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
evidenced by such Certificate, and such Certificate shall then be cancelled. No
interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Certificate for the benefit of the holder of such Certificate.
If payment of the Merger Consideration is to be made to a Person other than the
Person in whose name the surrendered Certificate is registered on the stock
transfer books of the Company, it shall be a condition of payment that the
Certificate so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the Person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a Person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such taxes either have been paid or are not applicable.
(c) At any time following the sixth month after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds which had been made available to the Paying Agent and not
disbursed to holders of Shares (including, without limitation, all interest and
other income received by the Paying Agent in respect of all funds made available
to it), and thereafter such holders shall be entitled to look to the Surviving
Corporation (subject to abandoned property, escheat and other similar laws) only
as general creditors thereof with respect to any Merger Consideration that may
be payable upon due surrender of the Certificates held by them. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Share for any Merger Consideration delivered in
respect of such Share to a public official pursuant to any abandoned property,
escheat or other similar law.
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(d) At the close of business on the day of the Effective Time, the stock
transfer books of the Company shall be closed and thereafter there shall be no
further registration of transfers of Shares on the records of the Company. From
and after the Effective Time, the holders of Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided herein or by applicable law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchasers as follows:
SECTION 4.01. Organization and Qualification. 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, (b) has the requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted and (c) is in good standing
and duly qualified to do business in each jurisdiction in which the transaction
of its business makes such qualification necessary, except where the failure to
be so organized, existing, qualified and in good standing or to have such power
or authority would not have a Material Adverse Effect. True and complete copies
of the Articles or Certificates of Incorporation and the by-laws of the Company
and each of its subsidiaries have been made available to Purchasers. A true and
complete list of all of the Company's subsidiaries, together with the
jurisdiction of incorporation of each such subsidiary and the percentage of the
outstanding capital stock of each such subsidiary owned by the Company and its
subsidiaries, is set forth in Section 4.01 of the Company's disclosure schedule
delivered to Purchasers in connection with this Agreement (the "Company
Disclosure Schedule").
SECTION 4.02. Capitalization. (a) The authorized capital stock of the
Company consists of 100,000,000 Shares and 20,000,000 shares of preferred stock,
par value $.001 per share (the "Preferred Stock"). As of the date of this
Agreement, (i) 42,636,016 Shares were issued and outstanding and 186,824 Shares
were held in treasury, (ii) 3,629,133 Shares were reserved for issuance pursuant
to outstanding Options and 2,672,300 Shares were reserved for issuance in
respect of future grants of Options, and (iii) no shares of Preferred Stock were
issued and outstanding. All outstanding Shares are validly issued, fully paid
and nonassessable and are not subject to preemptive rights. Except as set forth
in this Section 4.02(a) or as disclosed in the Company SEC Documents or in
Section 4.02(a) of the Company Disclosure Schedule, there are no outstanding
subscriptions, options, warrants, calls, rights, commitments or any other
agreements to which the Company is a party or by which the Company is bound
which obligate the Company to (i) issue, deliver or sell or cause to be issued,
delivered or sold any additional Shares or any other capital stock of the
Company or any other securities convertible into, or exercisable or exchangeable
for, or evidencing the right to subscribe for, any such Shares or (ii) purchase,
redeem or otherwise acquire any Shares and any other capital stock of the
Company. All Shares subject to issuance as aforesaid, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. There are
no outstanding contractual obligations of the Company or any of its subsidiaries
to repurchase, redeem or otherwise acquire any Shares or any capital stock of
any such subsidiary or to provide funds to, or make any investment (in the form
of a loan, capital contribution or otherwise) in, any subsidiary (other than a
wholly owned subsidiary of the Company) or any other Person. Each outstanding
share of capital stock of each of the Company's subsidiaries is duly authorized,
validly issued, fully paid and nonassessable and each such share owned by the
Company and its subsidiaries is free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
the Company's or such other subsidiary's voting rights, charges and other
encumbrances of any nature whatsoever, except for liens arising by operation of
law that are not in the aggregate material.
(b) Except as provided in the Company SEC Documents or in Section 4.02(b)
of the Company Disclosure Schedule, there are no voting trusts or shareholder
agreements to which the Company is a party with respect to the voting of the
capital stock of the Company.
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SECTION 4.03. Authorization and Validity of Agreement. The Company has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the Transactions in accordance with the terms hereof
(subject to the approval and adoption of this Agreement and the Merger by the
holders of two-thirds of the outstanding Shares, if required by applicable law,
and the filing and recordation of appropriate merger documents as required by
Delaware Law and Texas Law). The Board has duly authorized the execution,
delivery and performance of this Agreement by the Company, and no other
corporate action or other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or the Transactions (other than the
approval and adoption of this Agreement and the Merger by the holders of two-
thirds of the outstanding Shares, if required by applicable law). This Agreement
has been duly and validly executed and delivered by the Company and, assuming
this Agreement constitutes the legal, valid and binding obligation of
Purchasers, constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by any bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Board has taken all necessary actions
such that the provisions of the Texas Business Combination Law, Articles
13.01 - 13.08 of Texas Law, do not apply to the Transactions.
SECTION 4.04. Consents and Approvals. Neither the execution and delivery
of this Agreement by the Company nor the performance of this Agreement by the
Company and the consummation by the Company of the Transactions will require on
the part of the Company or any of its subsidiaries any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (i) in connection with the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) pursuant to the applicable requirements of the
Exchange Act and the SEC's rules and regulations promulgated thereunder and
state takeover laws, (iii) the filing and recordation of the Certificate of
Merger pursuant to Delaware Law and the Articles of Merger pursuant to Texas Law
and appropriate documents with the relevant authorities of other states in which
the Company is authorized to do business, (iv) as set forth in Section 4.04 of
the Company Disclosure Schedule or (v) where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not, individually or in the aggregate, have a Material Adverse Effect or
restrict or prevent the consummation of the Transactions.
SECTION 4.05. No Violation. Except as set forth in Section 4.05 of the
Company Disclosure Schedule, assuming the Merger has been duly approved by the
holders of two-thirds of the outstanding Shares, if required by applicable law,
neither the execution and delivery of this Agreement by the Company nor the
performance of this Agreement by the Company and the consummation by the Company
of the Transactions will (a) conflict with or violate the Certificate or
Articles of Incorporation of the Company or the By-laws of the Company or any of
its subsidiaries, (b) result in a violation or breach of, constitute a default
(with or without notice or lapse of time, or both) under, give rise to any right
of termination, cancellation or acceleration of, or result in the imposition of
any lien, charge or other encumbrance on any assets or property of the Company
or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective assets
or properties are bound, except for such violations, breaches and defaults (or
rights of termination, cancellation or acceleration or lien or other charge or
encumbrance) as to which requisite waivers or consents have been obtained or
which would not individually or in the aggregate have a Material Adverse Effect
or materially restrict or prevent the consummation of the Transactions or (c)
assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 4.04 and this Section 4.05 are duly and
timely obtained or made and the approval of the Merger by the holders of
two-thirds of the outstanding Shares has been obtained if required by applicable
law, conflict with or violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company, any of its subsidiaries or any of their
respective assets and properties, except for such violations which would not,
individually or in the aggregate, have a Material Adverse Effect or materially
restrict or prevent the consummation of the Transactions.
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<PAGE> 15
SECTION 4.06. SEC Reports; Financial Statements. (a) Except as set forth
on Section 4.06 of the Company Disclosure Schedule, since January 1, 1994 the
Company has filed with the SEC all forms, reports, schedules, statements and
other documents required to be filed by it with the SEC pursuant to the
Securities Act of 1933, as amended (the "Securities Act") and the SEC's rules
and regulations promulgated thereunder and the Exchange Act and the SEC's rules
and regulations promulgated thereunder (any such documents filed prior to the
date hereof being collectively, the "Company SEC Documents"). The Company SEC
Documents including, without limitation, any financial statements or schedules
included therein, at the time filed, or in the case of registration statements
on their respective effective dates, (i) complied as to form in all material
respects with the applicable requirements of and the SEC's rules and regulations
promulgated thereunder and the Exchange Act and the SEC's rules and regulations
promulgated thereunder and (ii) did not at the time filed (or, in the case of
registration statements, at the time of effectiveness), contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. No
subsidiary of the Company is required to file any form, report or other document
with the SEC.
(b) Each of the consolidated financial statements of the Company (including
any related notes thereto) included in the Company SEC Documents (excluding the
Company SEC Documents described in Section 4.07) comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the period involved (except as may be indicated in such financial
statements or in the notes thereto or, in the case of unaudited financial
statements, as permitted by the requirements of Form 10-Q) and present fairly,
in all material respects (subject, in the case of the unaudited statements, to
normal year-end adjustments which such adjustments in the aggregate would not
have a Material Adverse Effect and the absence of footnotes), the financial
position of the Company as of the dates thereof and the results of the Company's
operations and cash flows for the periods presented therein.
(c) The Company has heretofore furnished or made available to Purchasers
complete and correct copies of all amendments and modifications that have not
been filed by the Company with the SEC to all agreements, documents and other
instruments that previously had been filed by the Company with the SEC and are
currently in effect.
SECTION 4.07. Company Statement; Schedule 13E-3; Schedule 13E-4. The
proxy statement to be sent to the shareholders of the Company in connection with
the Shareholders' Meeting (such proxy statement, as amended or supplemented,
being referred to herein as the "Company Statement"), as of the date first
mailed to the shareholders of the Company and at the time of the Shareholders'
Meeting, the Schedule 13E-3 and the Schedule 13E-4 at the time filed with the
SEC will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading. The Company Statement, the Schedule 13E-3 and the Schedule
13E-4 will, when filed by the Company with the SEC, comply as to form in all
material respects with the applicable provisions of the Exchange Act and the SEC
rules and regulations promulgated thereunder. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to the statements made
in any of the foregoing documents based on written information supplied by or on
behalf of either Purchaser or any of their respective affiliates specifically
for inclusion therein.
SECTION 4.08. Compliance with Law. Except as set forth in the Company SEC
Documents or in Section 4.08 of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries is in violation of any applicable federal,
state, local or foreign statute, rule, regulation, decree, ordinance, code
requirement or order of any governmental or regulatory authority or rule of
common law, including, without limitation, all federal and state antitrust law
(whether statutory or otherwise) (collectively, "Law") applicable to the Company
or any of its subsidiaries, or any of the products produced, distributed
marketed or sold by the Company or any of its subsidiaries, except for
violations which would not have a Material Adverse Effect. Section 4.08 of the
Company Disclosure Schedule sets forth a brief description of each order, writ,
judgment,
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injunction, decree, stipulation, determination or award (including, without
limitation, recalls, field notifications or seizures) entered by or with any
governmental or regulatory authority (each, a "Governmental Order") applicable
to the Company and any of its subsidiaries. No such Governmental Order has had
or is likely to have a Material Adverse Effect. Without limiting the foregoing,
except for matters which would not, individually or in the aggregate, have a
Material Adverse Effect and those matters disclosed in the Company SEC Documents
or in Section 4.08 of the Company Disclosure Schedule, to the Knowledge of the
Company, (a) the business of the Company and each of its subsidiaries is being
conducted in compliance with applicable Environmental Laws, (b) the business of
the Company and each of its subsidiaries has not, and no other Person has, made,
caused or contributed to any material release of any hazardous or toxic waste or
substance on, at or under any of the Company's or its subsidiaries' properties,
and (c) neither the Company nor any of its subsidiaries is subject to any
compliance, remediation or settlement agreement from an alleged violation of
Environmental Laws. For purposes hereof, "Environmental Laws" shall mean all
applicable Laws relating to pollution or protection of human health or the
environment, including the Resource Conservation and Recovery Act, the Clean Air
Act, the Water Pollution Control Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response, Compensation and Liability Act and
analogous state Law. The Company and each of its subsidiaries hold all permits,
licenses, exemptions, orders and approvals of governmental, administrative, and
regulatory authorities, (collectively, "Permits") necessary for the conduct of
their respective businesses, including, without limitation, all Permits issued
by any governmental, administrative and regulatory authorities that are
concerned with the safety, efficacy, reliability or manufacturing of medical
products, as now being conducted and the same are in full force and effect,
except where the failure to hold Permits, or for such Permits to be in full
force and effect, would not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 4.09. Absence of Certain Changes. Except as disclosed in the
Company SEC Documents or in Section 4.09 of the Company Disclosure Schedule,
since December 31, 1996, the Company and each of its subsidiaries have conducted
its businesses only in the ordinary course of business and consistent with past
practice and (a) there has not been any Material Adverse Effect and (b) the
Company has not taken any of the actions set forth in paragraphs (a) through (i)
of Section 6.01.
SECTION 4.10. No Undisclosed Liabilities. Except (a) for liabilities
incurred in the ordinary course of business and consistent with past practice,
(b) liabilities incurred in connection with the Transactions, (c) liabilities
which would not, individually or in the aggregate, have a Material Adverse
Effect and (d) as disclosed in the Company SEC Documents or as set forth in
Section 4.10 of the Company Disclosure Schedule, from December 31, 1996, neither
the Company nor any of its subsidiaries has incurred any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
which would be required to be reflected in or reserved against on a consolidated
balance sheet, or in the notes thereto, of the Company prepared in accordance
with generally accepted accounting principles consistent with past practice.
SECTION 4.11. Litigation. Except as disclosed in the Company SEC
Documents or in Section 4.11 of the Company Disclosure Schedule and except for
regulatory proceedings of which the Company has not yet been notified (except to
the extent the Company has Knowledge of any such regulatory proceeding), there
are no claims, actions, proceedings or governmental, administrative or
regulatory investigations pending, nor has the Company or any of its
subsidiaries received notice of any threatened claims, actions, proceedings or
governmental, administrative or regulatory investigations, against the Company
or any of its subsidiaries by or before any court, arbitrator or administrative
or governmental or regulatory body, domestic or foreign, which, if adversely
determined, would, individually or in the aggregate, have a Material Adverse
Effect or seek to delay or prevent the consummation of the Transactions. None of
the Company, its subsidiaries, nor any of their respective assets is subject to
any outstanding and unsatisfied order, writ, judgment, injunction,
determination, award or decree which would, individually or in the aggregate,
have a Material Adverse Effect.
SECTION 4.12. Employee Benefit Matters. (a) All employee benefit plans
and other benefit arrangements covering employees of the Company and its
subsidiaries are listed in Section 4.12 of the Company Disclosure Schedule (the
"Company Benefit Plans"). True and complete copies of the Company Benefit Plans
have been provided to Purchasers. Except as set forth in Section 4.12(a) of the
Company Disclosure Schedule and to the extent applicable, the Company Benefit
Plans comply in all material respects
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with the requirements of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Internal Revenue Code of 1986, as amended (the
"Code"), and any Company Benefit Plan intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service (the
"IRS") to be so qualified. Except as set forth in Section 4.12(a) of the Company
Disclosure Schedule, no Company Benefit Plan is covered by Title IV of ERISA or
Section 412 of the Code. Except as set forth in Section 4.12(a) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries has
incurred any liability or penalty under Section 4975 of the Code or Section
502(i) of ERISA with respect to any Company Benefit Plan. Each Company Benefit
Plan has been maintained and administered in all material respects in compliance
with its terms and with all applicable laws including, but not limited to, ERISA
and the Code to the extent applicable thereto. Except as set forth in Section
4.12(a) of the Company Disclosure Schedule, to the Knowledge of the Company,
there are no pending, nor has the Company or any of its subsidiaries received
notice of any threatened, claims against or otherwise involving any of the
Company Benefit Plans. No Company Benefit Plan is under audit or investigation
by the IRS, the Department of Labor or the Pension Benefit Guaranty Corporation,
and to the Knowledge of the Company, no such audit or investigation is pending
or threatened. All material contributions required to be made as of the date of
this Agreement to the Company Benefit Plans have been made or provided for.
Neither the Company nor any entity under "common control" with the Company
within the meaning of Section 4001 of ERISA has contributed to, or been required
to contribute to, any "multi-employer plan" (as defined in Sections 3(37) and
4001(a)(3) of ERISA).
(b) Except as set forth in Section 4.12(b) of the Company Disclosure
Schedule, the consummation of the Transactions will not (either alone or upon
the occurrence of any additional or subsequent events) (i) constitute an event
under any Company Benefit Plan, trust, or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Company employee, or (ii) result in the triggering
or imposition of any restrictions or limitations on the right of the Company or
either Purchaser to amend or terminate any Company Benefit Plan and receive the
full amount of any excess assets remaining or resulting from such amendment or
termination, subject to applicable taxes. No payment or benefit which will or
may be made by the Company, any of its subsidiaries, either Purchaser or any of
their respective affiliates with respect to any employee of the Company or its
subsidiaries will be characterized as an "excess parachute payment," within the
meaning of Section 280G(b)(1) of the Code.
(c) Except as set forth in Section 4.12(c) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries (i) maintains or
contributes to any Company Benefit Plan which provides, or has any liability to
provide, life insurance, medical, severance or other employee welfare benefits
to any employee upon his retirement or termination of employment, except as may
be required by Section 4980B of the Code; or (ii) has ever represented, promised
or contracted (whether in oral or written form) to any employee (either
individually or to employees as a group) that such employee(s) would be provided
with life insurance, medical, severance or other employee welfare benefits upon
their retirement or termination of employment, except to the extent required by
Section 4980B of the Code.
(d) With respect to each Company Benefit Plan which is an "employee welfare
benefit plan" within the meaning of Section 3(1) of ERISA, all material claims
incurred (including claims incurred but not reported) by employees thereunder
for which the Company is, or will become, liable are (i) insured pursuant to a
contract of insurance whereby the insurance company bears any risk of loss with
respect to such claims, (ii) covered under a contract with a health maintenance
organization (an "HMO") pursuant to which the HMO bears the liability for such
claims, or (iii) reflected as a liability or accrued for in Section 4.12(d) of
the Company Disclosure Schedule.
(e) Except as set forth in Section 4.12(e) of the Company Disclosure
Schedule or except as would not have a Material Adverse Effect, with respect to
each Company Benefit Plan that is not subject to United States Law ("Foreign
Benefit Plan"): (i) all employer and employee contributions to each Foreign
Benefit Plan required by law or by the terms of such Foreign Benefit Plan have
been made or, if applicable, accrued in accordance with normal accounting
practices; (ii) the fair market value of the assets of each funded Foreign
Benefit Plan, the liability of each insurer for any Foreign Benefit Plan, funded
through insurance or the book
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reserve established for any Foreign Benefit Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations, as of the Effective Time, with respect to all current and former
participants in such plan according to the actuarial assumptions and valuations
most recently used to determine employer contributions to such Foreign Benefit
Plan and no transaction contemplated by this Agreement shall cause such assets
or insurance obligations to be less than such benefit obligations; and (iii)
each Foreign Benefit Plan required to be registered has been registered and has
been maintained in good standing with the appropriate regulatory authorities.
(f) The Company shall take such actions as are necessary to cause the
Employee Stock Purchase Plan to terminate prior to the termination of the Offer.
The Company shall take such actions as are necessary to cause any offer to
purchase Shares pursuant to the Company's Employee Stock Purchase Plan (the
"ESPP") to expire on or prior to the termination of the Offer. On such date, the
Company shall apply the funds credited as of such date under the ESPP within
each participant's payroll withholdings to the purchase of whole Shares in
accordance with the terms of the ESPP.
SECTION 4.13. Taxes. (a) For purposes of this Agreement, "Tax" or "Taxes"
means any and all taxes, fees, levies, duties, tariffs, imposts, and other
charges of any kind (together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto) imposed by any
governmental or taxing authority including, without limitation, taxes or other
charges on or with respect to income, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value added, or gains taxes; license, registration and documentation
fees; and customs' duties, tariffs, and similar charges.
(b) Except as disclosed in the Company SEC Documents or in Section 4.13(b)
of the Company Disclosure Schedule, the Company and each of its subsidiaries (i)
have filed all federal, state, local and foreign Tax returns required to be
filed by the Company or any of its subsidiaries for tax years ended prior to the
date of this Agreement, except for those Tax returns the failure of which to
file would not, individually or in the aggregate, have a Material Adverse Effect
or for which requests for extensions have been timely filed, and all such
returns are complete in all material respects, (ii) have paid or accrued all
Taxes shown to be due and payable on such returns, (iii) have accrued all such
Taxes for such periods subsequent to the periods covered by such returns, (iv)
have "open" years for federal income tax returns only as set forth in the
Company SEC Documents or in Section 4.13(b) of the Company Disclosure Schedule
and (v) have not participated in or cooperated with an international boycott
within the meaning of Section 999 of the Code. There are no liens for Taxes on
the assets of the Company or any of its subsidiaries, except for liens that
would not, individually or in the aggregate, have a Material Adverse Effect,
liens for Taxes not yet due and payable, and except as set forth in the Company
SEC Documents or in Section 4.13 of the Company Disclosure Schedule, there is no
pending, nor has the Company or any of its subsidiaries received notice of any
threatened Tax audit, examination, refund litigation or adjustment in
controversy which, if determined adversely, would, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth in Section
4.13(b) of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries is a party to any agreement providing for the allocation or sharing
of Taxes.
SECTION 4.14. Intellectual Property. (a) Section 4.14(a) of the Company
Disclosure Schedule sets forth a true and complete list of all Intellectual
Property owned by the Company for which registrations have been made or applied
for, including all patents, trademarks, copyrights, mask works and other forms
of registrable Intellectual Property (the "Scheduled Intellectual Property").
Except as would not individually or in the aggregate have a Material Adverse
Effect and except as set forth in Section 4.14(a) of the Company Disclosure
Schedule, the Company is the sole and exclusive owner of the Scheduled
Intellectual Property, free and clear of any Encumbrance. Except as would not
individually or in the aggregate have a Material Adverse Effect and except as
set forth in Section 4.14(a) of the Company Disclosure Schedule, the
registrations made for the Scheduled Intellectual Property are current,
outstanding and valid, and the Company has complied with all requirements to
maintain such Intellectual Property in full force and effect.
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(b) The Scheduled Intellectual Property, together with all other
Intellectual Property owned by the Company (collectively, the "Owned
Intellectual Property"), constitute all of the Intellectual Property requisite
and necessary for the conduct of the businesses of the Company. Except as set
forth in Section 4.14(b) of the Company Disclosure Schedule, the Company does
not have, nor does it require, any license (other than licenses generally
available to the public at reasonable cost) from another in or to any material
Intellectual Property that is material to the businesses of the Company. As a
result of the Transaction, as of the Effective Date, the Company shall own all
right, title and interest in and to all material Intellectual Property requisite
and necessary for the conduct of the businesses of the Company. Except as
provided on Section 4.14(b) of the Company Disclosure Schedule, the Company has
not granted a license to another in or to any of the Owned Intellectual
Property.
(c) Except as provided on Section 4.14(c) of the Company Disclosure
Schedule, to the Knowledge of the Company, no actions or proceedings involving
the Company are pending or threatened, (i) which challenge the ownership,
validity or enforceability of any of the Owned Intellectual Property, (ii) which
seek to restrict the use by the Company of any of the Owned Intellectual
Property, or (iii) which allege that the Company infringes or violates the
Intellectual Property of another. No pending or threatened action or proceeding,
including but not limited to those on Section 4.14(c) of the Company Disclosure
Schedule, would have a material effect on the businesses of the Company if
decided adversely to the Company. To the Knowledge of the Company, the Company
is aware of no infringement or violation of the Owned Intellectual Property by
another.
(d) For the purpose of this Section 4.14, the Company means the Company and
its subsidiaries, and the Intellectual Property means (i) inventions, whether or
not patentable, whether or not reduced to practice, and whether or not yet made
the subject of a pending patent application or applications, (ii) ideas and
conceptions of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications, (iii) national (including the United States) and multinational
statutory invention registrations, patents, patent registrations and patent
applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all rights therein
provided by international treaties or conventions and all improvements to the
inventions disclosed in each such registration, patent or application, (iv)
trademarks, service marks, trade dress, logos, trade names and corporate names,
whether or not registered, including all common law rights, and registrations
and applications for registration thereof, including, but not limited to, all
marks registered in the United States Patent and Trademark Office, the Trademark
Offices of the States and Territories of the United States of America, and the
Trademark Offices of other nations throughout the world, and all rights therein
provided by international treaties or conventions, (v) copyrights (registered or
otherwise) and registrations and applications for registration thereof, and all
rights therein provided by international treaties or conventions, (vi) computer
software, including, without limitation, source code, operating systems and
specifications, data, data bases, files, documentation and other materials
related thereto, data and documentation, (vii) trade secrets and confidential,
technical and business information (including ideas, formulas, compositions,
inventions, and conceptions of inventions whether patentable or unpatentable and
whether or not reduced to practice), (viii) whether or not confidential,
technology (including know-how and show-how), manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information, (ix) copies
and tangible embodiments of all the foregoing, in whatever form or medium, (x)
all rights to obtain and rights to apply for patents, and to register trademarks
and copyrights, and (xi) all rights to sue or recover and retain damages and
costs and attorneys' fees for present and past infringement of any of the
foregoing.
SECTION 4.15. Other Interests. Except as set forth in Section 4.15 of the
Company Disclosure Schedule or in the Company SEC Documents, the Company does
not own, directly or indirectly, any interest or investment (whether equity or
debt) in any corporation, partnership, joint venture, business, trust or entity
(other than investments in short-term investment securities).
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SECTION 4.16. Labor Matters. Except as set forth in Section 4.16 of the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries is
presently, nor has in the past been, a party to, or bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor union organization. There is no unfair labor practice or labor
arbitration proceeding pending or, to the Knowledge of the Company, threatened
against the Company or any of its subsidiaries relating to their respective
businesses except for any such proceeding which would not, individually or in
the aggregate, have a Material Adverse Effect.
SECTION 4.17. Brokers and Finders. No broker, finder or investment bank
has acted directly or indirectly for the Company, nor has the Company incurred
any obligation to pay any brokerage, finder's or other fee or commission in
connection with the transactions contemplated hereby, other than BT Alex. Brown
and Houlihan Lokey, the fees and expenses of which shall be borne by the
Company. The Company has furnished to Purchasers a complete and correct copy of
all agreements between the Company and BT Alex. Brown and Houlihan Lokey
pursuant to which such firm would be entitled to any payment relating to the
transactions contemplated by this Agreement.
SECTION 4.18. Opinions of Financial Advisors. (a) BT Alex. Brown has
delivered its opinion, dated the date of this Agreement, to the Board to the
effect that, as of such date, the cash consideration to be received in the Offer
and the Merger by the holders of Shares (other than B Purchaser and its
affiliates and any other holders of Shares who will retain Shares following
consummation of the Offer and the Merger) is fair from a financial point of view
to such holders and such opinion has not been withdrawn or modified in any
material respect prior to consummation of the Offer.
(b) Houlihan Lokey has delivered its opinion and report to the Board and
Purchasers with respect to solvency and related matters, and such opinion has
not been withdrawn or modified.
SECTION 4.19. Real Property and Leases. (a) The Company and each of its
subsidiaries has sufficient title to all of its properties and assets to conduct
its businesses as currently conducted or as contemplated to be conducted, except
as would not, individually or in the aggregate, have a Material Adverse Effect.
(b) Each parcel of real property owned or leased by the Company or any of
its subsidiaries (i) is owned or leased free and clear of all mortgages,
pledges, liens, security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any kind
(collectively, "Liens"), other than (A) Liens for current taxes and assessments
not yet past due, (B) inchoate mechanics' and materialmen's Liens for
construction in progress, (C) workmen's, repairmen's, warehousemen's and
carriers' Liens arising in the ordinary course of business of the Company or
such subsidiary consistent with past practice, and (D) all matters of record,
Liens and other imperfections of title and encumbrances which would not,
individually or in the aggregate, have a Material Adverse Effect (collectively,
"Permitted Liens"), and (ii) is neither subject to any governmental decree or
order to be sold nor is being condemned, expropriated or otherwise taken by any
public authority with or without payment of compensation therefor, nor, has any
notice been received by the Company stating that any such condemnation,
expropriation or taking been proposed.
(c) All leases of real property leased for the use or benefit of the
Company or any of its subsidiaries to which the Company or any of its
subsidiaries is a party requiring rental payments in excess of $100,000 on an
annualized basis during the period of the lease, and all amendments and
modifications thereto are in full force and effect and have not been modified or
amended, and there exists no default under any such lease by the Company or any
of its subsidiaries, nor any event which with notice or lapse of time or both
would constitute a default thereunder by the Company or any of its subsidiaries,
except as would not, individually or in the aggregate, have a Material Adverse
Effect.
SECTION 4.20. Material Contracts. (a) Section 4.20(a) of the Company
Disclosure Schedule lists each of the following contracts and agreements
(including, without limitation, oral arrangements to the extent
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legally binding) of the Company and each of its subsidiaries (such contracts and
agreements, together with all contracts and agreements disclosed in Section 4.14
of the Disclosure Schedule, being "Material Contracts"):
(i) each contract, agreement and other arrangement for the purchase of
inventory, spare parts, other materials or personal property with any
supplier or for the furnishing of services to the Company and each of its
subsidiaries or otherwise related to the businesses of the Company and each
of its subsidiaries under the terms of which the Company or any of its
subsidiaries: (A) are likely to pay or otherwise give consideration of more
than $3,000,000 in the aggregate during the calendar year ended December
31, 1997 or (B) are likely to pay or otherwise give consideration of more
than $10,000,000 in the aggregate over the remaining term of such contract;
(ii) each contract, agreement and other arrangement for the sale of
inventory or other personal property or for the furnishing of services by
the Company or any of its subsidiaries which: (A) is likely to involve
consideration of more than $3,000,000 in the aggregate during the calendar
year ended December 31, 1997 or (B) is likely to involve consideration of
more than $10,000,000 in the aggregate over the remaining term of the
contract;
(iii) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing, consulting and advertising contracts and agreements to which the
Company or any of its subsidiaries is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the Company
or any of its subsidiaries is a party and which are not cancelable without
penalty or further payment in excess of $50,000 and without more than 90
days' notice;
(v) all contracts and agreements relating to indebtedness of the
Company or any of its subsidiaries or to any direct or indirect guaranty by
the Company or any of its subsidiaries of indebtedness of any other Person;
(vi) all contracts, agreements, commitments, written understandings or
other arrangements with any Governmental Entity, to which the Company or
any of its subsidiaries is a party (other than arrangements entered into in
the ordinary course of business with hospitals or other medical facilities
owned or operated by any such Governmental Entity);
(vii) all contracts and agreements that limit or purport to limit the
ability of the Company or any of its subsidiaries to compete in any line of
business or with any Person or in any geographic area or during any period
of time; and
(viii) all other contracts and agreements, whether or not made in the
ordinary course of business, which are material to the Company and its
subsidiaries, taken as a whole, or the conduct of the business of the
Company and its subsidiaries, taken as a whole, or the absence of which
would, in the aggregate, have a Material Adverse Effect.
(b) Except as disclosed in Section 4.20(b) of the Company Disclosure
Schedule, each Material Contract: (i) is legal, valid and binding on the Company
or its respective subsidiary party thereto and, to the Knowledge of the Company,
the other parties thereto, and is in full force and effect and (ii) upon
consummation of the transactions contemplated by this Agreement, except to the
extent that any consents set forth in Section 4.04 of the Company Disclosure
Schedule are not obtained, shall continue in full force and effect without
penalty or other adverse consequence. Neither the Company nor any of its
subsidiaries is in breach of, or default under, any Material Contract.
(c) No other party to any Material Contract is, to the Knowledge of the
Company, in material breach thereof or default thereunder.
(d) Except as disclosed in Section 4.20(d) of the Company Disclosure
Schedule, there is no contract, agreement or other arrangement granting any
Person any preferential right to purchase any of the properties or assets of the
Company or any of its subsidiaries.
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SECTION 4.21. Certain Business Practices. Neither the Company nor any of
its subsidiaries nor any of their respective directors, officers, agents,
representatives or employees (in their capacity as directors, officers, agents,
representatives or employees) has: (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) directly or indirectly, paid or delivered any fee,
commission or other sum of money or item of property, however characterized, to
any finder, agent, or other party acting on behalf of or under the auspices of a
governmental official or Governmental Entity, in the United States or any other
country, which is in any manner related to the business or operations of the
Company or any of its subsidiaries, that was illegal under any federal, state or
local laws of the United States or any other country having jurisdiction; or (c)
made any payment to any customer or supplier of the Company or any of its
subsidiaries or any officer, director, partner, employee or agent of any such
customer or supplier for the unlawful sharing of fees or to any such customer or
supplier or any such officer, director, partner, employee or agent for the
unlawful rebating of charges, or engaged in any other unlawful reciprocal
practice, or made any other unlawful payment or given any other unlawful
consideration to any such customer or supplier or any such officer, director,
partner, employee or agent, in respect of the business of the Company and its
subsidiaries.
SECTION 4.22. Accounting Treatment. The Company has received from Ernst &
Young LLP a letter in form and substance reasonably satisfactory to Purchasers
that the Transactions will receive recapitalization accounting treatment and
such letter has not been withdrawn or modified.
SECTION 4.23. Stock Retention Agreements. Certain employees have, on the
date hereof, and the Company shall use all reasonable efforts to have certain
employees listed in Section 4.23 of the Company Disclosure Schedule enter into
agreements pursuant to which such employees will retain stock or options in the
Surviving Corporation (each such agreement being a "Stock Retention Agreement").
The Company shall not enter into any Stock Retention Agreement without the prior
consent of Purchasers.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Purchasers hereby represent and warrant, jointly and severally, to the
Company as follows:
SECTION 5.01. Organization and Qualification. Each Purchaser is (a) duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the requisite power and authority to
own, lease and operate its properties and to carry on its business as it is now
being conducted and (c) is in good standing and duly qualified to do business in
each jurisdiction in which the transaction of its business makes such
qualification necessary, except where the failure to be so organized, existing,
qualified and in good standing or to have such power or authority would not
materially restrict or prevent the consummation of the Transaction.
SECTION 5.02. Authorization and Validity of Agreement. Each Purchaser has
the requisite power and authority to execute and deliver this Agreement and to
consummate the Transactions in accordance with the terms hereof. The Board of
Managers of each Purchaser has duly authorized the execution, delivery and
performance of this Agreement by such Purchaser, and no other action or other
proceedings on the part of either Purchaser is necessary to authorize this
Agreement or the Transactions. This Agreement has been duly and validly executed
and delivered by each Purchaser and, assuming this Agreement constitutes the
legal, valid and binding obligation of the Company, constitutes the legal, valid
and binding obligation of each Purchaser, enforceable against such Purchaser in
accordance with its terms, except as enforcement thereof may be limited by any
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally or
by general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
SECTION 5.03. Consents and Approvals. Neither the execution and delivery
of this Agreement by Purchasers nor the performance of this Agreement by
Purchasers or the consummation by Purchasers of the Transactions will require on
the part of either Purchaser or any of its respective affiliates any consent,
approval, authorization or permit of, or filing with, or notification to, any
governmental or regulatory authority, except
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(a) in connection with the applicable requirements of the HSR Act, (b) pursuant
to the applicable requirements of the Exchange Act and the SEC's rules and
regulations promulgated thereunder and state takeover laws, (c) the filing and
recordation of the Certificate of Merger pursuant to Delaware Law and the
Articles of Merger pursuant to Texas Law, (d) as set forth in Section 5.03 of
Purchasers' disclosure schedule delivered to the Company in connection with this
Agreement (the "Purchaser Disclosure Schedule") or (e) where the failure to
obtain such consent, approval, authorization or permit, or to make such filing
or notification, would not materially restrict or prevent the consummation of
the Transactions.
SECTION 5.04. No Violation. Except as set forth in Section 5.04 of the
Purchaser Disclosure Schedule, neither the execution and delivery of this
Agreement by Purchasers nor the performance of this Agreement by Purchasers or
the consummation by Purchasers of the Transactions will (a) conflict with or
violate the organizational documents of either Purchaser, (b) result in a
violation or breach of, constitute a default (with or without notice or lapse of
time, or both) under, give rise to any right of termination, cancellation or
acceleration of, or result in the imposition of any lien, charge or other
encumbrance on any assets or property of either of Purchasers pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which either of Purchasers is a
party or by which either of Purchasers or any of their respective assets or
properties are bound, except for such violations, breaches and defaults (or
rights of termination, cancellation or acceleration or lien or other charge or
encumbrance) as to which consents have been obtained or which would not
individually or in the aggregate materially restrict or prevent the consummation
of the transactions contemplated hereby or (c) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in Section
5.03 and this Section 5.04 are duly and timely obtained or made, conflict with
or violate any order, writ, injunction, decree, statute, rule or regulation
applicable to either Purchaser, except for such violations which would not
restrict prevent the consummation of the Transactions.
SECTION 5.05. Offer Documents; Company Statement; Schedule 13E-3; Schedule
13E-4. No information supplied by or on behalf of Purchasers specifically for
inclusion in the Company Statement, Schedule 13E-3 or Schedule 13E-4 will, at
the respective times filed with the SEC or other governmental entity, or at any
time thereafter when the information included therein is required to be updated
pursuant to applicable law, or, in the case of the Company Statement, at the
date mailed to the Company's shareholders and at the time of the Shareholders'
Meeting, contain any untrue statement of a material act or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The Schedule 13E-3 will, when filed by Purchasers with the
SEC or other governmental entity, comply as to form in all material respects
with the provisions of the Exchange Act and the SEC's rules and regulations
promulgated thereunder.
SECTION 5.06. Financing. Purchasers have provided the Company with
complete and correct copies of (a) a commitment letter dated the date hereof
from Bank of America National Trust and Savings Association pursuant to which it
has committed, subject to the terms and conditions set forth therein, to provide
a senior credit facility in an aggregate amount of $300,000,000 and a tender
facility in an aggregate amount of $130,000,000 to finance the Transactions and
(b) a letter dated the date hereof from BT Alex. Brown pursuant to which it has
indicated that it is highly confident of its ability to underwrite in the public
markets, subordinated notes in an aggregate amount of $200,000,000 to finance
the Transactions. The financing to be provided pursuant to the foregoing
arrangements is hereinafter referred to as the "Debt Financing." As of the date
hereof, the commitment letter and the highly confident letter relating to the
Debt Financing referred to above have not been withdrawn. At the Closing, F
Purchaser will have available $17,414,435.50 and B Purchaser will have available
$138,197,020.50 for purposes of consummating the Closing (the "Equity
Financing"), reduced by an amount equal to the sum of (i) the number of shares
purchased by B Purchaser between the date hereof and the expiration of the Offer
multiplied by the Per Share Amount, (ii) the number of Shares retained by
management pursuant to Stock Retention Agreements entered into after the date
hereof multiplied by the Per Share Amount and (iii) the number of Options
retained by management pursuant to Stock Retention Agreements entered into after
the date hereof multiplied by the excess of the Per Share Amount over the
exercise price of such Options.
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SECTION 5.07. Brokers and Finders. No broker, finder or investment bank
has acted directly or indirectly for either Purchaser, nor has either Purchaser
incurred any obligation to pay any brokerage, finder's or other fee or
commission in connection with the Transactions.
SECTION 5.08. Operations of Purchasers. Purchasers have been formed
solely for the purpose of engaging in the Transactions and prior to the Closing
Date will have engaged in no other business activities.
ARTICLE VI
COVENANTS
SECTION 6.01. Conduct of the Business of the Company Pending the
Merger. From the date hereof until the Effective Time, the Company shall
conduct the business of the Company and each of its subsidiaries in all material
respects only in the ordinary course consistent with past practice, shall use
all reasonable efforts to preserve intact the business organization of the
Company and keep available the services of its present key officers and
employees (provided, however, that to satisfy the foregoing obligation, the
Company shall not be required to make any payments or enter into or amend any
contractual arrangements or understandings, except in the ordinary course of
business consistent with past practice) and shall use all reasonable efforts to
preserve the current relationships of the Company and each of its subsidiaries
with customers and suppliers with which the Company or such subsidiary has
significant business relations and, except as otherwise required by applicable
law or as set forth in Section 6.01 of the Company Disclosure Schedule, the
Company shall not, without the prior consent of Purchasers (which consent shall
not be unreasonably withheld):
(a) amend its Articles of Incorporation or By-Laws;
(b) declare, set aside or pay any dividend or other distribution or
payment in cash, stock or property in respect of its capital stock (other
than a quarterly cash dividend of $.0375 per Share for the third quarter of
fiscal year 1997), and not reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital
stock;
(c) issue, grant, sell, dispose of, encumber or pledge or agree to or
authorize the issuance, grant, sale, disposition, encumbrance of or pledge
of any shares of, or rights of any kind to acquire any shares of, the
capital stock of any class of or any other ownership interest in the
Company or any of its subsidiaries (other than pursuant to the
Transactions);
(d) acquire, sell, transfer, lease or encumber any material assets
except in the ordinary course of business and consistent with past
practice;
(e) adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation, dissolution,
consolidation, merger, restructuring or recapitalization of the Company or
any of its subsidiaries;
(f) grant any severance or termination pay to, or enter into any
employment agreement with, any executive officer or director of the
Company, other than in the ordinary course of business and consistent with
past practice;
(g) except in the ordinary course of business, increase the
compensation payable or to become payable to its officers or employees,
enter into any contract or other binding commitment in respect of any such
increase (other than pursuant to a Company Benefit Plan or policy or
agreement existing as of the date hereof) to, or enter into any severance
agreement with any director, executive officer or other employee of the
Company or establish, adopt, enter into, make any new grants or awards
under or amend, any Company Benefit Plan, except as required by applicable
law, to maintain tax-qualified status or as may be required by any Company
Benefit Plan as of the date hereof;
(h) settle or compromise any material claims or litigation or, except
in the ordinary course of business and consistent with past practice,
modify, amend or terminate any Material Contracts or waive, release or
assign any material rights or claims, or make any payment, direct or
indirect, of any material liability of the Company before the same becomes
due and payable in accordance with its terms;
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(i) take any action, other than in the ordinary course of business and
consistent with past practice with respect to accounting policies or
procedures (including tax accounting policies and procedures); except as
may be required by law or generally accepted accounting principles;
(j) make any Tax election or permit any material insurance policy
naming it as a beneficiary or a loss payable payee to be cancelled or
terminated without notice to Purchasers, except in the ordinary course of
business and consistent with past practice;
(k) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof or any
material amount of assets; (ii) incur any indebtedness for borrowed money
or issue any debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of any Person,
or make any loans or advances, except in the ordinary course of business
and consistent with past practice; (iii) enter into any contract or
agreement other than in the ordinary course of business and consistent with
past practice; or (iv) authorize any single capital expenditure which is in
excess of $2,000,000 or capital expenditures which are, in the aggregate,
in excess of $9,000,000 for the Company and its subsidiaries taken as a
whole; or
(l) authorize or enter into an agreement to do any of the foregoing.
SECTION 6.02. Access; Confidentiality. (a) From the date of this
Agreement until the Effective Time, upon reasonable prior notice to the Company,
the Company shall give Purchasers and their authorized representatives, and
Persons providing or committing to provide Purchasers with financing for the
Transactions and their representatives, reasonable access to its officers,
properties, books and records and shall furnish Purchasers and each of their
authorized representatives with such financial and operating data and other
information concerning the business and properties of the Company as Purchasers
from time to time may reasonably request.
(b) Purchasers will hold and will cause their respective affiliates, agents
and other representatives to keep all documents and information concerning the
Company furnished to Purchasers or their respective representatives in
connection with the Transactions confidential in accordance with a
confidentiality agreement dated March 10, 1997, between the Company and Fremont
Group L.L.C. and a confidentiality agreement dated March 11, 1997 between the
Company and Richard C. Blum & Associates, L.P., which confidentiality agreements
shall remain in full force and effect until the termination of this Agreement or
otherwise in accordance with its terms.
SECTION 6.03. Preparation of Company Statement; Shareholders' Meeting;
Further Actions. (a) The Company shall file the Offer Documents and, if
required by law, the Company Statement with the SEC. Each Purchaser shall
cooperate with the Company in connection with the preparation of the Offer
Documents and the Company Statement including, but not limited to, furnishing to
the Company any and all information regarding such Purchaser and any of its
affiliates as may be required to be disclosed therein. The Company shall use its
commercially reasonable efforts to cause the Offer Documents and the Company
Statement to be mailed to the Company's shareholders as promptly as practicable
after the date hereof in the case of the Offer Documents or after the
consummation of the Offer in the case of the Company Statement.
(b) The Company shall as promptly as practicable notify Purchasers of the
receipt of any comments from the SEC. All filings by the Company with the SEC
and all mailings to the Company's shareholders in connection with the
Transactions, including the Offer Documents and the Company Statement, shall be
subject to the prior review, comment and approval of Purchasers (such approval
not to be unreasonably withheld or delayed).
(c) If required by applicable law in order to consummate the Merger, the
Company, acting through the Board, shall, in accordance with applicable law and
the Company's Articles of Incorporation and By-laws, (i) duly call, give notice
of, convene and hold an annual or special meeting of its shareholders as soon as
practicable following consummation of the Offer for the purpose of considering
and taking action on this Agreement and the Merger (the "Shareholders' Meeting")
and (ii) subject to its fiduciary duties under applicable law as advised in
writing by outside counsel, (A) include in the Company Statement the
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unanimous recommendation of the Board that the shareholders of the Company
approve and adopt this Agreement and the Merger and (B) use its best efforts to
obtain such approval and adoption. At the Shareholders' Meeting, Purchasers
shall cause all Shares then owned by them and their subsidiaries to be voted in
favor of the approval and adoption of this Agreement and the Merger.
(d) Subject to the terms and conditions of this Agreement and applicable
law, each of the parties shall act in good faith and use commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the Transactions as soon as practicable, including such actions or things as any
other party may reasonably request in order to cause any of the conditions to
such other party's obligation to consummate the Transactions to be fully
satisfied. Without limiting the foregoing, the parties shall (and shall cause
their respective subsidiaries, and use commercially reasonable efforts to cause
their respective affiliates, directors, officers, employees, agents, attorneys,
accountants and representatives, to) consult and fully cooperate with and
provide assistance to each other in (i) obtaining all necessary consents,
approvals, waivers, licenses, permits, authorizations, registrations,
qualifications, or other permission or action by, and giving all necessary
notices to and making all necessary filings with and applications and
submissions to any court, administrative agency or commission or other
governmental authority, or instrumentality, domestic or foreign (collectively,
"Governmental Entity") or other Person or entity as soon as reasonably
practicable after filing; (ii) make promptly its respective filings, and
thereafter make any other required submissions, under, seeking early termination
of any waiting period under, the HSR Act; (iii) providing all such information
concerning such party, its subsidiaries and its officers, directors, partners
and affiliates and making all applications and filings as may be necessary or
reasonably requested in connection with any of the foregoing; (iv) consummating
and making effective the transactions contemplated hereby; and (v) in the event
and to the extent required, amending this Agreement so that this Agreement and
the Offer and the Merger comply with Delaware Law and Texas Law. Prior to making
any application to or filing with any Governmental Entity or other Person or
entity in connection with this Agreement (other than filing under the HSR Act),
each party shall provide the other party with drafts thereof and afford the
other party a reasonable opportunity to comment on such drafts. If at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement shall use their commercially reasonable efforts to take
all such action.
SECTION 6.04. Public Announcements. The Company and Purchasers will
obtain the consent of one another prior to issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated hereby and shall not issue any such press release or make any
public statement prior to obtaining such consent, except as may be required by
applicable law or pursuant to the rules and regulations of the NASDAQ National
Market.
SECTION 6.05. Recapitalization. The Company shall cooperate with any
reasonable requests of Purchasers or the SEC related to the reporting of the
Transactions as a recapitalization for financial reporting purposes including,
without limitation, to assist Purchasers and their affiliates with any
presentation to the SEC with regard to such reporting and to include appropriate
disclosure with regard to such reporting in all filings with the SEC and
mailings to the shareholders of the Company made in connection with the Offer or
the Merger. In furtherance of the foregoing, the Company shall provide to
Purchasers for the prior review of Purchasers' advisors any description of
Transactions which is meant to be disseminated.
SECTION 6.06. Acquisition Proposals. Neither the Company nor any of its
subsidiaries shall, directly or indirectly, through any officer, director, agent
or otherwise, solicit, initiate or encourage the submission of any proposal or
offer from any Person relating to any acquisition or purchase of all or (other
than in the ordinary course of business) any portion of the assets of, or any
equity interest in, the Company or any of its subsidiaries or any
recapitalization, business combination or similar transaction with the Company
or any of its subsidiaries (any communication with respect to the foregoing
being an "Acquisition Proposal") or participate in any negotiations regarding,
or furnish to any other Person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek any of the foregoing;
provided, however, that, at any time prior to the purchase of Shares by the
Company pursuant to the Offer, the Company may furnish information to, and
negotiate or
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otherwise engage in discussions with, any party who delivers a written
Acquisition Proposal which was not solicited or encouraged after the date of
this Agreement if the Board determines in good faith by a majority vote (i)
after consultation with and receipt of advice from its outside legal counsel,
that failing to take such action is reasonably determined to constitute a breach
of the fiduciary duties of the Board under applicable Law, (ii) after
consultation with and receipt of advice from a nationally recognized investment
banking firm, that such proposal is more favorable to the Company's Shareholders
from a financial point of view than the Transactions (including any adjustment
to the terms and conditions proposed by Purchasers in response to such
Acquisition Proposal), (iii) that sufficient commitments have been obtained with
respect to such Acquisition Proposal that the Board reasonably expects a
transaction pursuant to such Acquisition Proposal could be consummated and (iv)
that such Acquisition Proposal is not subject to any regulatory approvals that
could reasonably be expected to prevent consummation. The Company will
immediately cease all existing activities, discussions and negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. From and
after the execution of this Agreement, the Company shall immediately advise
Purchasers in writing of the receipt, directly or indirectly, of any inquiries,
discussions, negotiations, or proposals relating to an Acquisition Proposal
(including the specific terms thereof and the identity of the other party or
parties involved) and furnish to Purchasers within 48 hours of such receipt an
accurate description of all material terms (including any changes or adjustments
to such terms as a result of negotiations or otherwise) of any such written
proposal in addition to any information provided to any third party relating
thereto. In addition, the Company shall immediately advise Purchasers, in
writing, if the Board shall make any determination as to any Acquisition
Proposal as contemplated by the proviso to the first sentence of this Section
6.06. Notwithstanding the foregoing, the Company shall be permitted to take such
actions as may be required to comply with Rule 14e-2 of the Exchange Act.
SECTION 6.07. D&O Indemnification and Insurance. (a) From the Effective
Time through the sixth anniversary of the date on which the Effective Time
occurs, Purchasers shall cause the Surviving Corporation to indemnify and hold
harmless each present and former officer, director, employee or agent of the
Company, including, without limitation, each Person controlling any of the
foregoing Persons (the "Indemnified Parties"), against all claims, losses,
liabilities, damages, judgments, fines, fees, costs or expenses, including,
without limitation, attorneys' fees and disbursements (collectively, "Costs"),
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time (including, without limitation, this Agreement and the
transactions and actions contemplated hereby and giving effect to the
consummation of such transactions and actions), whether asserted or claimed
prior to, at or after the Effective Time, to the fullest extent permitted under
the Articles of Incorporation or By-Laws of the Company or indemnification
agreements in effect on the date hereof, including provisions relating to
advancement of expenses incurred in the defense of any claim, action, suit,
proceeding or investigation. Without limiting the foregoing, in the event that
any claim, action, suit, proceeding or investigation is brought against an
Indemnified Party (whether arising before or after the Effective Time), the
Indemnified Party may retain counsel satisfactory to such Indemnified Party and
Purchasers shall, or shall cause the Surviving Corporation to, advance the fees
and expenses of such counsel for the Indemnified Party in accordance with the
Articles of Incorporation or By-Laws of the Company in effect on the date of
this Agreement.
(b) For a period of six years from the Effective Time, Purchasers shall, or
shall cause the Surviving Corporation to, keep in effect provisions in its
Articles of Incorporation and By-Laws of the Company providing for exculpation
of director and officer liability and its indemnification of the Indemnified
Parties to the fullest extent permitted under Texas Law, which provisions shall
not be amended except as required by applicable law or except to make changes
permitted by law that would enlarge the Indemnified Parties' right to
indemnification.
(c) Purchasers shall cause the Surviving Corporation to maintain, at no
expense to the beneficiaries, directors' and officers' liability insurance ("D&O
Insurance") for the Indemnified Parties with respect to matters occurring at or
prior to the Effective Time, issued by a carrier or carriers assigned a
claims-paying ability rating by A.M. Best & Co. of "A (Excellent)" or higher,
providing at least the same coverage as the D&O Insurance currently maintained
by the Company and containing terms and conditions which are not
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materially less favorable to the beneficiaries, for a period of at least six
years from the Effective Time; provided, however, that in no event shall the
Surviving Corporation be required to expend pursuant to this Section 6.07(c)
more than an amount per year equal to 200% of current annual premiums paid by
the Company for such insurance (which premiums the Company represents to be
$134,480 per year in aggregate). In the event any claim is made against present
or former directors, officers or employees of the Company that is covered or
potentially covered by insurance, neither the Surviving Corporation nor
Purchasers shall do anything that would forfeit, jeopardize, restrict or limit
the insurance coverage available for that claim until the final disposition
thereof.
(d) Notwithstanding anything herein to the contrary, if any claim, action,
suit, proceeding or investigation (whether arising before, at or after the
Effective Time) is made against any Indemnified Party, on or prior to the sixth
anniversary of the Effective Time, the provisions of this Section 6.07 shall
continue in effect until the final disposition of such claim, action, suit,
proceeding or investigation.
(e) In the event that the Surviving Corporation or Purchasers or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
6.07, proper provision shall be made so that the successors and assigns of the
Surviving Corporation or Purchasers shall succeed to the obligations set forth
in this Section 6.08 and none of the actions described in clauses (i) or (ii)
shall be taken until such provision is made.
SECTION 6.08. Employee Benefits. (a) From and after the Effective Time,
Purchasers and the Surviving Corporation and their respective affiliates will
honor in accordance with their terms all existing employment, severance,
consulting and salary continuation agreements between the Company and any
current or former officer, director, employee or consultant of the Company.
(b) In the event that the Surviving Corporation or Purchasers or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any Person, then, and in each
such case, to the extent necessary to effectuate the purposes of this Section
6.08, proper provision shall be made so that the successors and assigns of the
Surviving Corporation or Purchasers shall succeed to the obligations set forth
in this Section 6.08 and none of the actions described in clauses (i) or (ii)
shall be taken until such provision is made.
SECTION 6.09. Fees and Expenses. (a) In the event the Merger is
consummated, all costs and expenses incurred by each party hereto in connection
with this Agreement and the Transactions (including, without limitation, fees
and disbursements of counsel, financial advisors and accountants) and
transaction fees of $5,119,000 to F Purchaser and $3,381,000 to B Purchaser
shall be paid by the Company or the Company shall promptly reimburse such party,
as the case may be.
(b) In the event the Fee is paid by the Company to Purchasers pursuant to
Section 8.03 the Company shall promptly reimburse Purchasers for all costs and
expenses incurred by Purchasers in connection with this Agreement and the
Transactions (including, without limitation, fees and disbursements of counsel,
financial advisors and accountants) in an amount not to exceed $2,000,000.
(c) In all events other than those expressly described in Section 6.09(a)
and (b), all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby (including, without limitation, fees and
disbursements of counsel, financial advisors and accountants) shall be borne by
the party which incurs such cost or expense, provided that all costs and
expenses related to the preparation, printing, filing and mailing (as
applicable) of the Offer Documents, the Company Statement and all SEC and other
regulatory filing fees incurred in connection with the Company Statement shall
be borne equally by the Company, on the one hand, and Purchasers, on the other
hand.
SECTION 6.10. Debt Financing. Purchasers shall use their reasonable best
efforts to obtain Debt Financing or other alternative financing on substantially
comparable or more favorable terms. The Company shall use its reasonable best
efforts to cooperate with Purchasers in obtaining the Debt Financing, including,
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without limitation, by participating in roadshows and meeting with, and
providing information to, potential sources of financing identified by
Purchasers.
SECTION 6.11. Headquarters of the Company. Purchasers shall use their
reasonable efforts to ensure that the headquarters of the Company shall be
situated in San Antonio, Texas until the third anniversary of the date of this
Agreement.
SECTION 6.12. Available Cash. As of the Closing, the assets of the
Company shall include $33,000,000 in cash of which $23,000,000 will be in
immediately available cash held by the Company or any of its direct or indirect
subsidiaries incorporated in the United States in an account at a commercial
bank located in the United States and available for use in consummating the
Offer as adjusted to reflect any amounts paid by the Company pursuant to any
agreement entered into by the Company to purchase the assets of RIK Medical,
L.L.C. and RIK Medical East, L.L.C. net of any cash included in such assets.
SECTION 6.13. Options. To the extent that any holders of Options elect to
surrender such Options for payment in accordance with Section 3.07, the parties
agree that proceeds of the Debt and Financing and the Equity Financing shall be
used to make such payments to the holders of Options who so elect.
ARTICLE VII
CONDITIONS
SECTION 7.01. Conditions to the Stock Purchase. (a) The respective
obligations of each party to effect the Stock Purchase shall be subject to the
satisfaction at or prior to the Closing Date of the following condition:
(i) No Order. No United States or state governmental authority or
other agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect
and has the effect of making the acquisition of Shares by Purchasers or any
affiliate of any of them illegal or otherwise restricting, preventing or
prohibiting consummation of the Transactions.
(ii) Offer. The conditions to the Offer set forth in Annex A shall
have been satisfied and the Company shall simultaneously with the Closing
purchase all Shares validly tendered and not withdrawn pursuant to the
Offer.
(b) The obligation of the Company to effect the Stock Purchase is also
subject to the satisfaction at or prior to the Closing Date of each of the
following additional conditions, unless waived by the Company:
(i) Accuracy of Representations and Warranties. All representations
and warranties made by Purchasers herein shall be true and correct in all
material respects (except for representations qualified by materiality or
Material Adverse Effect which shall be correct in all respects) on the
Closing Date, with the same force and effect as though such representations
and warranties had been made on and as of the Closing Date, except for
changes permitted or contemplated by this Agreement and except for
representations and warranties that are made as of a specified date or
time, which shall be true and correct in all material respects (except for
representations qualified by materiality or Material Adverse Effect which
shall be correct in all respects) only as of such specific date or time.
(ii) Compliance with Covenants. Each Purchaser shall have performed
in all material respects all obligations and agreements, and complied in
all material respects with covenants, contained in this Agreement to be
performed or complied with by it prior to or on the Closing Date.
(iii) Officer's Certificates. The Company shall have received such
certificates of each Purchaser, dated as of the Closing Date, signed by an
executive officer of such Purchaser to evidence satisfaction of the
conditions set forth in this Article VII (insofar as it relates to
Purchasers) as may be reasonably requested by the Company.
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(c) The obligation of Purchasers to effect the Stock Purchase is also
subject to the satisfaction at or prior to the Closing Date of each of the
following additional conditions, unless waived by Purchasers:
(i) Accuracy of Representations and Warranties. All representations
and warranties made by the Company herein shall be true and correct in all
material respects (except for representations qualified by materiality or
Material Adverse Effect which shall be correct in all respects) on the
Closing Date, with the same force and effect as though such representations
and warranties had been made on and as of the Closing Date, except for
changes permitted or contemplated by this Agreement and except for
representations and warranties that are made as of a specified date or
time, which shall be true and correct in all material respects (except for
representations qualified by materiality or Material Adverse Effect which
shall be correct in all respects) only as of such specific date or time.
(ii) Compliance with Covenants. The Company shall have performed in
all material respects all obligations and agreements, and complied in all
material respects with covenants, contained in this Agreement to be
performed or complied with by it prior to or on the Closing Date.
(iii) Officer's Certificates. Each Purchaser shall have received such
certificates of the Company, dated as of the Closing Date, signed by an
executive officer of the Company to evidence satisfaction of the conditions
set forth in this Article VII (insofar as it relates to the Company) as may
be reasonably requested by the Company.
(iv) Directors Resignations. All Directors of the Company shall have
tendered their resignations effective as of the Closing and shall have been
replaced by nominees acceptable to Purchasers.
SECTION 7.02. Conditions to the Merger. (a) The respective obligations of
each party to effect the Merger shall be subject to the satisfaction at or prior
to the Effective Time of the following conditions:
(i) Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the affirmative
vote of the shareholders of the Company to the extent required by Texas Law
and the Articles of Incorporation of the Company;
(ii) No Order. No United States or state governmental authority or
other agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any law, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is then in effect
and has the effect of making the acquisition of Shares by Purchasers or any
affiliate of any of them illegal or otherwise restricting, preventing or
prohibiting consummation of the Transactions; and
(iii) Stock Purchase. Purchasers shall have purchased, respectively,
the F Shares and the B Shares pursuant to the Stock Purchase.
(b) The obligation of the Company to effect the Merger is also subject to
the satisfaction at or prior to the Closing Date of each of the following
additional conditions, unless waived by the Company:
(i) Accuracy of Representations and Warranties. All representations
and warranties made by Purchasers herein shall be true and correct in all
material respects (except for representations qualified by materiality or
Material Adverse Effect which shall be correct in all respects) at the
Effective Time, with the same force and effect as though such
representations and warranties had been made on and as of the Effective
Time, except for changes permitted or contemplated by this Agreement and
except for representations and warranties that are made as of a specified
date or time, which shall be true and correct in all material respects
(except for representations qualified by materiality or Material Adverse
Effect which shall be correct in all respects) only as of such specific
date or time.
(ii) Compliance with Covenants. Each Purchaser shall have performed
in all material respects all obligations and agreements, and complied in
all material respects with covenants, contained in this Agreement to be
performed or complied with by it prior to or as of the Effective Time.
(iii) Officer's Certificates. The Company shall have received such
certificates of Purchasers, dated as of the Effective Time, signed by an
executive officer of each Purchaser to evidence satisfaction of the
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conditions set forth in this Article VII (insofar as it relates to
Purchasers) as may be reasonably requested by the Company.
(c) The obligation of Purchasers to effect the Merger is also subject to
the satisfaction at or prior to the Closing Date of each of the following
additional conditions, unless waived by Purchasers:
(i) Accuracy of Representations and Warranties. All representations
and warranties made by the Company herein shall be true and correct in all
material respects (except for representations qualified by materiality or
Material Adverse Effect which shall be correct in all respects) as of the
Effective Time, with the same force and effect as though such
representations and warranties had been made on and as of the Effective
Time, except for changes permitted or contemplated by this Agreement and
except for representations and warranties that are made as of a specified
date or time, which shall be true and correct in all material respects
(except for representations qualified by materiality or Material Adverse
Effect which shall be correct in all respects) only as of such specific
date or time.
(ii) Compliance with Covenants. The Company shall have performed in
all material respects all obligations and agreements, and complied in all
material respects with covenants, contained in this Agreement to be
performed or complied with by it prior to or as of the Effective Time.
(iii) Officer's Certificates. Each Purchaser shall have received such
certificates of the Company, dated as of the Effective Time, signed by an
executive officer of the Company to evidence satisfaction of the conditions
set forth in this Article VII (insofar as it relates to the Company) as may
be reasonably requested by the Company.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the
Transactions may be abandoned at any time prior to the Effective Time, as the
case may be, notwithstanding any requisite approval and adoption of this
Agreement and the transactions contemplated hereby by the shareholders of the
Company:
(a) By mutual written consent duly authorized by the Board of
Directors or Managers of each Purchaser and the Company; or
(b) By either Purchaser or the Company if (i) the Closing shall not
have occurred by January 31, 1998 or (ii) the Effective Time shall not have
occurred on or before May 31, 1998; provided, however, that the right to
terminate this Agreement under this Section 8.01(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Closing or the
Effective Time, as the case may be, to occur on or before such dates or
(ii) any court of competent jurisdiction in the United States or other
United States governmental authority shall have issued an order, decree,
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall
have become final and nonappealable; or
(c) By either Purchaser if (i) due to an occurrence or circumstance
that would result in a failure to satisfy any condition set forth in Annex
A hereto, the Company shall have (A) failed to commence the Offer within 10
business days following the date of this Agreement, (B) terminated the
Offer without having accepted any Shares for payment thereunder or (C)
failed to pay for Shares pursuant to the Offer within 60 days following the
commencement of the Offer, unless such failure to pay for Shares shall have
been caused by or resulted from the failure of Purchasers to perform in any
material respect any material covenant or agreement of either of them
contained in this Agreement or the material breach by Purchasers of any
material representation or warranty of either of them contained in this
Agreement or (ii) prior to the purchase of Shares pursuant to the Offer,
the Board or any committee thereof shall have withdrawn or modified in a
manner adverse to Purchasers its approval or recommendation of the Offer,
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this Agreement, the Transactions or shall have recommended another
transaction pursuant to any Acquisition Proposal, or shall have resolved to
do any of the foregoing; or
(d) By the Company, upon approval of the Board, if (i) due to an
occurrence or circumstance that would result in a failure to satisfy any of
the conditions set forth in Annex A hereto, the Company shall have (A)
failed to commence the Offer within 10 business days following the date of
this Agreement, (B) terminated the Offer without having accepted any Shares
for payment thereunder or (C) failed to pay for Shares pursuant to the
Offer within 60 days following the commencement of the Offer, unless such
failure to pay for Shares shall have been caused by or resulted from the
failure of the Company to perform in any material respect any material
covenant or agreement of it contained in this Agreement or the material
breach by the Company of any material representation or warranty of it
contained in this Agreement or (ii) prior to the purchase of Shares
pursuant to the Offer, the Board shall have withdrawn or modified in a
manner adverse to Purchasers its approval or recommendation of the Offer,
this Agreement or the Transactions in order to approve the execution by the
Company of a definitive agreement concerning a transaction pursuant to an
Acquisition Proposal.
SECTION 8.02. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void, and there shall be no liability on the part of any party hereto, except
(i) as set forth in Sections 6.02(b), 8.03 and 9.01 and (ii) nothing herein
shall relieve any party from liability for any breach hereof.
SECTION 8.03. Fees. Notwithstanding the provisions of Section 6.10, in
the event that
(a) any Person shall have commenced, publicly proposed or communicated
to the Company a proposal that is publicly disclosed for a tender or
exchange offer for 20% or more (or which, assuming the maximum amount of
securities which could be purchased, would result in any Person
beneficially owning 20% or more) of the then outstanding Shares or
otherwise for the direct or indirect acquisition of the Company or all or
substantially all of its assets for per Share consideration having a value
greater than the Per Share Amount and (w) the Offer shall have remained
open for at least 20 business days, (x) the Minimum Condition shall not
have been satisfied, (y) this Agreement shall have been terminated pursuant
to Section 8.01 and (z) within 12 months of any such termination a
transaction such as the transaction contemplated by this Section 8.03(a)
shall have been consummated or definitive documentation shall have been
entered into with respect thereto; or
(b) this Agreement is terminated pursuant to Section 8.01(c)(ii) or
8.01(d)(ii);
then, in any such event, the Company shall pay Purchasers (i) prior to such
consummation or entering into of definitive documentation in the case of
paragraph (a) or (ii) prior to such withdrawal or modification in the case of
termination pursuant to paragraph (b), a fee of $30 million (the "Fee").
SECTION 8.04. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after the
approval and adoption of this Agreement and the transactions contemplated hereby
by the shareholders of the Company, no amendment may be made which would reduce
the amount or change the type of consideration into which each Share shall be
converted upon consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 8.05. Waiver. At any time prior to the Effective Time, any party
hereto may (i) extend the time for the performance of any obligation or other
act of any other party hereto, (ii) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
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<PAGE> 33
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.01, as the case may be, except that the agreements set
forth in Article III and Sections 6.08 and 6.09 shall survive the Effective Time
indefinitely and those set forth in Sections 6.02(b) and 8.03 shall survive
termination indefinitely.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 9.02):
If to F Purchaser:
Fremont Purchasers II, Inc.
50 F Street, Suite 3700
San Francisco, California 94105-1895
Facsimile No.: (415) 284-8191
Attention: General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Facsimile No.: (212) 848-7179
Attention: David W. Heleniak, Esq.
If to B Purchaser:
RCBA Purchaser I, L.P.
909 Montgomery Street, Suite 400
San Francisco, California 94133-4625
Facsimile No.: (415) 434-3130
Attention: Murray Indick, Esq., General Counsel
with a copy to:
Wilmer Cutler & Pickering
2445 M Street, NW
Washington, DC 20037
Facsimile No.: (202) 663-6363
Attention: Michael Klein, Esq.
If to the Company:
Kinetic Concepts, Inc.
8023 Vantage Drive
San Antonio, Texas 78230-4726
Facsimile No.: (210) 255-6993
Attention: Dennis E. Noll, Esq., General Counsel
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<PAGE> 34
with a copy to:
Cox & Smith
112 East Pecan Street, Suite 1800
San Antonio, Texas 78205-1521
Facsimile No.: (210) 226-8395
Attention: Stephen Seidel, Esq.
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a specified Person means a Person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified Person;
(b) "beneficial owner" with respect to any Shares means a Person who
shall be deemed to be the beneficial owner of such Shares (i) which such
Person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 of the Exchange Act) beneficially owns, directly or indirectly,
(ii) which such Person or any of its affiliates or associates has, directly
or indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise,
or (B) the right to vote pursuant to any agreement, arrangement or
understanding or (iii) which are beneficially owned, directly or
indirectly, by any other Persons with whom such Person or any of its
affiliates or associates or Person with whom such Person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any Shares;
(c) "business day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of New York;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "Knowledge" means the actual knowledge, after due investigation,
of the officers of the Company with a title of vice president or higher;
(f) "Material Adverse Effect" means any change or effect or any event
or circumstance which is, or is reasonably likely to be, materially adverse
to the assets, liabilities, business, financial condition or results of
operations of the Company and its subsidiaries taken as a whole;
(g) "Person" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government; and
(h) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, either of Purchasers or any other person means an affiliate
controlled by such person, directly or indirectly, through one or more
intermediaries.
SECTION 9.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
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<PAGE> 35
SECTION 9.05. Entire Agreement; Assignment. This Agreement and the
Shareholder Support Agreement constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
operation of law or otherwise, except that Purchasers may assign all or any of
their rights and obligations hereunder to any affiliate or affiliates of either
of Purchasers provided that no such assignment shall relieve the assigning party
of its obligations hereunder if such assignee does not perform such obligations.
SECTION 9.06. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.07 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
SECTION 9.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.08. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State. All actions and
proceeding arising out of or relating to this Agreement shall be heard and
determined in any Delaware state or federal court. THE COMPANY AND PURCHASERS
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVER ANY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENT (VERBAL OR WRITTEN) OR ACTION OF THE COMPANY OR PURCHASERS.
SECTION 9.09. Joint and Several Obligations. The obligations of
Purchasers under this Agreement shall be joint and several except that neither
Purchaser shall have any obligation or liability with respect to the portion of
the Equity Financing to be provided by the other Purchaser in accordance with
Section 5.06.
SECTION 9.10. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Purchasers and the Company have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
FREMONT PURCHASER II, INC.
By /s/ R. S. KOPF
------------------------------------
Title:
RCBA PURCHASER I, L.P.
By /s/ N. COLIN LIND
------------------------------------
Title: Managing Director
KINETIC CONCEPTS, INC.
By /s/ RAYMOND R. HANNIGAN
------------------------------------
Title: President and Chief Executive
Officer
I-35
<PAGE> 36
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer, if (v) the Minimum Condition shall not have been satisfied, (w) any
applicable waiting period under the HSR Act shall not have expired or been
terminated prior to the expiration of the Offer, (x) the Debt Financing shall
not have been obtained, (y) the Closing shall not have occurred or (z) at any
time on or after the date of this Agreement, and prior to the acceptance for
payment of Shares, any of the following conditions shall exist:
(a) there shall be instituted or be pending any action or proceeding
before any court or governmental, administrative or regulatory authority or
agency, domestic or foreign, in each case that has a reasonable likelihood
of success notwithstanding the reasonable efforts of the Company and
Purchasers to dismiss or otherwise terminate such action or proceeding, (i)
challenging or seeking to make illegal, materially delay or otherwise
directly or indirectly restrain or prohibit or make materially more costly
the making of the Offer, the acceptance for payment of, or payment for, any
Shares by the Company, Purchasers or any affiliate of either of Purchasers,
or the consummation of any other Transaction, or seeking to obtain material
damages in connection with any Transaction; (ii) seeking to prohibit or
limit materially the ownership or operation by the Company, Purchasers or
any of their affiliates of all or any material portion of the business or
assets of the Company, Purchasers or any of their affiliates, or to compel
the Company, Purchasers or any of their affiliates to dispose of or hold
separate all or any material portion of the business or assets of the
Company, Purchasers or any of their affiliates, as a result of the
Transactions; (iii) seeking to impose or confirm limitations on the ability
of Purchasers or any of their affiliates to exercise effectively full
rights of ownership of any Shares, including, without limitation, the right
to vote any Shares acquired by Purchaser pursuant to the Stock Purchase or
the Shareholder Support Agreement or otherwise on all matters properly
presented to the Company's shareholders, including, without limitation, the
approval and adoption of this Agreement and the transactions contemplated
hereby; or (iv) seeking to require divestiture by Purchasers or any of
their affiliates;
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) Purchasers, the Company or any of their affiliates or
(ii) any Transaction, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, other than the routine application of the waiting period
provisions of the HSR Act to the Offer, which is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any change, condition, event or
development that has a Material Adverse Effect on the Company;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange, the NASDAQ National Market, or the over-the-counter market in the
United States, (ii) any decline, measured from the date hereof, in the
Standard & Poor's 500 Index by an amount in excess of 15%, (iii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iv) any limitation (whether or not
mandatory) by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, on, or other event that, in the
reasonable judgment of Purchasers, might affect, the extension of credit by
banks or other lending institutions, (v) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States or (vi) in the case of any of the
foregoing existing on the date hereof, a material acceleration or worsening
thereof;
(e) (i) it shall have been publicly disclosed or Purchasers shall have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 of the Exchange Act) of 20% or
more of the then outstanding Shares has been acquired by any person, other
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<PAGE> 37
than Purchasers or any of either of their affiliates or (ii) (A) the Board
or any committee thereof shall have withdrawn or modified in a manner
adverse to Purchasers the approval or recommendation of the Offer or the
Transactions, or approved or recommended any takeover proposal or any other
acquisition of Shares other than pursuant to the Transactions or (B) the
Board or any committee thereof shall have resolved to do any of the
foregoing;
(f) the Merger Agreement shall have been terminated in accordance with
its terms;
(g) Purchasers and the Company shall have agreed that the Company
shall terminate the Offer or postpone the acceptance for payment of or
payment for Shares thereunder; or
(h) The Company shall not have received Houlihan Lokey's written
opinion, which opinion shall not have been withdrawn, addressed to the
Board and the Purchasers with respect to solvency and related matters in
form and substance reasonably satisfactory to the Board and Purchasers.
The parties acknowledge that the Conditions to the Offer set forth above in
this Annex A are for the benefit of the Purchasers and the Company and that the
Company shall not assert failure of, or waive, any such condition without the
prior written consent of each Purchaser (which consent shall not be unreasonably
withheld).
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<PAGE> 38
EXHIBIT A
RESTATED ARTICLES OF INCORPORATION
(WITH AMENDMENTS)
OF KINETIC CONCEPTS, INC.
ARTICLE ONE
Kinetic Concepts, Inc., pursuant to the provisions of Article 4.07 of the
Texas Business Corporation Act ("TBCA"), hereby adopts restated articles of
incorporation that accurately copy the articles of incorporation and all
amendments thereto that are in effect to date and as further amended by such
restated articles of incorporation as hereinafter set forth and that contain no
other change in any provisions thereof.
ARTICLE TWO
The articles of incorporation of the corporation are amended by the
restated articles of incorporation as follows:
Article Three of the Articles of Incorporation is amended by the restated
articles of incorporation of the corporation to read as follows:
"ARTICLE THREE
The purpose for which the Corporation is organized is to transact any or
all lawful business for which corporations may be organized under the Texas
Business Corporation Act; provided, however, that the corporation shall not
transact any business in this state that is prohibited by Article 2.01-B of the
Texas Business Corporation Act."
Article Four of the Articles of Incorporation is amended by the restated
articles of incorporation of the corporation to read as follows:
"ARTICLE FOUR
The total number of shares of all classes of stock that the Corporation is
authorized to issue is [one hundred fifty million (150,000,000) shares], all of
which shall be shares of Common Stock, par value $.001 per share."
Article Six has been redesignated Article Ten and amended by the restated
articles of incorporation of the corporation to read as follows:
"ARTICLE TEN
The street address of the registered office of the Corporation is [ ],
and the name of the registered agent of the Corporation at such address is
[ ]."
Article Seven has been redesignated as paragraph (2) of Article Eight and
amended by the restated articles of incorporation of the corporation to read as
follows:
"(2) To the extent permitted by the Texas Business Corporation Act as it
now exists and as it may hereafter be amended, a Director of the Corporation
shall not be personally liable to the Corporation or its shareholders for
monetary damages for an act or omission in the Director's capacity as a
director, except for liability for (a) a breach of the Director's duty of
loyalty to the Corporation or its shareholders, (b) an act or omission not in
good faith that constitutes a breach of duty of the Director to the Corporation
or an act or omission that involves intentional misconduct or a knowing
violation of the law, (c) a transaction from which the Director received an
improper benefit, whether or not the benefit resulted from an action taken
within the
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<PAGE> 39
scope of the Director's office, or (d) an act or omission for which the
liability for the Director is expressly provided for by statute."
Article Eight has been redesignated Article Nine and amended by the
restated articles of incorporation of the corporation to read as follows:
"ARTICLE NINE
The current board of directors of the Corporation [at the time of filing]
[at the time of execution] of these Amended and Restated Articles of
Incorporation consists of eight (8) directors. The names and address of the
persons who are acting [at the time of filing] [at the time of execution] of
these Amended and Restated Articles of Incorporation in the capacity of
directors until the selection of their successors are:
<TABLE>
<S> <C>
NAME ADDRESS
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]"
</TABLE>
Article Nine has been redesignated Article Six and amended by the restated
articles of incorporation of the corporation to read as follows:
"ARTICLE SIX
No shareholder or other holder of securities of the Corporation shall have
any preemptive right to acquire additional, unissued or treasury shares of the
Corporation, or securities of the Corporation convertible into or carrying a
right to subscribe to or acquire shares, except as provided by any agreement
between the Corporation and its shareholders."
Articles Ten and Eleven have been deleted in their entirety by the
amendments effected by the restated articles of incorporation of the
corporation.
The Articles of Incorporation are further amended by the restated articles
of incorporation of the corporation by adding new Article Seven and paragraph
(1) to Article Eight to read as follows:
"ARTICLE SEVEN
(1) With respect to any matter for which, but for this provision, the
affirmative vote of the holders of two-thirds of the shares entitled to vote is
required by the Act, the act of the shareholders on that matter shall be the
affirmative vote of a majority of the shares entitled to vote on that matter
rather than the affirmative vote otherwise required by the Act. With respect to
any matter for which, but for this provision, the affirmative vote of the
holders of two-thirds of the shares of any class or series is required by the
Act, the act of the shareholders on that matter shall be the affirmative vote of
a majority of the shares of that class or series rather than the affirmative
vote of the holders of shares of that class or series otherwise required by the
Act.
(2) Any action required by the Texas Business Corporation Act to be taken
at any annual or special meeting of shareholders, or any action which may be
taken at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice, and without a vote, if a consent or consents in
writing,
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<PAGE> 40
setting forth the action so taken shall be signed by the holder or holders of
all shares entitled to vote on the action were present and voted.
ARTICLE EIGHT
(1) Elections of directors of the Corporation need not be by written
ballot, except and to the extent provided in the By-laws of the Corporation."
The Articles of Incorporation are further amended by the restated articles
of incorporation of the corporation by adding new Articles Eleven and Twelve to
read as follows:
"ARTICLE ELEVEN
(1) The Corporation reserves the right to amend, alter, change or repeal
any provision of these Articles of Incorporation, in the manner now or hereafter
prescribed by law, and all rights conferred on shareholders in these Articles of
Incorporation are subject to this reservation.
(2) The By-laws of the Corporation may be amended, repealed or adopted by
the affirmative vote of the holders of a majority of shares then entitled to
vote on such action. The Board of Directors shall not have the power to amend,
repeal or adopt any By-law of the Corporation.
ARTICLE TWELVE
The Corporation shall indemnify its directors to the fullest extent
provided by the Texas Business Corporation act, as amended."
ARTICLE THREE
Each such amendment made by the restated articles of incorporation has been
effected in conformity with the provisions of the Texas Business Corporation Act
and such restated articles of incorporation and each such amendment made by the
restated articles of incorporation were duly adopted by the shareholders of the
corporation on the day of , 199 .
ARTICLE FOUR
The number of shares outstanding was , and the number of shares
entitled to vote on the restated articles of incorporation as so amended was
. All of the shareholders have signed a written consent to the
adoption of such restated articles of incorporation as so amended pursuant to
Article 9.10(A) of the TBCA and any written notice required by Article 9.10(A)
of the TBCA has been given.
ARTICLE FIVE
The articles of incorporation and all amendments and supplements thereto
are hereby superseded by the following restated articles of incorporation which
accurately copy the entire text thereof and as amended as above set forth:
"AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
KINETIC CONCEPTS, INC.
ARTICLE ONE
The name of the corporation (which is hereinafter called the "Corporation")
is Kinetic Concepts, Inc.
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<PAGE> 41
ARTICLE TWO
The period of duration of the Corporation is perpetual.
ARTICLE THREE
The purpose for which the Corporation is organized is to transact any or
all lawful business for which corporations may be organized under the Texas
Business Corporation Act; provided, however, that the corporation shall not
transact any business in this state that is prohibited by Article 2.01-B of the
Texas Business Corporation Act.
ARTICLE FOUR
The total number of shares of all classes of stock that the Corporation is
authorized to issue is [one hundred fifty million (150,000,000) shares], all of
which shall be shares of Common Stock, par value $.001 per share.
ARTICLE FIVE
The Corporation will not commence business until it has received for the
issuance of its shares consideration of the value of at least One Thousand
Dollars ($1,000.00), consisting of money, labor done or property actually
received.
ARTICLE SIX
No shareholder or other holder of securities of the Corporation shall have
any preemptive right to acquire additional, unissued or treasury shares of the
Corporation, or securities of the Corporation convertible into or carrying a
right to subscribe to or acquire shares, except as provided by any agreement
between the Corporation and its shareholders.
ARTICLE SEVEN
(1) With respect to any matter for which, but for this provision, the
affirmative vote of the holders of two-thirds of the shares entitled to vote is
required by the Act, the act of the shareholders on that matter shall be the
affirmative vote of a majority of the shares entitled to vote on that matter
rather than the affirmative vote otherwise required by the Act. With respect to
any matter for which, but for this provision, the affirmative vote of the
holders of two-thirds of the shares of any class or series is required by the
Act, the act of the shareholders on that matter shall be the affirmative vote of
a majority of the shares of that class or series rather than the affirmative
vote of the holders of shares of that class or series otherwise required by the
Act.
(2) Any action required by the Texas Business Corporation Act to be taken
at any annual or special meeting of shareholders, or any action which may be
taken at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken shall be signed by the holder or
holders of shares having not less than the minimum number of votes that would be
necessary to take such action at a meeting at which the holders of all shares
entitled to vote on the action were present and voted.
ARTICLE EIGHT
(1) Elections of directors of the Corporation need not be by written
ballot, except and to the extent provided in the By-laws of the Corporation.
(2) To the extent permitted by the Texas Business Corporation Act as it now
exists and as it may hereafter be amended, a Director of the Corporation shall
not be personally liable to the Corporation or its
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<PAGE> 42
shareholders for monetary damages for an act or omission in the Director's
capacity as a director, except for liability for (a) a breach of the Director's
duty of loyalty to the Corporation or its shareholders, (b) an act or omission
not in good faith that constitutes a breach of duty of the Director to the
Corporation or an act or omission that involves intentional misconduct or a
knowing violation of the law, (c) a transaction from which the Director received
an improper benefit, whether or not the benefit resulted from an action taken
within the scope of the Director's office, or (d) an act or omission for which
the liability for the Director is expressly provided for by statute.
[Any repeal or modification of all or part of this article Eight by the
shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.]
ARTICLE NINE
The current board of directors of the Corporation [at the time of filing]
[at the time of execution] of these Amended and Restated Articles of
Incorporation consists of eight (8) directors. The names and address of the
persons who are acting [at the time of filing] [at the time of execution] of
these Amended and Restated Articles of Incorporation in the capacity of
directors until the selection of their successors are:
<TABLE>
<S> <C>
NAME ADDRESS
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
</TABLE>
ARTICLE TEN
The street address of the registered office of the Corporation is
[ ], and the name of the registered agent of the Corporation at
such address is [ ].
ARTICLE ELEVEN
(1) The Corporation reserves the right to amend, alter, change or repeal
any provision of these Articles of Incorporation, in the manner now or hereafter
prescribed by law, and all rights conferred on shareholders in these Articles of
Incorporation are subject to this reservation.
(2) The By-laws of the Corporation may be amended, repealed or adopted by
the affirmative vote of the holders of a majority of shares then entitled to
vote on such action. The Board of Directors shall not have the power to amend,
repeal or adopt any By-law of the Corporation.
ARTICLE TWELVE
The Corporation shall indemnify its directors to the fullest extent
provided by the Texas Business Corporation act, as amended.
--------------------------------------
Name:
Title:"
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<PAGE> 43
EXHIBIT B
AMENDED AND RESTATED
BY-LAWS
OF
KINETIC CONCEPTS, INC.
ARTICLE I
OFFICES
SECTION 1. Principal Office. The principal office of the Corporation
shall be in the City of San Antonio, Texas.
SECTION 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Texas as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
SHAREHOLDERS
SECTION 1. Time and Place of Meeting. All meetings of the shareholders
shall be held at such time and at such place within or without the State of
Texas as shall be determined by the Board of Directors.
SECTION 2. Annual Meetings. The annual meeting of shareholders of the
Corporation for the election of directors of the Corporation, and for the
transaction of such other business as may properly come before such meeting,
shall be held at such place, date and time as shall be fixed by the Board and
designated in the notice or waiver of notice of such annual meeting.
SECTION 3. Special Meetings. Special meetings of the shareholders may be
called at any time by the President or the Board of Directors, and shall be
called by the President or Secretary at the request in writing of the holders of
not less than fifty percent (50%) of all the shares issued, outstanding and
entitled to vote at the meeting. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at special meetings shall
be confined to the purposes stated in the notice of the meeting.
SECTION 4. Notice. Written or printed notice stating the place, day and
hour of any shareholders' meeting, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President,
Secretary, or the officer or person calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, postage prepaid, to
the shareholder at his address as it appears on the stock transfer books of the
Corporation.
SECTION 5. Record Date. The Board of Directors may fix in advance a
record date for the purpose of determining shareholders entitled to notice of or
to vote at a meeting of shareholders, such record date to be not less than ten
(10) nor more than sixty (60) days prior to such meeting, or the Board of
Directors may close the stock transfer books for such purpose for a period of
not less than ten (10) nor more than sixty (60) days prior to such meeting. In
the absence of any action by the Board of Directors, the date upon which the
notice of the meeting is mailed shall be the record date.
SECTION 6. List of Shareholders. The officer or agent of the Corporation
having charge of the share transfer records for shares of the Corporation shall
make, at least ten (10) days before each meeting of the shareholders, a complete
list of the shareholders entitled to vote at such meeting or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
voting shares held by each, which list, for a period of ten (10) days prior to
such meeting, shall be kept on file at the registered office of the Corporation
and shall be subject to inspection by any such shareholder at any time during
the usual business
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hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting. The original share transfer records shall be prima
facie evidence as to who are the shareholders entitled to examine such list or
transfer books or to vote at any meetings of shareholders.
SECTION 7. Quorum. Except as otherwise provided by law or the Articles of
Incorporation, the holders of a majority of the issued and outstanding shares
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
business except as otherwise provided by the Texas Business Corporation Act
(herein called the "Act"). If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders entitled to
vote, present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. When any adjourned
meeting is reconvened and a quorum shall be present or represented, any business
may be transacted which might have been transacted at the meeting as originally
notified. Once a quorum is constituted, the shareholders present or represented
by proxy at a meeting may continue to transact business until adjournment,
notwithstanding the subsequent withdrawal therefrom of such number of
shareholders as to leave less than a quorum.
SECTION 8. Voting. When a quorum is present at any meeting, the vote of
the holders of a majority of the shares present or represented by proxy at such
meeting and entitled to vote shall be the act of the shareholders, unless the
vote of a different number is required by the Act, the Articles of Incorporation
or these By-Laws.
SECTION 9. Proxy. Each shareholder shall at every meeting of the
shareholders be entitled to one vote in person or by proxy for each share having
voting power held by such shareholder. Every proxy must be executed in writing
by the shareholder or by his duly authorized attorney-in-fact, and shall be
filed with the Secretary of the Corporation prior to or at the time of the
meeting. No proxy shall be valid after eleven months from the date of its
execution unless otherwise provided therein. Each proxy shall be revocable
unless expressly provided therein to be irrevocable and unless otherwise made
irrevocable by law.
SECTION 10. Action by Written Consent. Any action required or permitted
to be taken at any meeting of the shareholders may be taken without a meeting if
a consent in writing, setting forth the action so taken, shall be signed by all
of the shareholders entitled to vote with respect to the subject matter thereof,
and such consent shall have the same force and effect as a unanimous vote of
shareholders.
SECTION 11. Meetings by Conference Telephone. Shareholders may
participate in and hold meetings of shareholders by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in such a
meeting shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transactions of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE III
DIRECTORS
SECTION 1. Numbers of Directors. The Corporation shall have no less than
one and no more than ten directors as may be provided from time to time by a
resolution of the Board of Directors or by a vote of the holders of a majority
of shares then entitled to vote in the election of Directors, but no decrease
shall have the effect of reducing the term of any incumbent Director. Directors
shall be elected at the annual meeting of the shareholders, except as provided
in Section 2 of this Article, and each director shall hold office until his
successor is elected and qualified. Directors need not be shareholders of the
Corporation or residents of the State of Texas. Except as otherwise provided by
any agreement between the Corporation and its shareholders, any or all of the
Directors may be removed, with or without cause, by the shareholders, at any
time, by a vote of the holders of a majority of the shares then entitled to vote
in the election of Directors, provided that notice of the meeting states that
one of the purposes of the meeting is the removal of a director or directors.
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SECTION 2. Vacancies. Except as otherwise provided by any agreement
between the Corporation and its shareholders, the affirmative vote of the
holders of a majority of the shares then entitled to vote in the election of
Directors may fill any vacancy occurring in the Board of Directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office. Any directorship to be filled by reason of an increase in
the number of directors shall be filled by a vote of the holders of a majority
of the shares then entitled to vote in the election of Directors at an annual
meeting or at a special meeting of shareholders called for that purpose. Except
as otherwise provided by any agreement between the Corporation and its
shareholders, at any annual meeting of shareholders, or any special meaning
called for such purpose, any director may be removed from office, with or
without cause, though his term may not have expired.
SECTION 3. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by the Act, the
Articles of Incorporation or by these By-Laws directed or required to be
exercised or done by the shareholders.
SECTION 4. Place of Meetings. The directors of the Corporation may hold
their meetings, both regular and special, either within or without the State of
Texas.
SECTION 5. Annual Meetings. The first meeting of each newly elected Board
of Directors shall be held without further notice immediately following the
annual meeting of the shareholders, and at the same place, unless by unanimous
consent of the directors then elected and serving such time or place shall be
changed.
SECTION 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
SECTION 7. Special Meetings. Special meetings of the Board of Directors
may be called by the President on two days' notice to each director, either
personally or by mail or by telegram. Special meetings shall be called by the
President or Secretary in like manner and on like notice on the written request
of any two directors.
SECTION 8. Quorum. At all meetings of the Board of Directors, the
presence of a majority of the number of directors fixed by Section 1 of this
Article shall be necessary and sufficient to constitute a quorum for the
transaction of business, and the affirmative vote of at least a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically provided by the
Act, the Articles of Incorporation or these By-Laws. If a quorum shall not be
present at any meeting of directors, the directors present thereat may adjourn
the meeting from time to time without notice other than announcement at the
meeting, until a quorum shall be present.
SECTION 9. Executive Committee. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate an Executive Committee, to
consist of two or more directors, one of whom shall be designated as chairman,
who shall preside at all meetings of such Committee. To the extent provided in
the resolution of the Board of Directors, the Executive Committee shall have and
may exercise all of the authority of the Board of Directors in the management of
the business and affairs of the Corporation, except where action of the Board of
Directors is required by the Act or by the Articles of Incorporation, and shall
have the power to authorize the seal of the Corporation to be affixed to all
papers which may require it. The Executive Committee shall keep regular minutes
of its proceedings and report the same to the Board of Directors when required.
Any member of the Executive Committee may be removed, for or without cause, by
the affirmative vote of a majority of the whole Board of Directors. If any
vacancy or vacancies occur in the Executive Committee, such vacancy or vacancies
shall be filled by the affirmative vote of a majority of the whole Board of
Directors.
SECTION 10. Other Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate other committees, each
committee to consist of two or more directors, which committees shall have such
power and authority and shall perform such functions as may be provided in such
resolution. Such committee or committees shall have such name or names as may be
designated by the Board
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of Directors and shall keep regular minutes of their proceedings and report the
same to the Board of Directors when required.
SECTION 11. Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors;
provided that nothing herein contained shall be construed to preclude any
directors from serving the Corporation in any other capacity and receiving
compensation therefor. Members of the Executive Committee may, by resolution of
the Board of Directors, be allowed like compensation for attending Executive
Committee meetings.
SECTION 12. Action by Written Consent. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
designated by the Board of Directors may be taken without a meeting if a written
consent, setting forth the action so taken, is signed by all the members of the
Board of Directors or of such committee, and such consent shall have the same
force and effect as a unanimous vote at a meeting.
SECTION 13. Meetings by Conference Telephone. Members of the Board of
Directors or members of any committee designated by the Board of Directors may
participate in and hold a meeting of such Board or committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
such a meeting shall constitute presence in person at such meeting, except where
a person participates in the meeting for the express purpose of objecting to the
transactions of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV
NOTICES
SECTION 1. Form of Notice. Whenever under the provisions of the Act, the
Articles or Incorporation or these By-Laws, notice is required to be given to
any director or shareholder, and no provision is made as to how such notice
shall be given, it shall not be construed to mean personal notice, but any such
notice may be given in writing, by mail, postage prepaid, addressed to such
director or shareholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail shall be
deemed to be given at the time when the same be thus deposited, postage prepaid,
in the United States mail as aforesaid.
SECTION 2. Waiver. Whenever any notice is required to be given to any
director or shareholder of the Corporation, under the provisions of the Act, the
Articles of Incorporation or these By-Laws, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated in such notice, shall be deemed equivalent to the giving of such
notice.
ARTICLE V
OFFICERS
SECTION 1. In General. The officers of the Corporation shall be elected
by the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors may also, if it chooses to do so, elect a Chairman of the
Board, additional Vice Presidents, one or more Assistant Secretaries and one or
more Assistant Treasurers, all of whom shall also be officers. Two or more
offices may be held by the same person.
SECTION 2. Election. The Board of Directors at its first meeting after
such annual meeting of the shareholders shall elect a President and, if it so
chooses, may elect a Chairman of the Board, both of whom shall be members of the
Board, but the other officers need not be members of the Board. The Board of
Directors may appoint such other officers and agents as it shall deem necessary
and may determine the salaries of all officers and agents from time to time. The
officers shall hold office until their successors are chosen and qualified. Any
officer elected or appointed by the Board of Directors may be removed, for or
without cause, at
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any time by a majority vote of the whole Board. Election or appointment of an
officer or agent shall not of itself create contract rights.
SECTION 3. Chairman. The Chairman of the Board of Directors, if there be
a Chairman, shall preside at all meetings of the shareholders and the Board of
Directors and shall have such other powers as may from time to time be assigned
by the Board of Directors.
SECTION 4. President. The President shall preside at all meetings of the
shareholders and the Board of Directors, if a Chairman of the Board has not been
elected, and shall see that all orders and resolutions of the Board of Directors
are carried into effect. The President shall execute all contracts requiring a
seal and shall also execute mortgages, conveyances or other legal instruments in
the name of and on behalf of the Corporation, but this provision shall not
prohibit the delegation of such powers by the Board of Directors to some other
officer, agent or attorney-in-fact of the Corporation.
SECTION 5. Vice Presidents. The Vice President or, if there be more than
one, the Vice Presidents in the order of their seniority or in any other order
determined by the Board of Directors, shall, in the absence or disability of the
Senior Vice President, perform the duties and exercise the powers of the Senior
Vice President, and shall generally assist the President and Senior Vice
Presidents and perform such other duties as the Board of Directors shall
prescribe.
SECTION 6. Secretary. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the shareholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for any other committees of the Board when required. He
shall give, or cause to be given, notice of all meetings of the shareholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose
supervision he shall be. He shall keep in safe custody the seal of the
Corporation.
SECTION 7. Assistant Secretaries. Any Assistant Secretary shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
SECTION 8. Treasurer. The Treasurer shall have the custody of all
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements of the Corporation, and shall deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the President and
directors at the regular meetings of the Board or whenever they may require it,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation, and shall perform such other duties as may be prescribed by
the Board of Directors or the President.
SECTION 9. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be prescribed
by the Board of Directors or the President.
ARTICLE VI
CERTIFICATES OF REPRESENTING SHARES
SECTION 1. Form of Certificates. The Corporation shall deliver
certificates representing shares to which shareholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof the holder's name, the number,
class of shares, and the par value of the shares or a statement that the shares
are without par value. They shall be signed by the President or a Vice President
and the Secretary or an Assistant Secretary, and may be sealed with the seal of
the Corporation or a facsimile thereof if the Corporation shall then have a
seal. If any certificate is countersigned by a transfer agent or registered by a
registrar, either of which is other than the Corporation or an employee of the
Corporation, the signatures of the Corporation's officers may be
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facsimiles. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on such certificate or certificates,
shall cease to be such officer or officers of the Corporation, whether because
of death, resignation or otherwise, before such certificate or certificates have
been delivered by the Corporation or its agents, such certificate or
certificates may nevertheless be adopted by the Corporation and be issued and
delivered as though the person or persons who signed the certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the Corporation.
SECTION 2. Lost Certificates. The Board of Directors may direct that a
new certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost or
destroyed. When authorizing the issue of a new certificate, the Board of
Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost or destroyed, certificate, or his
legal representative, to advertise the same in such manner as it shall require
and/or give the Corporation a bond in such form, in such sum, and with such
surety or sureties as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost or destroyed.
SECTION 3. Transfer of Shares. Shares of stock shall be transferable only
on the books of the Corporation by the holder thereof in person or by his duly
authorized attorney and, upon surrender to the Corporation or to the transfer
agent of the Corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation or the transfer agent of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
SECTION 4. Registered Shareholders. The Corporation shall be entitled to
recognize the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. Dividends. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of the Act and of the Articles of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property, or
in shares of the Corporation, provided that all such declarations and payments
of dividends shall be in strict compliance with all applicable laws and the
Articles of Incorporation. The Board of Directors may fix in advance a record
date for the purposes of determining shareholders entitled to receive payment of
any dividend, such record date to be not more than sixty (60) days prior to the
payment of such dividend, or the Board of Directors may close the stock transfer
books for such purpose for a period of not more than fifty (60) days prior to
the payment date of such dividend. In the absence of any action by the Board of
Directors, the date upon which the Board of Directors adopts the resolution
declaring such dividend shall be the record date.
SECTION 2. Reserves. There may be created by resolution of the Board of
Directors out of the earned surplus of the Corporation such reserve or reserves
as the Board of Directors from time to time, in its discretion, deems proper to
provide for contingencies or to equalize dividends, or to repair or maintain any
property of the Corporation, or for such other purpose as the Board shall deem
beneficial to the Corporation, and the Board may modify or abolish any reserve
in the same manner in which it was created.
SECTION 3. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
SECTION 4. Annual Statement. The Board of Directors shall present at each
annual meeting and when called for by vote of the shareholders at any special
meeting of the shareholders, a full and clear statement of the business and
condition of the Corporation.
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SECTION 5. Disallowed Payments. Any payments made to an officer of the
Corporation such as a salary, commission, bonus, interest, or rent, or
entertainment expense incurred by him, which shall be disallowed in whole or in
part as a deductible expense by the Internal Revenue Service, shall be
reimbursed by such officer to the Corporation to the full extent of such
disallowance. It shall be the duty of the Directors, as a Board, to enforce
payment by the officer, subject to the determination of the Directors,
proportionate amounts may be withheld from his future compensation payments
until the amount owed to the Corporation has been recovered.
ARTICLE VIII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
SECTION 1. As utilized in this Article, the following terms shall have the
meanings indicated:
(a) The term "corporation" includes any domestic or foreign
predecessor entity of the corporation in a merger, consolidation or other
action in which the liabilities of the predecessor are transferred to the
corporation by operation of law and in any other transaction in which the
corporation assumes the liabilities of the predecessor, but does not
specifically exclude liabilities that are the subject matter of this
Article.
(b) The term "director" means any person who is or was a director of
the corporation and any person who, while a director of the corporation, is
or was serving at the request of the corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other
enterprise.
(c) The term "expenses" include court costs and attorneys' fees.
(d) The term "official capacity" means: (i) when used with respect to
a director, the office of director in the corporation, and (ii) when used
with respect to a person other than a director, the elective or appointive
office in the corporation held by the officer or the employment or agency
relationship undertaken by the employee or agent on behalf of the
corporation, but (iii) in both (i) and (ii) above does not include service
for any other foreign or domestic corporation or any partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other
enterprise.
(e) The term "proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any appeal in such an action, suit or
proceeding and any inquiry or investigation that could lead to such an
action, suit or proceeding.
SECTION 2. The corporation shall indemnify a person who was, is or is
threatened to be made a named defendant or respondent in a proceeding because
the person is or was a director only if it is determined, in accordance with
Section 6 of this Article that the person (a) conducted himself or herself in
good faith; (b) reasonably believed: (i) in the case of conduct in the official
capacity as a director of the corporation, that the conduct was in the
corporation's best interests, and (ii) in all other cases, that the conduct was
at least not opposed to the corporation's best interests; and (iii) in the case
of any criminal proceeding, had no reasonable cause to believe the conduct was
unlawful.
SECTION 3. A director shall not be indemnified by the corporation as
provided in Section 2 of this Article for obligations resulting from a
proceeding (a) in which the director is found liable on the basis that a
personal benefit was improperly received by the director, whether or not the
benefit resulted from an action taken in the person's official capacity, or (b)
in which the person is found liable to the corporation, except to the extent
permitted in Section 5 of this Article.
SECTION 4. The termination of a proceeding by judgment, order, settlement
or conviction or on a plea of nolo contendere or its equivalent is not of itself
determinative that the person did not meet the requirements set forth in Section
2 of this Article. A person shall be deemed to have been found liable in respect
of any
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claim, issue or matter only after the person shall have been so adjudged by a
court of competent jurisdiction after exhaustion of all appeals therefrom.
SECTION 5. A person may be indemnified by the corporation as provided in
Section 2 of this Article against judgements, penalties (including excise and
similar taxes), fines, settlements and reasonable expenses actually incurred by
the person in connection with the proceeding; but if the person is found liable
to the corporation or is found liable on the basis that a personal benefit was
improperly received by the person, the indemnification (a) shall be limited to
reasonable expenses actually incurred by the person in connection with the
proceeding, and (b) shall not be made in respect of any proceeding in which the
person shall have been found liable for willful or intentional misconduct in the
performance of the person's duty to the corporation.
SECTION 6. A determination of indemnification under Section 2 of this
Article shall be made (a) by a majority vote of a quorum consisting of directors
who at the time of the vote are not named defendants or respondents in the
proceeding; (b) if such a quorum cannot be obtained, by a majority vote of a
committee of the board of directors, designated to act in the matter by a
majority vote of all directors, consisting solely of two (2) or more directors
who at the time of the vote are not named defendants or respondents in the
proceeding (c) by special legal counsel selected by the board of directors or a
committee thereof by a vote as set forth in subsection (a) or (b) of this
Section 6, or, if such a quorum cannot be obtained and such a committee cannot
be established, by a majority vote of all directors; or (d) by the shareholders
in a vote that excludes the shares held by directors who are named defendants or
respondents in the proceeding.
SECTION 7. Authorization of indemnification and determination as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible, except that if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of expenses shall be
made in the manner specified by subsection (c) of Section 6 of this Article for
the selection of special legal counsel. A provision contained in the articles of
incorporation, the bylaw, a resolution of shareholders or directors, or an
agreement that makes mandatory the indemnification described in Section 2 of
this Article shall be deemed to constitute authorization of indemnification in
the manner required herein, even though such provision may not have been adopted
or authorized in the same manner as the determination that indemnification is
permissible.
SECTION 8. The corporation shall indemnify a director against reasonable
expenses incurred by the director in connection with a proceeding in which the
director is a named defendant or respondent because the person is or was a
director if the director has been wholly successful, on the merits or otherwise,
in the defense of the proceeding.
SECTION 9. If upon application of a director, a court of competent
jurisdiction determines, after giving any notice the court considers necessary,
that the director is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances, whether or not the director has met the
requirements set forth in Section 2 of this Article or has been found liable in
the circumstances described in Section 3 of this Article, the corporation shall
indemnify the director to such further extent as the court shall determine; but
if the person is found liable to the corporation or is found liable on the basis
that personal benefit was improperly received by the person, the indemnification
shall be limited to reasonable expenses actually incurred by the person in
connection with the proceeding.
SECTION 10. Reasonable expenses incurred by a director who was, is or is
threatened to be made a named defendant or respondent in a proceeding may be
paid or reimbursed by the corporation in advance of the final disposition of the
proceeding and without the defemination specified in Section 6 of this Article
or the authorization or determination specified in Section 7 of this Article,
after the corporation receives a written affirmation by the director of a good
faith belief that the standard of conduct necessary for indemnification under
this Article has been met and a written undertaking by or on behalf of the
director to repay the amount paid or reimbursed if it is ultimately determined
that he has not met that standard or if it is ultimately determined that
indemnification of the director against expenses incurred by him in connection
with that proceeding is prohibited by Section 5 of this Article. A provision
contained in the articles of incorporation, these bylaws, a resolution of the
shareholders or directors, or an agreement that makes mandatory the payment
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or reimbursement permitted under this Section shall be deemed to constitute
authorization of that payment or reimbursement.
SECTION 11. The written undertaking required by Section 10 of this Article
shall be an unlimited general obligation of the director, but need not be
secured. It may be accepted without reference to financial ability to make
repayment.
SECTION 12. Notwithstanding any other provision of this Article, the
corporation may pay or reimburse expenses incurred by a director in connection
with an appearance as a witness or other participation in a proceeding at a time
when he is not a named defendant or respondent in the proceeding.
SECTION 13. An officer of the corporation shall be indemnified by the
corporation as and to the same extent provided by Sections 7, 8 and 9 of this
Article for a director and is entitled to seek indemnification under those
sections to the same extent as a director. The corporation may indemnify and
advance expenses to an officer, employee or agent of the corporation to the same
extent that it may indemnify and advance expenses to directors under this
Article.
SECTION 14. The corporation may indemnify and advance expenses to persons
who are not or were not officers, employees or agents of the corporation but who
are or were serving at the request of the corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise, to the same
extent that it may indemnify and advance expenses to directors under this
Article.
SECTION 15. The corporation may indemnify and advance expenses to an
officer, employee, agent or person identified in Section 14 of this Article and
who is not a director to such further extent, consistent with law, as may be
provided by the articles of incorporation, these bylaws, general or specific
action of the board of directors or contract or as permitted or required by
common law.
SECTION 16. The corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a director, officer, employee
or agent of the corporation or who is or was serving at the request of the
corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise, against any liability asserted against such
person and incurred by such person in such a capacity or arising out of the
status as such a person, whether or not the corporation would have the power to
indemnify such person against that liability under this Article. If the
insurance or other arrangement is with a person or entity that is not regularly
engaged in the business of providing insurance coverage, the insurance or
arrangement may provide for payment of a liability with respect to which the
corporation would not have the power to indemnify the person only if including
coverage for the additional liability has been approved by the shareholders of
the corporation. Without limiting the power of the corporation to procure or
maintain any kind of insurance or other arrangement, the corporation may, for
the benefit of persons indemnified by the corporation (a) create a trust fund,
(b) establish any form of self-insurance, (c) secure its indemnity obligations
by grant of a security interest or other lien on the assets of the corporation,
or (d) establish a letter of credit, guaranty or surety arrangement. The
insurance or other arrangement may be procured, maintained or established within
the corporation or with any insurer or other person deemed appropriate by the
board of directors, regardless of whether all or part of the stock or other
securities of the insurer or other person are owned in whole or part by the
corporation. In the absence of fraud, the judgment of the board of directors as
to the terms and conditions of the insurance or other arrangement and the
identity of the insurer or other person participating in an arrangement shall be
conclusive and the insurance or arrangement shall not be voidable and shall not
subject the directors approving the insurance or arrangement to liability, on
any ground, regardless of whether directors participating in the approval are
beneficiaries of the insurance or arrangement.
SECTION 17. Any indemnification of or advance of expenses to a director in
accordance with this Article shall be reported in writing to the shareholders
with or before the notice or waiver of notice of the next meeting of
shareholders or with or before the next submission to shareholders of a consent
to action without a
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meeting and, in any case, within the twelve (12) month period immediately
following the date of the indemnification or advance.
SECTION 18. For purposes of this Article, the corporation is deemed to
have requested a director to serve an employee benefit plan whenever the
performance by the director of the director's duties to the corporation also
imposes duties on, or otherwise involves services by, the director to the plan
or participants or beneficiaries of the plan. Excise taxes assessed on a
director with respect to an employee benefit plan pursuant to applicable law
shall be deemed to be fines. Action taken or omitted by the director with
respect to an employee benefit plan in the performance of the director's duties
or for a purpose reasonably believed by the director to be in the interest of
the participants and beneficiaries of the plan shall be deemed to be for a
purpose which is not opposed to the best interests of the corporation.
ARTICLE IX
BY-LAWS
SECTION 1. Amendments. These By-Laws may be altered, amended or repealed
and new By-Laws may be adopted by the shareholders in accordance with the
Articles of Incorporation.
SECTION 2. When By-Laws Silent. It is expressly recognized that when the
By-Laws are silent as to the manner of performing any corporate function, the
provisions of the Act shall control.
CERTIFICATE
I, [ ], do hereby certify that I am duly elected and acting
Secretary of [ ] (the "Company") and that the above and foregoing
Amended and Restated By-Laws were adopted as the By-Laws of the Company by
Consent Action of the Board of Directors of the Company dated [ ],
1997.
--------------------------------------
[ ]
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EXHIBIT C
AGREEMENT AMONG SHAREHOLDERS
This agreement (the "Agreement") dated this day of 1997
concerns the respective obligations and relationship of those identified below
as shareholders of Kinetic Concepts, Inc.
SECTION 1. Definitions. The following terms shall have the following meanings
for the purposes of this Agreement:
1.01 "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries or by agreement,
controls, is controlled by, or is under common control with such Person, and,
with respect to any natural person, any member of his or her immediate family or
a trust for the benefit of any such Person.
1.02 "Closing Time" means the time of the closing of the redemption of the
Common Stock by KCI.
1.03 "Common Stock" means the common stock, par value $0.001 per share, of
KCI.
1.04 "Dr. Leininger" means Dr. James R. Leininger, the founder of KCI and
its Chairman since 1976.
1.05 "Fremont" means Fremont Partners, L.P. and/or its Affiliates listed on
Schedule 1.05.
1.06 "Fremont/KCI Group" means those Persons listed on Schedule 1.06 to
which additions may be made after the Closing Time only to reflect transfers by
Fremont to Fremont Affiliates who invest within six (6) months of the Closing
Time.
1.07 "KCI" means Kinetic Concepts, Inc.
1.08 "KCI Percentage" means, for each of the Shareholders, the percentage
of all outstanding fully diluted Common Stock owned by that Shareholder from
time to time. Schedule 1.08 reflects the KCI Percentage of each Shareholder as
of the date of this Agreement.
1.09 "Person" means any individual, firm, corporation, partnership, limited
liability company, trust, joint venture, pension fund, governmental authority,
or other entity.
1.10 "Public Offering" means a consummated public offering of a number of
shares equal to at least twenty percent (20%) of the then issued and outstanding
Common Stock that is underwritten on a firm commitment basis by a
nationally-recognized investment banking firm.
1.11 "RCBA" means Richard C. Blum & Associates, L.P. and/or its Affiliates
listed on Schedule 1.11.
1.12 "RCBA/KCI Group" means those Persons listed on Schedule 1.12, to which
additions may be made after the Closing Time only to reflect transfers by RCBA
to RCBA Affiliates who invest within six (6) months of the Closing Time.
1.13 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
1.14 "Shareholder" means any Person that is, as of the date of this
Agreement, or becomes, at any subsequent time, a party to this Agreement. The
Shareholders as of the date of this Agreement are Fremont, RCBA, Dr. Leininger,
the Fremont/KCI Group, and the RCBA/KCI Group.
1.15 Terms and Usage Generally. The definitions in this Section 1 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine, and neuter forms. All references herein to Sections and
Schedules shall be deemed to be references to Sections of and Schedules to this
Agreement unless the context shall otherwise require. All Exhibits and Schedules
attached hereto shall be deemed incorporated herein as if set forth in full
herein. The words "include," "includes," and "including" shall be deemed to be
followed by the phrase "without limitation." The words "hereof," "herein," and
"hereunder" and words of similar import
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when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. References to a Person are also to
its permitted successors and permitted assigns.
SECTION 2. Transfer of Shares.
2.01 Restrictions on Transfer of Shares. Each of Fremont and RCBA agree
for themselves and for the respective Fremont/KCI Group and RCBA/KCI Group, and
Dr. Leininger agrees for himself, that immediately after the Closing Time, the
KCI Percentages held by them will be that set forth in Schedule 1.08, and that
until six (6) months after the Common Stock shall have been the subject of a
Public Offering pursuant to the Securities Act, no shares of Common Stock or of
equity interests in the entities comprising the controlling interests in the
Persons comprising the Fremont/KCI Group or the RCBA/KCI Group may be sold,
transferred, pledged, or hypothecated, directly or indirectly (a "Transfer"),
except as set forth in Section 2.02 hereof. Any attempted Transfer that is not
permitted by this Section 2 shall be deemed a violation and breach of this
Agreement that may be treated as null and void by the Shareholders and by KCI.
Any shares of Common Stock or of equity interests in the entities comprising the
controlling interests in the Persons comprising the Fremont/KCI Group or the
RCBA/KCI Group that are the subject of a Transfer permitted by this Section 2
shall remain subject to this Section 2. As a condition precedent to the
effectiveness of any Transfer to any person or entity that is not a party to
this Agreement, such transferee, for good and recognizable consideration, shall
agree in writing to become a party to this Agreement and to be bound by its
terms and provisions.
2.02 Permitted Transfers. Notwithstanding the foregoing, the following
Transfers will be permitted so long as the transferee, for good and recognizable
consideration, agrees in writing to become a party to this Agreement and to be
bound by its terms and provisions and so long as the Transfer complies with the
registration provisions (or exemptions therefrom) of all applicable federal and
state securities laws:
(a) Transfers by gift or the laws of descent and distribution to any
Affiliate of the transferor.
(b) Sales by Fremont or any member of the Fremont/KCI Group to any
other member of the Fremont/KCI Group.
(c) Sales by RCBA or any member of the RCBA/KCI Group to any other
member of the RCBA/ KCI Group.
(d) Sales between Fremont or any member of the Fremont/KCI Group on
the one hand and RCBA or any member of the RCBA/KCI Group on the other
hand, or vice versa, so long as the seller has first offered the securities
on the same price and terms, for at least thirty (30) days, to the member
of its own Group.
(e) Sales by Dr. Leininger of up to 10.5% of KCI's then outstanding
Common Stock.
2.03 Tag-Along Rights. If, at any time after the restrictions of Section
2.01 expire, a Shareholder proposes to sell Common Stock for value (the
"Transferor") to any Person (other than a transferee in a Transfer permitted by
Section 2.02) in one transaction or a series of related transactions, then such
Transferor shall offer (the "Participation Offer") to include in the proposed
sale a number of shares of Common Stock designated by any of the other
Shareholders not to exceed, in respect of any such Shareholder, the number of
shares equal to the product of (i) the aggregate number of shares to be sold to
the proposed transferee and (ii) the Shareholder's respective KCI Percentage;
provided that if the consideration to be received includes any securities, only
Shareholders that are Accredited Investors (as defined below) shall be entitled
to include their shares in such sale (but, in such case, each Shareholder shall
be entitled to include in such sale a number of its shares, without duplication,
equal to the number of shares held by its Affiliates that are excluded from sale
by the operation of this proviso). The Transferor shall give written notice to
each Shareholder of the Participation Offer (the "Transferor's Notice") at least
twenty (20) days prior to the proposed sale. The Transferor's Notice shall
specify the proposed transferee, the number of shares to be sold to such
transferee, the amount and type of consideration to be received therefor, and
the place and date on which the sale is to be consummated. Each Shareholder that
wishes to include shares of Common Stock in the proposed sale in accordance with
the terms of this Section 2.03 shall so notify the Transferor not more than ten
(10) days after
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the date of the Transferor's Notice. The Participation Offer shall be
conditioned upon the Transferor's sale of shares pursuant to the transactions
contemplated in the Transferor's Notice with the transferee named therein. If
any Shareholder accepts the Participation Offer, the Transferor shall reduce to
the extent necessary the number of shares it otherwise would have sold in the
proposed sale so as to permit other Shareholders that have accepted the
Participation Offer to sell the number of shares that they are entitled to sell
under this Section 2.03, and the Transferor and such other Shareholder or
Shareholders shall sell the number of shares specified in the Participation
Offer to the proposed transferee in accordance with the terms of such sale set
forth in the Transferor's Notice. For purposes of this Section 2.03, "Accredited
Investor" shall have the meaning set forth for such term in Regulation D.
Notwithstanding the foregoing, a Shareholder shall have the right to include
shares of Common Stock in the Transferor's sale under this Section 2.03 only if
such Shareholder holds, on the date he receives the Transferor's Notice, at
least ten percent (10%) of the issued and outstanding shares of Common Stock.
2.04 Drag-Along Rights.
(a) Notwithstanding any other provision in this Section 2, if, at any
time after the restrictions of Section 2.01 expire, Fremont, RCBA, the
Fremont/KCI Group, and the RCBA/KCI Group (collectively, the "Seller")
propose to sell all (but not less than all) of the Common Stock they then
hold to a third party or parties in which the Seller does not own, have any
right to acquire, or propose to own or acquire, any interest (a "Third
Party") pursuant to a Bona Fide Offer (as defined below), then the Seller
shall have the right, subject to the provisions of this Section 2.04, to
require Dr. Leininger (the "Co-Seller"), to include in such sale (a
"Required Sale") all of the Common Stock held by the Co-Seller by
delivering notice (the "Required Sale Notice") to the Co-Seller.
(b) The Required Sale Notice shall set forth: (i) the date of such
notice (the "Notice Date"), (ii) the name and address of the Third Party,
(iii) the proposed amount of consideration to be paid per share for the
Sale Shares, and the terms and conditions of payment offered by the Third
Party in reasonable detail, together with written proposals or agreements,
if any, with respect thereto, (iv) the aggregate number of Sale Shares, (v)
confirmation that the Seller is selling one hundred percent (100%) of the
aggregate number of shares of Common Shares then held by it to a Third
Party, and (vi) the proposed date of the Required Sale (the "Required Sale
Date"), which shall be not less than twenty (20) nor more than one hundred
eighty (180) days after the date of the Notice Date.
(c) The Co-Seller shall cooperate in good faith with the Seller in
connection with consummating the Required Sale (including, without
limitation, the giving of consents and the voting of any Common Stock held
by the Co-Seller to approve such Required Sale). On the Required Sale Date,
the Co-Seller shall deliver, free and clear of all liens, claims, or
encumbrances, a certificate or certificates and/or other instrument or
instruments for all of its Common Stock, duly endorsed and in proper form
for transfer, with the signature guaranteed, to such Third Party in the
manner and at the address indicated in the Required Sale Notice and the
Seller shall cause the Co-Seller's share of the purchase price to be paid
to the Co-Seller.
(d) "Bona Fide Offer" shall mean an offer (whether in the form of a
purchase of shares, merger, recapitalization, business combination, or
otherwise) for Common Stock.
(e) In the event of any Required Sale, if the Co-Seller holds options
to purchase Common Stock, he must exercise or cancel all such stock options
prior to or simultaneously with the consummation of the Required Sale. Any
shares of Common Stock for which options are exercised must be included in
the Required Sale.
(f) Notwithstanding the foregoing, the Co-Seller shall not be required
to sell his shares of Common Stock under this Section 2.04 if, on the date
he receives the Required Sale Notice, he holds less than ten percent (10%)
of the issued and outstanding shares of Common Stock.
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SECTION 3. Governance and Voting.
3.01 The Shareholders agree that each shall take such steps as are required
to assure that after the Closing Time, and continuing until such time as the
Common Stock shall have been the subject of a Public Offering registered under
the Securities Act, the Board of Directors of KCI shall have at least eight (8)
members, two (2) of whom shall be persons designated by Fremont, two (2) of whom
shall be persons designated by RCBA, one (1) of whom shall be Dr. Leininger (so
long as he shall own at least fifteen percent (15%) of the outstanding equity of
KCI), one (1) of whom shall be Raymond R. Hannigan (provided, however, that if
Raymond R. Hannigan for any reason ceases to serve KCI as its chief executive
officer, then the successor chief executive officer shall be elected to serve as
director in Mr. Hannigan's place), and two (2) or more of whom shall be
independent outside directors, who shall not be affiliated with Fremont or RCBA
and who shall be designated by the unanimous vote of the Nominating Committee of
the Board of Directors of KCI, which shall comprise Dr. Leininger, one (1)
director designated by Fremont, and one (1) director designated by RCBA.
3.02 Each of Fremont, RCBA and Dr. Leininger agrees that none of them shall
charge any management, monitoring, consulting or similar fees to KCI or their
Affiliates without the prior consent of the other two (which consent shall not
be unreasonably withheld). In the event Fremont or RCBA charge any such fees to
KCI or its Affiliates (i) the fees shall be of a type and amount customary
between financial buyers and companies that have been the subject of a leveraged
buyout and (ii) Dr. Leininger shall participate in such fees to the extent
equitable in consideration for any management, monitoring or consulting services
that he has provided to KCI or its Affiliates.
SECTION 4. Preemptive Rights.
4.01 Grant of Preemptive Rights. KCI will not issue or sell any capital
stock without first complying with this Section 4. KCI hereby grants to each of
the Shareholders the preemptive right to purchase up to that Shareholder's Pro
Rata Share (as defined below) of any capital stock that KCI may, from time to
time, propose to sell or issue. For purposes of this Section 4, a Shareholder's
"Pro Rata Share" shall mean the percentage of all outstanding fully diluted
capital stock of KCI owned by that Shareholder from time to time.
4.02 Suspension of Preemptive Rights. The preemptive rights granted in
Section 4.01 shall be suspended with respect to Dr. Leininger if, at the time of
the proposed issuance and sale of capital stock, the exercise of such right
would result in Fremont, RCBA, the Fremont/KCI Group, and the RCBA/KCI Group
collectively holding less than a majority of the issued and outstanding shares
of Common Stock after giving effect to such issuance and sale.
4.03 Notice to Shareholders. If KCI proposes to issue or sell any capital
stock, KCI shall provide each Shareholder with written notice of KCI's intention
(the "Notice of Issuance"). The Notice of Issuance shall describe the type of
capital stock to be issued or sold and the price and other terms upon which KCI
proposes to issue or to sell such capital stock.
4.04 Exercise of Preemptive Rights. Each Shareholder may exercise its
preemptive right under this Section 4, in whole or in part, by giving written
notice of its election to participate in the offering within twenty (20) days
after receipt of the Notice of Issuance. If a Shareholder fails fully to
exercise such preemptive right within such twenty (20) day period, KCI shall
have sixty (60) days in which the sell the capital stock described in the Notice
of Issuance that the Shareholder did not agree to purchase. In the event that
KCI does not sell such capital stock within such sixty (60) day period, KCI
thereafter will not issue or sell such capital stock without again complying
with this Section 4.
4.05 Exceptions. Notwithstanding the foregoing, the preemptive rights
granted in Section 4.01 will not apply to (i) any issuance of capital stock as a
dividend or stock split in respect of outstanding capital stock or (ii) any
issuance of capital stock in an underwritten public offering.
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SECTION 5. Registration Rights.
5.01 Demand Registration.
(a) At any time after the fifth anniversary of this Agreement, if
there has not been a Public Offering by such date, each of the Shareholders
may make one (1) written request to KCI for registration of at least
thirty-three percent (33%) of the shares of Common Stock then held by such
Shareholder under Form S-3 (or such other appropriate or successor form if
Form S-3 is not available) and in accordance with the provisions of Rule
415 promulgated under the Securities Act (a "Demand Registration"). In
addition to that right to request a Demand Registration, each Shareholder
shall have the right to request an additional Demand Registration of at
least thirty-three percent (33%) of the shares of Common Stock then held by
such Shareholder at any time after one (1) year, but before three (3)
years, following the completion of a Public Offering.
(b) A registration will not count as a Demand Registration unless the
Shareholder is able to register and sell at least seventy-five percent
(75%) of the shares requested to be included in such registration;
provided, however, that if the Shareholder is able to register and sell
less than such stated percentage, the Shareholder shall be entitled to
invoke this provision to request a subsequent Demand Registration on only
one additional occasion.
(c) KCI may include in any Demand Registration any of its securities
to be registered for offering and sale on behalf of KCI.
(d) If a Demand Registration is an underwritten registration and the
managing underwriters advise KCI in writing that, in their opinion, the
number of securities in such offering exceeds the number that can be sold
in an orderly manner within a price range acceptable to the Shareholder and
to KCI, then the number of such shares that the managing underwriters
believe that may be sold in such offering shall be allocated first to the
Shareholder's shares for inclusion in the registration statement, second to
the shares of any Piggyback Shareholder (as defined in Section 5.02(a)),
then to the KCI shares.
(e) If a Demand Registration is an underwritten offering, the
investment bankers and managers for the offering will be selected by the
Shareholder, subject to the approval of KCI, which will not be unreasonably
withheld.
(f) KCI shall pay the expenses described in Section 5.06 for any
registration pursuant to this Section 5.01.
5.02 Piggyback Registration Rights.
(a) If at any time KCI shall determine to proceed with the preparation
and filing of a registration statement (other than a registration statement
on Form S-4, Form S-8, or other limited purpose form) under the Securities
Act in connection with KCI's or another securityholder's proposed offer and
sale of Common Stock or equity securities convertible into Common Stock,
KCI will give written notice of its determination to the Shareholders at
least twenty (20) days prior to filing the registration statement. Upon the
written request from a Shareholder given within ten (10) days after receipt
of any such notice from KCI, KCI will include the number of shares
requested by the Shareholder in such registration statement ("Piggyback
Registration"). Notwithstanding anything in this Agreement to the contrary,
if a Shareholder (a "Piggyback Shareholder") makes a request for Piggyback
Registration in a registration statement filed pursuant to another
Shareholder's request for a Demand Registration under Section 5.01, and the
Piggyback Shareholder is able to register and sell at least seventy-five
percent (75%) of the shares requested to be included in the registration,
such request shall be deemed to satisfy the Piggyback Shareholder's right
to request a Demand Registration under Section 5.01.
(b) If a Piggyback Registration is an underwritten primary
registration on behalf of KCI and the managing underwriters advise KCI in
writing that, in their opinion, the number of total securities to be
registered in such offering exceeds the number that can be sold in an
orderly manner within a price range acceptable to KCI, then the number of
securities that the managing underwriter believes may be sold in such
offering shall be allocated first to the shares being offered by KCI for
inclusion in the registration
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statement, then to the shares of Shareholders submitted for registration,
pro rata among the Shareholders in accordance with the number of shares
they then hold.
(c) If a Piggyback Registration is an underwritten secondary
registration on behalf of the shareholders of KCI's securities and the
managing underwriters advise KCI in writing that, in their opinion, the
number of total securities to be registered in such offering exceeds the
number that can be sold in an orderly manner within a price range
acceptable to the shareholders initially requesting such registration, KCI
will include in such registration the securities being requested to be
included therein by the holders initially requesting such registration and
the shares of the Shareholders that requested Piggyback Registration, pro
rata among the holders of such securities on the basis of the number of
shares owned by each such shareholder.
(d) KCI shall pay the expenses described in Section 5.06 for
registration statements filed pursuant to this Section 5.02.
5.03 Registration Procedures. Whenever a Shareholder has requested that
KCI, pursuant to the provisions of Section 5.01 or Section 5.02, effect the
registration of Common Stock under the Securities Act, KCI will:
(a) as soon as reasonably practicable, prepare and file with the SEC a
registration statement with respect to such securities and use its best
efforts to cause such registration statement to become and remain effective
for such period as may be reasonably necessary to effect the sale of such
securities (the "Effective Period");
(b) as soon as reasonably practicable, prepare and file with the SEC
such amendments to such registration statement and supplements to the
prospectus contained therein as may be necessary to keep such registration
statement effective for the Effective Period as may be reasonably necessary
to effect the sale of such securities;
(c) furnish to the Shareholder and to the underwriters for the
securities being registered such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus, and such
other documents as the Shareholder and such underwriters may reasonably
request in order to facilitate the public offering of such securities;
(d) use its best efforts to register or qualify the Common Stock
covered by such registration statement under such state securities or blue
sky laws of such jurisdictions as the Shareholder may reasonably request in
writing within ten (10) days following the original filing of such
registration statement, except that KCI shall not for any purpose be
required to execute a general consent to service of process or to qualify
to do business as a foreign corporation in any jurisdiction wherein it is
not so qualified or subject itself to taxation in a jurisdiction where it
had not previously been subject to taxation or take any other action that
would subject KCI to service of process in a lawsuit other than one arising
out of the registration of the Common Stock;
(e) cause all such registered shares of Common Stock to be listed on
an exchange or NASDAQ by filing a subsequent listing application;
(f) notify the Shareholder, promptly after it shall receive notice
thereof, of the time when such registration statement has become effective
or a supplement to any prospectus forming a part of such registration
statement has been filed;
(g) notify the Shareholder promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or
for additional information;
(h) prepare and promptly file with the SEC and promptly notify the
Shareholder of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at any time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material
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fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading; and
(i) advise the Shareholder, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such stop order should be issued.
5.04 Underwriting. A Shareholder may not participate in any registration
hereunder unless such Shareholder (a) agrees to sell its shares of Common Stock
on the basis provided in the underwriting arrangements, if any, and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, and other documents reasonably required under the terms
of such underwriting arrangements, if any, and these registration rights.
5.05 Holdback Agreements. Each Shareholder agrees not to effect any public
sale or distribution of Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock, including a sale pursuant to Rule
144 under the Securities Act, during the fourteen (14) days prior to, and during
a period of up to one hundred eighty (180) days beginning on and following the
effective date of any registration statement filed by KCI pursuant to this
Section 5 (except as part of such registration), if and to the extent reasonably
requested by the managing underwriter of the offering.
5.06 Expenses. With respect to any registration requested pursuant to
Section 5.01 hereof and with respect to an inclusion of a Shareholder's shares
of Common Stock in a registration statement pursuant to Section 5.02 hereof, all
fees, costs, and expenses of such registration, inclusion, and public offering,
including, without limitation, all registration, filing, and listing fees,
printing expenses, fees and disbursements of legal counsel and accountants for
KCI, and all legal fees and disbursements and other expenses of complying with
state securities or blue sky laws of any jurisdictions in which the securities
to be offered are to be registered and qualified, shall be borne by KCI;
provided, however, that each Shareholder shall bear its own attorney fees and
the underwriting commissions and registration fees with respect to the sale of
its shares of Common Stock.
5.07 Indemnification.
(a) KCI will indemnify and hold harmless each Shareholder and any
underwriter (as defined in the Securities Act) for a Shareholder and each
person, if any, who controls such Shareholder or underwriter within the
meaning of the Securities Act, from and against and will reimburse the
Shareholder and each such underwriter and controlling person with respect
to, any and all loss, damage, liability, cost, and expense to which the
Shareholder or any such underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs, or expenses are caused by any untrue statement
or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein, or any amendment
or supplement thereto or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however,
that KCI will not be liable in any such case to the extent that any such
loss, damage, liability, cost, or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished in writing by a
Shareholder, such underwriter, or such controlling person specifically for
use in the preparation thereof. KCI will not be subject to any liability
for any settlement made without its consent, which consent shall not be
unreasonably withheld.
(b) Each Shareholder will indemnify and hold harmless KCI, its
directors and officers, any controlling person, and any underwriter thereof
from and against, and will reimburse KCI, its directors and officers, any
controlling person, and any underwriter thereof with respect to, any and
all loss, damage, liability, cost, or expense to which KCI or any
controlling person and/or any underwriter thereof may become subject under
the Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs, or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained
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in such registration statement, any prospectus contained therein, or any
amendment or supplement thereto or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in reliance
upon and in conformity with information furnished in writing by or on
behalf of the Shareholder specifically for use in the preparation thereof.
A Shareholder will not be subject to any liability for any settlement made
without its consent, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 5.07 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to
be made against the indemnifying party pursuant to the provisions of said
paragraph (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party
will not relieve it from any liability that it may have to any indemnified
party otherwise than hereunder, except to the extent that such omission
materially and adversely affects the indemnifying party's ability to defend
against or compromise such claim. In case such action is brought against
any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to
participate in and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, that if
the defendants in any action include both the indemnified party and the
indemnifying party and there are legal defenses available to the
indemnified party and/or other indemnified parties that are different from
or in addition to those available to the indemnifying party or if there is
a conflict of interest that would prevent counsel for the indemnifying
party from also representing the indemnified party, the indemnified party
or parties shall have the right to select separate counsel to participate
in the defense of such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to an indemnified party
of its election so to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party pursuant to the provisions of
said paragraph (a) or (b) for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense thereof
other than costs of investigation, unless (i) the indemnified party shall
have employed counsel in accordance with the provisions of the preceding
sentence, (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after the notice of the commencement of the
action, or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
(d) If for any reason the foregoing indemnification is unavailable or
is insufficient to hold harmless an indemnified party, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities,
or expenses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and the indemnified party
on the other hand in connection with the statement or omission that
resulted in the losses, claims, damages, liabilities, or expenses, as well
as any other relevant equitable considerations. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
SECTION 6. Liabilities and Indemnification.
6.01 Unless otherwise expressly assumed in writing by Fremont, the
Fremont/KCI Group, RCBA, the RCBA/KCI Group, or Dr. Leininger:
(a) none of them shall be liable to any third parties for any actions,
commitments, or debts of any other as a shareholder of KCI; and
(b) each of them shall take all reasonable steps to negotiate and
preclude exposing any of the other of them to any such liability to any
third party.
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<PAGE> 61
6.02 To the extent any of Fremont, the Fremont/KCI Group, RCBA, the
RCBA/KCI Group, or Dr. Leininger is presented with a demand or made party to an
adjudication by a third party asserting their potential liability as a
shareholder of KCI for any acts or omissions by any other party or parties to
this Agreement, they shall notify the other party or parties in writing
promptly, and upon the receipt of such notice the notified party or parties will
assume the responsibility for the defense, resolution, and/or satisfaction of
the claim and in all respects indemnify the party that is faced with such a
claim to the full extent of that party's costs and ultimate liabilities, if any.
SECTION 7. Miscellaneous.
7.01 Notices. Except as otherwise expressly provided in this Agreement,
all notices, requests, and other communications to any party hereunder shall be
in writing (including a facsimile or similar writing) and shall be given to such
party at the address or facsimile number specified for such party on Schedule
7.01 hereto or as such party shall hereafter specify for that purpose by notice
to the other parties. Each such notice, request, or other communication shall be
effective (i) if given by facsimile, at the time such facsimile is transmitted
and the appropriate confirmation is received (or, if such time is not during a
business day, at the beginning of the next such business day), (ii) if given by
mail, three business days (or, if to an address outside the United States, seven
calendar days) after such communication is deposited in the mails with
first-class postage prepaid, addressed as aforesaid, or (iii) if given by any
other means, when delivered at the address specified pursuant to this Section
7.01.
7.02 No Third Party Beneficiaries. This Agreement is not intended to
confer any rights or remedies hereunder upon, and shall not be enforceable by,
any Person other than the parties hereto.
7.03 Waiver. No failure by any party to insist upon the strict performance
of any covenant, agreement, term, or condition of this Agreement or to exercise
any right or remedy consequent upon a breach of such or any other covenant,
agreement, term, or condition shall operate as a waiver of such or any other
covenant, agreement, term, or condition of this Agreement. Any Person by notice
given in accordance with Section 7.01 may, but shall not be under any obligation
to, waive any of its rights or conditions to its obligations hereunder, or any
duty, obligation, or covenant of any other Person. No waiver shall affect or
alter the remainder of this Agreement, but each and every covenant, agreement,
term, and condition hereof shall continue in full force and effect with respect
to any other then existing or subsequent breach. The rights and remedies
provided by this Agreement are cumulative, and the exercise of any one right or
remedy by any party shall not preclude or waive its right to exercise any or all
other rights or remedies.
7.04 Integration. This Agreement constitutes the entire agreement among
the parties hereto and thereto pertaining to the subject matter hereof and
thereof and supersedes all prior agreements and understandings of the parties in
connection herewith and therewith, and no covenant, representation, or condition
not expressed in this Agreement, the confidentiality agreements between Fremont,
RCBA, and KCI, or any other such agreement shall affect, or be effective to
interpret, change, or restrict, the express provisions of this Agreement.
7.05 Dispute Resolution. Any controversy, claim or dispute between Dr.
Leininger and any other party to this Agreement, arising out of or relating to
this Agreement or any breach thereof, including any dispute concerning the scope
of this Section 7.05, shall be resolved exclusively in a California court of law
in a proceeding conducted without a jury, each party hereto expressly waiving
their right to a trial by jury.
7.06 Headings. The titles of the Sections of this Agreement are for
convenience only and shall not be interpreted to limit or amplify the provisions
of this Agreement.
7.07 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same instrument, which may be
sufficiently evidenced by one counterpart.
7.08 Severability. Each provision of this Agreement shall be considered
separable and if for any reason any provision or provisions hereof are
determined to be invalid and contrary to any existing of future law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement that are valid.
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<PAGE> 62
7.09 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
conflicts of law principles thereof.
7.10 Non-Assignability. All of the rights and obligations of the parties
to this Agreement are intended to be exercisable and fulfilled by the parties
themselves, as presently constituted. None of those rights or obligations may be
assigned, assumed, or transferred without the written informed consent of the
counterparties.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties as
of the day and year first above written.
<TABLE>
<S> <C>
Fremont Partners, L.P. Richard C. Blum & Associates, L.P.
By Fremont Advisers, L.L.C., By Richard C. Blum & Associates, Inc.,
its General Partner its General Partner
By: By:
- --------------------------------------------- ---------------------------------------------
Name: Name:
Title: Title:
Kinetic Concepts, Inc.
By:
- --------------------------------------------- ---------------------------------------------
Name: Dr. James R. Leininger
Title:
</TABLE>
[Fremont/KCI Group and RCBA/KCI Group members' signatures lines.]
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<PAGE> 1
EXHIBIT 10.25
<TABLE>
<S> <C>
RCBA PURCHASER I, L.P. FREMONT PURCHASER II, INC.
909 MONTGOMERY STREET, SUITE 400 50 FREMONT STREET, SUITE 3700
SAN FRANCISCO, CA 94133-4625 SAN FRANCISCO, CA 94105-1895
FAX: (415) 434-3130 FAX: (415) 284-5191
TELEPHONE: (415) 434-1111 TELEPHONE: (415) 284-8972
</TABLE>
November 5, 1997
Kinetic Concepts, Inc.
8023 Vantage Drive
San Antonio, TX 78230
Ladies and Gentleman:
Reference is made to the Transaction Agreement (the "Transaction
Agreement"), dated as of October 2, 1997, among Fremont Purchaser II, Inc. ("F
Purchaser"), RCBA Purchaser I, L.P. ("B Purchaser," and, together with F
Purchaser, "Purchasers") and Kinetic Concepts, Inc. (the "Company"). All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Transaction Agreement.
The Transaction Agreement in Section 3.06(c) provides, among other things,
that the 6,064,155 Shares held by and registered in the name of the Shareholder
and the 3,837,890 Shares held by and registered in the names of the listed
entities shall not be cancelled at the Effective Time, but shall remain
outstanding. The Parties hereby agree to adjust the numbers of Shares not
subject to cancellation such that the Shareholder and the listed parties shall
have 5,939,220 Shares and 3,871,752 Shares, respectively, which shall not be
cancelled at the Effective Time, but shall remain outstanding. The parties
further agree that the Shares held by and registered in the name of The Common
Fund for Non-Profit Organizations, Stinson Capital Partners II, L.P. and
RCBA-KCI Capital Partners, L.P. shall not be cancelled at the Effective Time,
but shall remain outstanding. The parties further acknowledge that Fremont
Partners L.P., FP Advisors, L.L.C., Fremont Group, L.L.C. and Fremont Investors
Inc. do not hold any Shares.
The Transaction Agreement provides in Section 5.06, among other things,
that the amount of Equity Financing may be subject to certain adjustments. The
parties hereby agree that F Purchaser will have available $135,325,998.50 and B
Purchaser will have available $14,865,966.50 for purposes of consummating the
Closing and, notwithstanding Section 5.06, such amounts shall not be subject to
adjustment.
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<PAGE> 2
Please indicate by signing below that you acknowledge and agree to the
above described terms.
Very truly yours,
FREMONT PURCHASER II, INC.
By /s/ JAMES FARRELL
------------------------------------
Name:
Title:
RCBA PURCHASER I, L.P.
By: Richard C. Blum & Associates,
L.P.,
its General Partner
By /s/ MURRAY A. INDICK
------------------------------------
Name:
Title:
Acknowledged and Agreed:
KINETIC CONCEPTS, INC.
By /s/ DENNIS E. NOLL
--------------------------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 10.26
AGREEMENT AMONG SHAREHOLDERS
This agreement (the "Agreement") dated this 5th day of November 1997
concerns the respective obligations and relationship of those identified below
as shareholders of Kinetic Concepts, Inc.
SECTION 1. Definitions. The following terms shall have the following meanings
for the purposes of this Agreement:
1.01 "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries or by agreement,
controls, is controlled by, or is under common control with such Person, and,
with respect to any natural person, any member of his or her immediate family or
a trust for the benefit of any such Person.
1.02 "Closing Time" means the time of the closing of the redemption of the
Common Stock by KCI.
1.03 "Common Stock" means the common stock, par value $0.001 per share, of
KCI.
1.04 "Dr. Leininger" means Dr. James R. Leininger, the founder of KCI and
its Chairman since 1976.
1.05 "Fremont" means Fremont Partners, L.P. and/or its Affiliates listed on
Schedule 1.05.
1.06 "Fremont/KCI Group" means those Persons listed on Schedule 1.06 to
which additions may be made after the Closing Time only to reflect transfers by
Fremont to Fremont Affiliates who invest within six (6) months of the Closing
Time.
1.07 "KCI" means Kinetic Concepts, Inc.
1.08 "KCI Percentage" means, for each of the Shareholders, the percentage
of all outstanding fully diluted Common Stock owned by that Shareholder from
time to time. Schedule 1.08 reflects the KCI Percentage of each Shareholder as
of the date of this Agreement.
1.09 "Person" means any individual, firm, corporation, partnership, limited
liability company, trust, joint venture, pension fund, governmental authority,
or other entity.
1.10 "Public Offering" means a consummated public offering of a number of
shares equal to at least twenty percent (20%) of the then issued and outstanding
Common Stock that is underwritten on a firm commitment basis by a
nationally-recognized investment banking firm.
1.11 "RCBA" means Richard C. Blum & Associates, L.P. and/or its Affiliates
listed on Schedule 1.11.
1.12 "RCBA/KCI Group" means those Persons listed on Schedule 1.12, to which
additions may be made after the Closing Time only to reflect transfers by RCBA
to RCBA Affiliates who invest within six (6) months of the Closing Time.
1.13 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
1.14 "Shareholder" means any Person that is, as of the date of this
Agreement, or becomes, at any subsequent time, a party to this Agreement. The
Shareholders as of the date of this Agreement are Fremont, RCBA, Dr. Leininger,
the Fremont/KCI Group, and the RCBA/KCI Group.
1.15 Terms and Usage Generally. The definitions in this Section 1 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine, and neuter forms. All references herein to Sections and
Schedules shall be deemed to be references to Sections of and Schedules to this
Agreement unless the context shall otherwise require. All Exhibits and Schedules
attached hereto shall be deemed incorporated herein as if set forth in full
herein. The words "include," "includes," and "including" shall be deemed to be
followed by the phrase "without limitation." The words "hereof," "herein," and
"hereunder" and words of similar import
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<PAGE> 2
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. References to a Person are also to
its permitted successors and permitted assigns.
SECTION 2. Transfer of Shares.
2.01 Restrictions on Transfer of Shares. Each of Fremont and RCBA agree
for themselves and for the respective Fremont/KCI Group and RCBA/KCI Group, and
Dr. Leininger agrees for himself, that immediately after the Closing Time, the
KCI Percentages held by them will be that set forth in Schedule 1.08, and that
until six (6) months after the Common Stock shall have been the subject of a
Public Offering pursuant to the Securities Act, no shares of Common Stock or of
equity interests in the entities comprising the controlling interests in the
Persons comprising the Fremont/KCI Group or the RCBA/KCI Group may be sold,
transferred, pledged, or hypothecated, directly or indirectly (a "Transfer"),
except as set forth in Section 2.02 hereof. Any attempted Transfer that is not
permitted by this Section 2 shall be deemed a violation and breach of this
Agreement that may be treated as null and void by the Shareholders and by KCI.
Any shares of Common Stock or of equity interests in the entities comprising the
controlling interests in the Persons comprising the Fremont/KCI Group or the
RCBA/KCI Group that are the subject of a Transfer permitted by this Section 2
shall remain subject to this Section 2. As a condition precedent to the
effectiveness of any Transfer to any person or entity that is not a party to
this Agreement, such transferee, for good and recognizable consideration, shall
agree in writing to become a party to this Agreement and to be bound by its
terms and provisions.
2.02 Permitted Transfers. Notwithstanding the foregoing, the following
Transfers will be permitted so long as the transferee, for good and recognizable
consideration, agrees in writing to become a party to this Agreement and to be
bound by its terms and provisions and so long as the Transfer complies with the
registration provisions (or exemptions therefrom) of all applicable federal and
state securities laws:
(a) Transfers by gift or the laws of descent and distribution to any
Affiliate of the transferor.
(b) Sales by Fremont or any member of the Fremont/KCI Group to any
other member of the Fremont/KCI Group.
(c) Sales by RCBA or any member of the RCBA/KCI Group to any other
member of the RCBA/ KCI Group.
(d) Sales between Fremont or any member of the Fremont/KCI Group on
the one hand and RCBA or any member of the RCBA/KCI Group on the other
hand, or vice versa, so long as the seller has first offered the securities
on the same price and terms, for at least thirty (30) days, to the member
of its own Group.
(e) Sales by Dr. Leininger of up to 10.5% of KCI's then outstanding
Common Stock.
2.03 Tag-Along Rights. If, at any time after the restrictions of Section
2.01 expire, a Shareholder proposes to sell Common Stock for value (the
"Transferor") to any Person (other than a transferee in a Transfer permitted by
Section 2.02) in one transaction or a series of related transactions, then such
Transferor shall offer (the "Participation Offer") to include in the proposed
sale a number of shares of Common Stock designated by any of the other
Shareholders not to exceed, in respect of any such Shareholder, the number of
shares equal to the product of (i) the aggregate number of shares to be sold to
the proposed transferee and (ii) the Shareholder's respective KCI Percentage;
provided that if the consideration to be received includes any securities, only
Shareholders that are Accredited Investors (as defined below) shall be entitled
to include their shares in such sale (but, in such case, each Shareholder shall
be entitled to include in such sale a number of its shares, without duplication,
equal to the number of shares held by its Affiliates that are excluded from sale
by the operation of this proviso). The Transferor shall give written notice to
each Shareholder of the Participation Offer (the "Transferor's Notice") at least
twenty (20) days prior to the proposed sale. The Transferor's Notice shall
specify the proposed transferee, the number of shares to be sold to such
transferee, the amount and type of consideration to be received therefor, and
the place and date on which the sale is to be consummated. Each Shareholder that
wishes to include shares of Common Stock in the proposed sale in accordance with
the terms of this Section 2.03 shall so notify the Transferor not more than ten
(10) days after
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<PAGE> 3
the date of the Transferor's Notice. The Participation Offer shall be
conditioned upon the Transferor's sale of shares pursuant to the transactions
contemplated in the Transferor's Notice with the transferee named therein. If
any Shareholder accepts the Participation Offer, the Transferor shall reduce to
the extent necessary the number of shares it otherwise would have sold in the
proposed sale so as to permit other Shareholders that have accepted the
Participation Offer to sell the number of shares that they are entitled to sell
under this Section 2.03, and the Transferor and such other Shareholder or
Shareholders shall sell the number of shares specified in the Participation
Offer to the proposed transferee in accordance with the terms of such sale set
forth in the Transferor's Notice. For purposes of this Section 2.03, "Accredited
Investor" shall have the meaning set forth for such term in Regulation D.
Notwithstanding the foregoing, a Shareholder shall have the right to include
shares of Common Stock in the Transferor's sale under this Section 2.03 only if
such Shareholder holds, on the date he receives the Transferor's Notice, at
least ten percent (10%) of the issued and outstanding shares of Common Stock.
2.04 Drag-Along Rights.
(a) Notwithstanding any other provision in this Section 2, if, at any
time after the restrictions of Section 2.01 expire, Fremont, RCBA, the
Fremont/KCI Group, and the RCBA/KCI Group (collectively, the "Seller")
propose to sell all (but not less than all) of the Common Stock they then
hold to a third party or parties in which the Seller does not own, have any
right to acquire, or propose to own or acquire, any interest (a "Third
Party") pursuant to a Bona Fide Offer (as defined below), then the Seller
shall have the right, subject to the provisions of this Section 2.04, to
require Dr. Leininger (the "Co-Seller"), to include in such sale (a
"Required Sale") all of the Common Stock held by the Co-Seller by
delivering notice (the "Required Sale Notice") to the Co-Seller.
(b) The Required Sale Notice shall set forth: (i) the date of such
notice (the "Notice Date"), (ii) the name and address of the Third Party,
(iii) the proposed amount of consideration to be paid per share for the
Sale Shares, and the terms and conditions of payment offered by the Third
Party in reasonable detail, together with written proposals or agreements,
if any, with respect thereto, (iv) the aggregate number of Sale Shares, (v)
confirmation that the Seller is selling one hundred percent (100%) of the
aggregate number of shares of Common Shares then held by it to a Third
Party, and (vi) the proposed date of the Required Sale (the "Required Sale
Date"), which shall be not less than twenty (20) nor more than one hundred
eighty (180) days after the date of the Notice Date.
(c) The Co-Seller shall cooperate in good faith with the Seller in
connection with consummating the Required Sale (including, without
limitation, the giving of consents and the voting of any Common Stock held
by the Co-Seller to approve such Required Sale). On the Required Sale Date,
the Co-Seller shall deliver, free and clear of all liens, claims, or
encumbrances, a certificate or certificates and/or other instrument or
instruments for all of its Common Stock, duly endorsed and in proper form
for transfer, with the signature guaranteed, to such Third Party in the
manner and at the address indicated in the Required Sale Notice and the
Seller shall cause the Co-Seller's share of the purchase price to be paid
to the Co-Seller.
(d) "Bona Fide Offer" shall mean an offer (whether in the form of a
purchase of shares, merger, recapitalization, business combination, or
otherwise) for Common Stock.
(e) In the event of any Required Sale, if the Co-Seller holds options
to purchase Common Stock, he must exercise or cancel all such stock options
prior to or simultaneously with the consummation of the Required Sale. Any
shares of Common Stock for which options are exercised must be included in
the Required Sale.
(f) Notwithstanding the foregoing, the Co-Seller shall not be required
to sell his shares of Common Stock under this Section 2.04 if, on the date
he receives the Required Sale Notice, he holds less than ten percent (10%)
of the issued and outstanding shares of Common Stock.
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<PAGE> 4
SECTION 3. Governance and Voting.
3.01 The Shareholders agree that each shall take such steps as are required
to assure that after the Closing Time, and continuing until such time as the
Common Stock shall have been the subject of a Public Offering registered under
the Securities Act, the Board of Directors of KCI shall have at least eight (8)
members, two (2) of whom shall be persons designated by Fremont, two (2) of whom
shall be persons designated by RCBA, one (1) of whom shall be Dr. Leininger (so
long as he shall own at least fifteen percent (15%) of the outstanding equity of
KCI), one (1) of whom shall be Raymond R. Hannigan (provided, however, that if
Raymond R. Hannigan for any reason ceases to serve KCI as its chief executive
officer, then the successor chief executive officer shall be elected to serve as
director in Mr. Hannigan's place), and two (2) or more of whom shall be
independent outside directors, who shall not be affiliated with Fremont or RCBA
and who shall be designated by the unanimous vote of the Nominating Committee of
the Board of Directors of KCI, which shall comprise Dr. Leininger, one (1)
director designated by Fremont, and one (1) director designated by RCBA.
3.02 Each of Fremont, RCBA and Dr. Leininger agrees that none of them shall
charge any management, monitoring, consulting or similar fees to KCI or their
Affiliates without the prior consent of the other two (which consent shall not
be unreasonably withheld). In the event Fremont or RCBA charge any such fees to
KCI or its Affiliates (i) the fees shall be of a type and amount customary
between financial buyers and companies that have been the subject of a leveraged
buyout and (ii) Dr. Leininger shall participate in such fees to the extent
equitable in consideration for any management, monitoring or consulting services
that he has provided to KCI or its Affiliates.
3.03 After the Closing Time, and until such time as the Common Stock shall
have been the subject of a Public Offering registered under the Securities Act,
each of Fremont and RCBA shall have the following rights with respect to KCI:
(i) the right to inspect the books and records of KCI and (ii) the right to
inspect the properties and operations of KCI. The rights provided to Fremont and
RCBA in Section 3.01 above and in this Section 3.03 are intended to enable
Fremont and RCBA to be operated as a "venture capital operating company" within
the meaning of the regulations of the Department of Labor set forth in 29 CFR
Section 2510.3-101(d), and Section 3.01 above and this Section 3.03 shall be
interpreted accordingly.
SECTION 4. Preemptive Rights.
4.01 Grant of Preemptive Rights. KCI will not issue or sell any capital
stock without first complying with this Section 4. KCI hereby grants to each of
the Shareholders the preemptive right to purchase up to that Shareholder's Pro
Rata Share (as defined below) of any capital stock that KCI may, from time to
time, propose to sell or issue. For purposes of this Section 4, a Shareholder's
"Pro Rata Share" shall mean the percentage of all outstanding fully diluted
capital stock of KCI owned by that Shareholder from time to time.
4.02 Suspension of Preemptive Rights. The preemptive rights granted in
Section 4.01 shall be suspended with respect to Dr. Leininger if, at the time of
the proposed issuance and sale of capital stock, the exercise of such right
would result in Fremont, RCBA, the Fremont/KCI Group, and the RCBA/KCI Group
collectively holding less than a majority of the issued and outstanding shares
of Common Stock after giving effect to such issuance and sale.
4.03 Notice to Shareholders. If KCI proposes to issue or sell any capital
stock, KCI shall provide each Shareholder with written notice of KCI's intention
(the "Notice of Issuance"). The Notice of Issuance shall describe the type of
capital stock to be issued or sold and the price and other terms upon which KCI
proposes to issue or to sell such capital stock.
4.04 Exercise of Preemptive Rights. Each Shareholder may exercise its
preemptive right under this Section 4, in whole or in part, by giving written
notice of its election to participate in the offering within twenty (20) days
after receipt of the Notice of Issuance. If a Shareholder fails fully to
exercise such preemptive right within such twenty (20) day period, KCI shall
have sixty (60) days in which the sell the capital stock described in the Notice
of Issuance that the Shareholder did not agree to purchase. In the event
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<PAGE> 5
that KCI does not sell such capital stock within such sixty (60) day period, KCI
thereafter will not issue or sell such capital stock without again complying
with this Section 4.
4.05 Exceptions. Notwithstanding the foregoing, the preemptive rights
granted in Section 4.01 will not apply to (i) any issuance of capital stock as a
dividend or stock split in respect of outstanding capital stock or (ii) any
issuance of capital stock in an underwritten public offering.
SECTION 5. Registration Rights.
5.01 Demand Registration.
(a) At any time after the fifth anniversary of this Agreement, if
there has not been a Public Offering by such date, each of the Shareholders
may make one (1) written request to KCI for registration of at least
thirty-three percent (33%) of the shares of Common Stock then held by such
Shareholder under Form S-3 (or such other appropriate or successor form if
Form S-3 is not available) and in accordance with the provisions of Rule
415 promulgated under the Securities Act (a "Demand Registration"). In
addition to that right to request a Demand Registration, each Shareholder
shall have the right to request an additional Demand Registration of at
least thirty-three percent (33%) of the shares of Common Stock then held by
such Shareholder at any time after one (1) year, but before three (3)
years, following the completion of a Public Offering.
(b) A registration will not count as a Demand Registration unless the
Shareholder is able to register and sell at least seventy-five percent
(75%) of the shares requested to be included in such registration;
provided, however, that if the Shareholder is able to register and sell
less than such stated percentage, the Shareholder shall be entitled to
invoke this provision to request a subsequent Demand Registration on only
one additional occasion.
(c) KCI may include in any Demand Registration any of its securities
to be registered for offering and sale on behalf of KCI.
(d) If a Demand Registration is an underwritten registration and the
managing underwriters advise KCI in writing that, in their opinion, the
number of securities in such offering exceeds the number that can be sold
in an orderly manner within a price range acceptable to the Shareholder and
to KCI, then the number of such shares that the managing underwriters
believe that may be sold in such offering shall be allocated first to the
Shareholder's shares for inclusion in the registration statement, second to
the shares of any Piggyback Shareholder (as defined in Section 5.02(a)),
then to the KCI shares.
(e) If a Demand Registration is an underwritten offering, the
investment bankers and managers for the offering will be selected by the
Shareholder, subject to the approval of KCI, which will not be unreasonably
withheld.
(f) KCI shall pay the expenses described in Section 5.06 for any
registration pursuant to this Section 5.01.
5.02 Piggyback Registration Rights.
(a) If at any time KCI shall determine to proceed with the preparation
and filing of a registration statement (other than a registration statement
on Form S-4, Form S-8, or other limited purpose form) under the Securities
Act in connection with KCI's or another securityholder's proposed offer and
sale of Common Stock or equity securities convertible into Common Stock,
KCI will give written notice of its determination to the Shareholders at
least twenty (20) days prior to filing the registration statement. Upon the
written request from a Shareholder given within ten (10) days after receipt
of any such notice from KCI, KCI will include the number of shares
requested by the Shareholder in such registration statement ("Piggyback
Registration"). Notwithstanding anything in this Agreement to the contrary,
if a Shareholder (a "Piggyback Shareholder") makes a request for Piggyback
Registration in a registration statement filed pursuant to another
Shareholder's request for a Demand Registration under Section 5.01, and the
Piggyback Shareholder is able to register and sell at least seventy-five
percent (75%) of the
III-5
<PAGE> 6
shares requested to be included in the registration, such request shall be
deemed to satisfy the Piggyback Shareholder's right to request a Demand
Registration under Section 5.01.
(b) If a Piggyback Registration is an underwritten primary
registration on behalf of KCI and the managing underwriters advise KCI in
writing that, in their opinion, the number of total securities to be
registered in such offering exceeds the number that can be sold in an
orderly manner within a price range acceptable to KCI, then the number of
securities that the managing underwriter believes may be sold in such
offering shall be allocated first to the shares being offered by KCI for
inclusion in the registration statement, then to the shares of Shareholders
submitted for registration, pro rata among the Shareholders in accordance
with the number of shares they then hold.
(c) If a Piggyback Registration is an underwritten secondary
registration on behalf of the shareholders of KCI's securities and the
managing underwriters advise KCI in writing that, in their opinion, the
number of total securities to be registered in such offering exceeds the
number that can be sold in an orderly manner within a price range
acceptable to the shareholders initially requesting such registration, KCI
will include in such registration the securities being requested to be
included therein by the holders initially requesting such registration and
the shares of the Shareholders that requested Piggyback Registration, pro
rata among the holders of such securities on the basis of the number of
shares owned by each such shareholder.
(d) KCI shall pay the expenses described in Section 5.06 for
registration statements filed pursuant to this Section 5.02.
5.03 Registration Procedures. Whenever a Shareholder has requested that
KCI, pursuant to the provisions of Section 5.01 or Section 5.02, effect the
registration of Common Stock under the Securities Act, KCI will:
(a) as soon as reasonably practicable, prepare and file with the SEC a
registration statement with respect to such securities and use its best
efforts to cause such registration statement to become and remain effective
for such period as may be reasonably necessary to effect the sale of such
securities (the "Effective Period");
(b) as soon as reasonably practicable, prepare and file with the SEC
such amendments to such registration statement and supplements to the
prospectus contained therein as may be necessary to keep such registration
statement effective for the Effective Period as may be reasonably necessary
to effect the sale of such securities;
(c) furnish to the Shareholder and to the underwriters for the
securities being registered such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus, and such
other documents as the Shareholder and such underwriters may reasonably
request in order to facilitate the public offering of such securities;
(d) use its best efforts to register or qualify the Common Stock
covered by such registration statement under such state securities or blue
sky laws of such jurisdictions as the Shareholder may reasonably request in
writing within ten (10) days following the original filing of such
registration statement, except that KCI shall not for any purpose be
required to execute a general consent to service of process or to qualify
to do business as a foreign corporation in any jurisdiction wherein it is
not so qualified or subject itself to taxation in a jurisdiction where it
had not previously been subject to taxation or take any other action that
would subject KCI to service of process in a lawsuit other than one arising
out of the registration of the Common Stock;
(e) cause all such registered shares of Common Stock to be listed on
an exchange or NASDAQ by filing a subsequent listing application;
(f) notify the Shareholder, promptly after it shall receive notice
thereof, of the time when such registration statement has become effective
or a supplement to any prospectus forming a part of such registration
statement has been filed;
III-6
<PAGE> 7
(g) notify the Shareholder promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or
for additional information;
(h) prepare and promptly file with the SEC and promptly notify the
Shareholder of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at any time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading; and
(i) advise the Shareholder, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such stop order should be issued.
5.04 Underwriting. A Shareholder may not participate in any registration
hereunder unless such Shareholder (a) agrees to sell its shares of Common Stock
on the basis provided in the underwriting arrangements, if any, and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, and other documents reasonably required under the terms
of such underwriting arrangements, if any, and these registration rights.
5.05 Holdback Agreements. Each Shareholder agrees not to effect any public
sale or distribution of Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock, including a sale pursuant to Rule
144 under the Securities Act, during the fourteen (14) days prior to, and during
a period of up to one hundred eighty (180) days beginning on and following the
effective date of any registration statement filed by KCI pursuant to this
Section 5 (except as part of such registration), if and to the extent reasonably
requested by the managing underwriter of the offering.
5.06 Expenses. With respect to any registration requested pursuant to
Section 5.01 hereof and with respect to an inclusion of a Shareholder's shares
of Common Stock in a registration statement pursuant to Section 5.02 hereof, all
fees, costs, and expenses of such registration, inclusion, and public offering,
including, without limitation, all registration, filing, and listing fees,
printing expenses, fees and disbursements of legal counsel and accountants for
KCI, and all legal fees and disbursements and other expenses of complying with
state securities or blue sky laws of any jurisdictions in which the securities
to be offered are to be registered and qualified, shall be borne by KCI;
provided, however, that each Shareholder shall bear its own attorney fees and
the underwriting commissions and registration fees with respect to the sale of
its shares of Common Stock.
5.07 Indemnification.
(a) KCI will indemnify and hold harmless each Shareholder and any
underwriter (as defined in the Securities Act) for a Shareholder and each
person, if any, who controls such Shareholder or underwriter within the
meaning of the Securities Act, from and against and will reimburse the
Shareholder and each such underwriter and controlling person with respect
to, any and all loss, damage, liability, cost, and expense to which the
Shareholder or any such underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs, or expenses are caused by any untrue statement
or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein, or any amendment
or supplement thereto or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however,
that KCI will not be liable in any such case to the extent that any such
loss, damage, liability, cost, or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished in writing by a
Shareholder, such underwriter, or such controlling person specifically for
use in
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<PAGE> 8
the preparation thereof. KCI will not be subject to any liability for any
settlement made without its consent, which consent shall not be
unreasonably withheld.
(b) Each Shareholder will indemnify and hold harmless KCI, its
directors and officers, any controlling person, and any underwriter thereof
from and against, and will reimburse KCI, its directors and officers, any
controlling person, and any underwriter thereof with respect to, any and
all loss, damage, liability, cost, or expense to which KCI or any
controlling person and/or any underwriter thereof may become subject under
the Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs, or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein, or any amendment
or supplement thereto or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in reliance
upon and in conformity with information furnished in writing by or on
behalf of the Shareholder specifically for use in the preparation thereof.
A Shareholder will not be subject to any liability for any settlement made
without its consent, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 5.07 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to
be made against the indemnifying party pursuant to the provisions of said
paragraph (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party
will not relieve it from any liability that it may have to any indemnified
party otherwise than hereunder, except to the extent that such omission
materially and adversely affects the indemnifying party's ability to defend
against or compromise such claim. In case such action is brought against
any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to
participate in and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, that if
the defendants in any action include both the indemnified party and the
indemnifying party and there are legal defenses available to the
indemnified party and/or other indemnified parties that are different from
or in addition to those available to the indemnifying party or if there is
a conflict of interest that would prevent counsel for the indemnifying
party from also representing the indemnified party, the indemnified party
or parties shall have the right to select separate counsel to participate
in the defense of such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to an indemnified party
of its election so to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party pursuant to the provisions of
said paragraph (a) or (b) for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense thereof
other than costs of investigation, unless (i) the indemnified party shall
have employed counsel in accordance with the provisions of the preceding
sentence, (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after the notice of the commencement of the
action, or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
(d) If for any reason the foregoing indemnification is unavailable or
is insufficient to hold harmless an indemnified party, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities,
or expenses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and the indemnified party
on the other hand in connection with the statement or omission that
resulted in the losses, claims, damages, liabilities, or expenses, as well
as any other relevant equitable considerations. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
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<PAGE> 9
SECTION 6. Liabilities and Indemnification.
6.01 Unless otherwise expressly assumed in writing by Fremont, the
Fremont/KCI Group, RCBA, the RCBA/KCI Group, or Dr. Leininger:
(a) none of them shall be liable to any third parties for any actions,
commitments, or debts of any other as a shareholder of KCI; and
(b) each of them shall take all reasonable steps to negotiate and
preclude exposing any of the other of them to any such liability to any
third party.
6.02 To the extent any of Fremont, the Fremont/KCI Group, RCBA, the
RCBA/KCI Group, or Dr. Leininger is presented with a demand or made party to an
adjudication by a third party asserting their potential liability as a
shareholder of KCI for any acts or omissions by any other party or parties to
this Agreement, they shall notify the other party or parties in writing
promptly, and upon the receipt of such notice the notified party or parties will
assume the responsibility for the defense, resolution, and/or satisfaction of
the claim and in all respects indemnify the party that is faced with such a
claim to the full extent of that party's costs and ultimate liabilities, if any.
SECTION 7. Miscellaneous.
7.01 Notices. Except as otherwise expressly provided in this Agreement,
all notices, requests, and other communications to any party hereunder shall be
in writing (including a facsimile or similar writing) and shall be given to such
party at the address or facsimile number specified for such party on Schedule
7.01 hereto or as such party shall hereafter specify for that purpose by notice
to the other parties. Each such notice, request, or other communication shall be
effective (i) if given by facsimile, at the time such facsimile is transmitted
and the appropriate confirmation is received (or, if such time is not during a
business day, at the beginning of the next such business day), (ii) if given by
mail, three business days (or, if to an address outside the United States, seven
calendar days) after such communication is deposited in the mails with
first-class postage prepaid, addressed as aforesaid, or (iii) if given by any
other means, when delivered at the address specified pursuant to this Section
7.01.
7.02 No Third Party Beneficiaries. This Agreement is not intended to
confer any rights or remedies hereunder upon, and shall not be enforceable by,
any Person other than the parties hereto.
7.03 Waiver. No failure by any party to insist upon the strict performance
of any covenant, agreement, term, or condition of this Agreement or to exercise
any right or remedy consequent upon a breach of such or any other covenant,
agreement, term, or condition shall operate as a waiver of such or any other
covenant, agreement, term, or condition of this Agreement. Any Person by notice
given in accordance with Section 7.01 may, but shall not be under any obligation
to, waive any of its rights or conditions to its obligations hereunder, or any
duty, obligation, or covenant of any other Person. No waiver shall affect or
alter the remainder of this Agreement, but each and every covenant, agreement,
term, and condition hereof shall continue in full force and effect with respect
to any other then existing or subsequent breach. The rights and remedies
provided by this Agreement are cumulative, and the exercise of any one right or
remedy by any party shall not preclude or waive its right to exercise any or all
other rights or remedies.
7.04 Integration. This Agreement constitutes the entire agreement among
the parties hereto and thereto pertaining to the subject matter hereof and
thereof and supersedes all prior agreements and understandings of the parties in
connection herewith and therewith, and no covenant, representation, or condition
not expressed in this Agreement, the confidentiality agreements between Fremont,
RCBA, and KCI, or any other such agreement shall affect, or be effective to
interpret, change, or restrict, the express provisions of this Agreement.
7.05 Dispute Resolution. Any controversy, claim or dispute between Dr.
Leininger and any other party to this Agreement, arising out of or relating to
this Agreement or any breach thereof, including any dispute concerning the scope
of this Section 7.05, shall be resolved exclusively in a California court of law
in a proceeding conducted without a jury, each party hereto expressly waiving
their right to a trial by jury.
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<PAGE> 10
7.06 Headings. The titles of the Sections of this Agreement are for
convenience only and shall not be interpreted to limit or amplify the provisions
of this Agreement.
7.07 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same instrument, which may be
sufficiently evidenced by one counterpart.
7.08 Severability. Each provision of this Agreement shall be considered
separable and if for any reason any provision or provisions hereof are
determined to be invalid and contrary to any existing of future law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement that are valid.
7.09 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
conflicts of law principles thereof.
7.10 Non-Assignability. All of the rights and obligations of the parties
to this Agreement are intended to be exercisable and fulfilled by the parties
themselves, as presently constituted. None of those rights or obligations may be
assigned, assumed, or transferred without the written informed consent of the
counterparties.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties as
of the day and year first above written.
Fremont Partners, L.P.
By: FP Advisors, L.L.C.,
its General Partner
By: Fremont Group, L.L.C.,
its managing member
By: Fremont Investors, Inc.,
its manager
By: /s/ ROBERT JAUNICH II
-----------------------------------
Name: Robert Jaunich II
Title: Managing Director
Richard C. Blum & Associates, L.P.
By: Richard C. Blum & Associates,
Inc.,
its General Partner
By: /s/ N. COLIN LIND
-----------------------------------
Name: N. Colin Lind
Title: Managing Director
Kinetic Concepts, Inc.
By: /s/ DENNIS E. NOLL
-----------------------------------
Name:
Title:
/s/ JAMES R. LEININGER, M.D.
-------------------------------------
James R. Leininger, M.D.
III-10
<PAGE> 11
The Common Fund or
Non-Profit Organizations
By: Richard C. Blum & Associates,
L.P.,
its attorney-in-fact
By: Richard C. Blum & Associates,
Inc.,
its General Partner
By: /s/ N. COLIN LIND
-----------------------------------
Name: N. Colin Lind
Title: Managing Director
Stinson Capital Partners II, L.P.
By: Richard C. Blum & Associates,
L.P.,
its General Partner
By: /s/ N. COLIN LIND
-----------------------------------
Name: N. Colin Lind
Title: Managing Director
RCBA-KCI Capital Partners, L.P.
By: Richard C. Blum & Associates,
L.P.,
its General Partner
By: /s/ N. COLIN LIND
-----------------------------------
Name: N. Colin Lind
Title: Managing Director
RCBA Purchaser I, L.P.
By: Richard C. Blum & Associates,
L.P.,
its General Partner
By: /s/ N. COLIN LIND
-----------------------------------
Name: N. Colin Lind
Title: Managing Director
III-11
<PAGE> 12
Fremont Acquisition Company II,
L.L.C.
By: Fremont Partners, L.P.,
its member
By: FP Advisors, L.L.C.,
its General Partner
By: Fremont Group, L.L.C.,
its managing member
By: Fremont Investors, Inc.,
its manager
By: /s/ ROBERT JAUNICH II
-----------------------------------
Name: Robert Jaunich II
Title: Managing Director
Fremont Acquisition Company IIA,
L.L.C.
By: FP Advisors, L.L.C.,
its non-member manager
By: Fremont Group, L.L.C.,
its managing member
By: Fremont Investors, Inc.,
its manager
By: /s/ ROBERT JAUNICH II
-------------------------------------
Name: Robert Jaunich II
Title: Managing Director
Fremont Offshore Partners, L.P.
By: FP Advisors, L.L.C.,
its General Partner
By: Fremont Group, L.L.C.,
its managing member
By: Fremont Investors, Inc.,
its manager
By: /s/ ROBERT JAUNICH II
-----------------------------------
Name: Robert Jaunich II
Title: Managing Director
Fremont Partners Side-By-Side, L.P.
By: Fremont Investors, Inc.,
its manager
By: /s/ ROBERT JAUNICH II
-----------------------------------
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<PAGE> 13
Fremont-KCI Co-Investment Company,
L.L.C.
By: FP Advisors, L.L.C.,
its member-manager
By: Fremont Group, L.L.C.,
its managing member
By: Fremont Investors, Inc.,
its manager
By: /s/ ROBERT JAUNICH II
-----------------------------------
Name: Robert Jaunich II
Title: Managing Director
FREMONT PURCHASER II, INC.
By: /s/ ROBERT JAUNICH II
-----------------------------------
Name: Robert Jaunich II
Title: Chairman
III-13
<PAGE> 1
EXHIBIT 10.27
CONFORMED COPY
KINETIC CONCEPTS, INC.
THE SUBSIDIARY BORROWERS
FROM TIME TO TIME PARTIES HERETO
$530,000,000
CREDIT AND GUARANTEE AGREEMENT
November 3, 1997
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
AS ADMINISTRATIVE AGENT
BANKERS TRUST COMPANY
AS SYNDICATION AGENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS................................................................................... 2
1.1 Defined Terms............................................................................ 2
1.2 Other Definitional Provisions............................................................ 29
SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS.............................................. 29
2.1 Revolving Credit Commitments............................................................. 29
2.2 Procedure for Revolving Credit Borrowing................................................. 30
2.3 Commitment Fee........................................................................... 30
2.4 Termination or Reduction of Commitments; Repayment of
Revolving Loans...................................................................... 31
2.5 L/C Commitment........................................................................... 31
2.6 Procedure for Issuance of Letters of Credit.............................................. 32
2.7 Letter of Credit Fees, Commissions and Other Charges..................................... 32
2.8 L/C Participations....................................................................... 33
2.9 Reimbursement Obligation of the Company.................................................. 34
2.10 Obligations Absolute.................................................................... 35
2.11 Letter of Credit Payments............................................................... 35
2.12 Application............................................................................. 35
2.13 Fronted Offshore Currency Subfacility................................................... 35
2.14 Procedure for Fronted Offshore Loan Borrowings.......................................... 36
2.15 Fronted Offshore Loan Fees, Commissions and Other Charges............................... 36
2.16 Participations in Fronted Offshore Loans................................................ 36
2.17 Swing Line Commitment................................................................... 38
2.18 Procedure for Swing Line Borrowing; Prepayment of Swing
Line Loans........................................................................... 38
2.19 Repayment of Swing Line Loans; Participations in Swing Line
Borrowings........................................................................... 38
SECTION 3. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS..................................................... 39
3.1 Term Loans............................................................................... 39
3.2 Procedure for Term Loan Borrowing........................................................ 40
3.3 Repayment of Tranche A Term Loans. ..................................................... 40
3.4 Repayment of Tranche B Term Loans........................................................ 40
3.5 Repayment of Tranche C Term Loans........................................................ 41
3.6 Reduction of Term Commitments............................................................ 41
</TABLE>
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<TABLE>
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<S> <C>
SECTION 4. AMOUNT AND TERMS OF ACQUISITION LOAN COMMITMENTS.............................................. 42
4.1 Acquisition Loans........................................................................ 42
4.2 Procedure for Acquisition Loan Borrowing................................................. 42
4.3 Repayment of Acquisition Loans........................................................... 42
4.4 Commitment Fees.......................................................................... 43
4.5 Termination or Reduction of Acquisition Loan Commitments................................. 43
SECTION 5. AMOUNT AND TERMS OF TENDER LOAN COMMITMENTS................................................... 43
5.1 Tender Loans............................................................................. 43
5.2 Procedure for Tender Loan Borrowing...................................................... 43
5.3 Repayment of Tender Loans................................................................ 44
SECTION 6. GENERAL PROVISIONS APPLICABLE TO LOANS
AND LETTERS OF CREDIT....................................................................... 44
6.1 Evidence of Debt......................................................................... 44
6.2 Optional Prepayments..................................................................... 45
6.3 Mandatory Prepayments of Loans and Reductions of Revolving
Credit Commitments and Acquisition Loan Commitments.................................. 46
6.4 Conversion and Continuation Options...................................................... 51
6.5 Minimum Amounts and Maximum Number of Tranches........................................... 52
6.6 Interest Rates and Payment Dates......................................................... 52
6.7 Computation of Interest and Fees......................................................... 52
6.8 Inability to Determine Interest Rate..................................................... 53
6.9 Pro Rata Treatment and Payments.......................................................... 54
6.10 Illegality.............................................................................. 55
6.11 Requirements of Law..................................................................... 55
6.12 Taxes................................................................................... 56
6.13 Indemnity............................................................................... 58
6.14 Offshore Currency Spot Rate............................................................. 58
6.15 Subsidiary Borrowers.................................................................... 59
6.16 Mitigation Obligations; Replacement of Lenders.......................................... 59
SECTION 7. REPRESENTATIONS AND WARRANTIES................................................................ 60
7.1 Financial Condition...................................................................... 60
7.2 No Change; Solvency...................................................................... 61
7.3 Corporate Existence; Compliance with Law................................................. 61
7.4 Corporate Power; Authorization; Enforceable Obligations.................................. 61
7.5 No Legal Bar............................................................................. 62
7.6 No Material Litigation................................................................... 62
7.7 No Labor Controversy..................................................................... 62
7.8 No Default............................................................................... 62
7.9 Ownership of Property; Liens............................................................. 62
</TABLE>
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<TABLE>
<CAPTION>
Page
<S> <C>
7.10 Intellectual Property................................................................... 62
7.11 No Burdensome Restrictions.............................................................. 63
7.12 Taxes................................................................................... 63
7.13 Federal Regulations..................................................................... 63
7.14 ERISA................................................................................... 63
7.15 Investment Company Act; Other Regulations............................................... 63
7.16 Subsidiaries............................................................................ 64
7.17 Purpose of Loans........................................................................ 64
7.18 Environmental Matters................................................................... 64
7.19 Regulation H............................................................................ 65
7.20 No Material Misstatements............................................................... 65
7.21 Representations and Warranties Contained in the
Recapitalization Documentation....................................................... 65
7.22 Ownership of the Company................................................................ 66
7.23 Collateral.............................................................................. 66
7.24 Senior Debt; No Other Designated Senior Debt............................................ 66
SECTION 8. CONDITIONS PRECEDENT.......................................................................... 66
8.1 Conditions to Initial Loans.............................................................. 66
8.2 Conditions to Each Extension of Credit................................................... 72
8.3 Additional Conditions to Each Subsidiary Borrower Credit
Event................................................................................ 73
SECTION 9. AFFIRMATIVE COVENANTS......................................................................... 73
9.1 Financial Statements..................................................................... 73
9.2 Certificates; Other Information.......................................................... 74
9.3 Payment of Obligations................................................................... 75
9.4 Conduct of Business and Maintenance of Existence......................................... 75
9.5 Maintenance of Property; Insurance....................................................... 75
9.6 Inspection of Property; Books and Records; Discussions................................... 76
9.7 Notices.................................................................................. 76
9.8 Environmental Laws....................................................................... 76
9.9 Further Assurances....................................................................... 77
9.10 Additional Collateral................................................................... 77
9.11 Senior Subordinated Debt Escrow Amount.................................................. 78
9.12 Interest Rate Protection................................................................ 78
SECTION 10. NEGATIVE COVENANTS............................................................................ 78
10.1 Financial Condition Covenants........................................................... 79
10.2 Limitation on Indebtedness.............................................................. 81
10.3 Limitation on Liens..................................................................... 82
10.4 Limitation on Guarantee Obligations..................................................... 83
10.5 Limitation on Fundamental Changes....................................................... 84
10.6 Limitation on Sale of Assets............................................................ 85
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
<S> <C>
10.7 Limitation on Dividends................................................................. 85
10.8 Limitation on Capital Expenditures...................................................... 86
10.9 Limitation on Investments, Loans and Advances........................................... 86
10.10 Limitation on Optional Payments and Modifications of
Subordinated and Other Debt Instruments............................................. 87
10.11 Limitation on Transactions with Affiliates............................................. 87
10.12 Limitation on Sales and Leasebacks..................................................... 88
10.13 Limitation on Changes in Fiscal Year................................................... 88
10.14 Limitation on Negative Pledge Clauses.................................................. 88
10.15 Limitation on Lines of Business........................................................ 88
10.16 Limitation on Modifications of Recapitalization
Documentation....................................................................... 88
10.17 Limitation on Subsidiary Distributions................................................. 88
10.18 Limitation on Management Fees.......................................................... 89
10.19 Cancellation of Shares Acquired in Tender Offer........................................ 89
10.20 Designated Senior Debt................................................................. 89
SECTION 11. EVENTS OF DEFAULT............................................................................. 89
SECTION 12. THE AGENTS.................................................................................... 92
12.1 Appointment............................................................................. 92
12.2 Delegation of Duties.................................................................... 93
12.3 Exculpatory Provisions.................................................................. 93
12.4 Reliance by Agents...................................................................... 93
12.5 Notice of Default....................................................................... 94
12.6 Non-Reliance on Agents and Other Lenders................................................ 94
12.7 Indemnification......................................................................... 94
12.8 Agent in Its Individual Capacity........................................................ 95
12.9 Successor Administrative Agent.......................................................... 95
SECTION 13. GUARANTEE..................................................................................... 95
13.1 Guarantee............................................................................... 95
13.2 No Subrogation, Contribution, Reimbursement or Indemnity................................ 96
13.3 Amendments, etc. with respect to the Subsidiary Borrower
Obligations: Waiver of Rights........................................................ 96
13.4 Guarantee Absolute and Unconditional.................................................... 97
13.5 Reinstatement........................................................................... 98
SECTION 14. MISCELLANEOUS................................................................................. 98
14.1 Amendments and Waivers.................................................................. 98
14.2 Notices................................................................................. 99
14.3 No Waiver; Cumulative Remedies.......................................................... 100
14.4 Survival of Representations and Warranties.............................................. 100
14.5 Payment of Expenses and Taxes........................................................... 100
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
14.6 Successors and Assigns; Participations and Assignments.................................. 101
14.7 Adjustments; Set-off.................................................................... 103
14.8 Counterparts............................................................................ 104
14.9 Severability............................................................................ 104
14.10 Integration............................................................................ 104
14.11 GOVERNING LAW.......................................................................... 104
14.12 Submission To Jurisdiction; Waivers.................................................... 105
14.13 Acknowledgements....................................................................... 105
14.14 WAIVERS OF JURY TRIAL.................................................................. 105
14.15 Confidentiality........................................................................ 106
14.16 Conversion of Currencies............................................................... 106
14.17 Limitation on Obligations of Subsidiary Borrowers...................................... 106
14.18 Usury Savings Clause................................................................... 106
</TABLE>
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<PAGE> 7
ANNEXES
ANNEX A - Pricing Grid
SCHEDULES
1.1(a) - Commitments
7.1 - Sales, Transfers and Dispositions
7.2 - Treasury Stock Purchases for 1997
7.9 - Owner Real Property
7.16 - Subsidiaries
7.18 - Environmental Matters
7.22 - Ownership of the Company
10.2(e) - Existing Indebtedness
10.3(f) - Existing Liens
10.6(f) - Scheduled Asset Sales
10.9(n) - Existing Investments
14.2 - Addresses for Notices
EXHIBITS
A - Form of Addendum
B - Form of Borrowing Subsidiary Agreement
C - Form of Borrowing Subsidiary Termination
D - Form of Fronting Lender Addendum
E - Form of Guarantee and Collateral Agreement
F - Form of Mortgage
G-1 - Form of Revolving Credit Note
G-2 - Form of Tranche A Term Note
G-3 - Form of Tranche B Term Note
G-4 - Form of Tranche C Term Note
G-5 - Form of Tender Note
G-6 - Form of Acquisition Note
G-7 - Form of Swing Line Note
G-8 - Form of Fronted Loan Note
H - Form of Closing Certificate
I-1 - Form of Legal Opinion of Shearman & Sterling
I-2 - Form of Legal Opinion of Dennis Noll
I-3 - Form of Legal Opinion of Cox & Smith Incorporated
I-4 - Form of Legal Opinion of Will Quirk
J - Form of Assignment and Acceptance
K - Form of Swing Line Loan Participation Certificate
-vi-
<PAGE> 8
CREDIT AND GUARANTEE AGREEMENT, dated as of November 3, 1997, among
KINETIC CONCEPTS, INC., a Texas corporation (the "Company"), the Subsidiary
Borrowers (as defined hereinafter) from time to time parties to this Agreement,
the several banks and other financial institutions from time to time parties to
this Agreement (the "Lenders"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association ("Bank of America"), as
administrative agent for the Lenders hereunder, and BANKERS TRUST COMPANY, a New
York banking corporation ("Bankers Trust"), as syndication agent for the Lenders
hereunder.
W I T N E S S E T H :
WHEREAS, Fremont Purchaser II, Corp. ("Fremont"), RCBA Purchaser I,
L.P. ("RCBA" and, together with Fremont, the "Sponsors") and the Company have
entered into a Transaction Agreement, dated as of October 2, 1997 (the
"Transaction Agreement"), pursuant to which the Sponsors, together with certain
of their affiliates and investors (the Sponsors and such affiliates and
investors are collectively referred to herein as the "New Investor Group"), will
participate and invest in a leveraged recapitalization transaction involving the
Company (the "Recapitalization").
WHEREAS, the Recapitalization will be accomplished through the
following steps: (a) the Sponsors will purchase for cash from the Company
approximately $155,612,000 (but not less than $125,000,000) of newly issued
shares of common stock ("Shares") of the Company (the "New Investor Shares");
(b) the Company will make an all cash tender offer (the "Tender Offer") to
acquire all of its issued and outstanding Shares (and related options), other
than the New Investor Shares and Shares and certain management options (such
Shares and management options, together with the New Investor Shares, the
"Rollover Shares") owned by certain existing stockholders of the Company,
including the Sponsors and members of the Company's Board of Directors and/or
management (the "Rollover Shareholders" and, together with the New Investor
Group, the "Buyers"), for a maximum aggregate repurchase price not to exceed
$655,000,000; (c) any Shares (and related options) acquired by the Company
pursuant to the Tender Offer will immediately be cancelled; (d) any Shares (and
related options) not acquired pursuant to the Tender Offer (other than the
Rollover Shares) will be acquired in a merger in which such Shares will be
converted to the right to receive the consideration paid in the Tender Offer
(the "Merger" and the date on which the Merger occurs, the "Merger Date"); and
(e) pursuant to the Merger, the Rollover Shares (which shall have an aggregate
value of approximately $352,794,990) shall be converted to newly issued shares
of the Company as the surviving corporation of the Merger, which newly issued
shares shall represent all of the issued and outstanding common stock of the
Company immediately following the Merger. References herein to the
"Recapitalization" shall include all of the foregoing transactions and all
related financings and other transactions.
WHEREAS, to finance the Recapitalization, (a) the Company will
receive at least $125,000,000 in cash proceeds from the sale of the New Investor
Shares prior to the consummation of the Tender Offer, (b) the Company will,
prior to the consummation of the Merger, receive at least $200,000,000 in cash
proceeds from either (i) the issuance of senior subordinated unsecured notes
(the "Senior Subordinated Notes") in a public offering or Rule 144A private
placement by one or more financial institutions satisfactory to the Lenders or
(ii) the proceeds of borrowings under a Senior Subordinated Credit Agreement
(the "Senior Subordinated Credit Agreement"), among the Company, the financial
institutions parties thereto (the "Senior Subordinated Lenders") and Bankers
Trust, as agent for the Senior Subordinated Lenders, and (c) the Company will
require $530,000,000 in senior secured credit facilities pursuant to this
Agreement.
WHEREAS, the Administrative Agent and the Lenders are willing to
make available such senior secured credit facilities upon the terms and subject
to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto hereby agree as follows:
<PAGE> 9
2
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"Accepting Tranche B Lenders" and "Accepting Tranche C Lenders": as
defined in subsection 6.3(i).
"Acquired EBITDA": with respect to the RIK Acquisition or any
Permitted Acquisition by the Company or any of its Subsidiaries during any
period, the portion of consolidated net income of the Prior Owner thereof
for such period attributable to the Capital Stock or assets acquired by
the Company or such Subsidiary pursuant to the RIK Acquisition or such
Permitted Acquisition, as the case may be, plus, to the extent deducted in
computing such portion of consolidated net income for such period, the sum
of (a) income tax expense, (b) interest expense and (c) depreciation and
amortization expense, all as determined with respect to such Capital Stock
or assets while under the ownership of the Prior Owner in accordance with
GAAP, provided that "Acquired EBITDA" in respect of the RIK Acquisition
shall be calculated after giving effect on a pro forma basis (as if they
had occurred at the beginning of such period) to (x) the elimination of
expense items incurred by the Prior Owner with respect to the assets
acquired pursuant to the RIK Acquisition which are not assumed by the
Company or such Subsidiary pursuant to the RIK Acquisition and (y) any
projected cost savings planned by the Company or such Subsidiary in
connection with the RIK Acquisition of up to $3,000,000 in the aggregate
that are disclosed in writing to the Lenders prior to the Closing Date.
"Acquired Interest Expense": with respect to any Permitted
Acquisition by the Company or any of its Subsidiaries during any period,
the sum of (a) the portion of interest expense, both expensed and
capitalized, of the Prior Owner thereof for such period determined in
accordance with GAAP (including that portion of payments under Financing
Leases of the Prior Owner attributable to interest expense of Prior Owner
for such period in accordance with GAAP) attributable to any Indebtedness
of the Prior Owner which is assumed by the Company or any of its
Subsidiaries pursuant to such Permitted Acquisition and (b) the Interest
Expense that would have been incurred by the Company from the beginning of
such period through the date of consummation of such Permitted Acquisition
had the Indebtedness incurred by the Company or any of its Subsidiaries to
finance such Permitted Acquisition been incurred on the first day of such
period (assuming the rate of interest applicable to such Indebtedness
during such period was equal to the rate of interest applicable to such
Indebtedness on the date of consummation of such Permitted Acquisition).
"Acquisition": as to any Person, the acquisition (in a single
transaction or a series of related transactions) by such Person of (a) at
least 50% of the outstanding Capital Stock of any other Person, (b) all or
substantially all of the assets of any other Person or (c) assets
constituting one or more business units or divisions of any other Person.
"Acquisition Loan": as defined in subsection 4.1.
"Acquisition Loan Availability Period": the period from and
including the Closing Date to and including December 31, 2000.
"Acquisition Loan Commitment": as to any Lender, the obligation of
such Lender to make Acquisition Loans to the Company pursuant to
subsection 4.1 in an aggregate amount not to exceed at any one time
outstanding the amount set forth under such Lender's name in Schedule
1.1(a) opposite the heading "Acquisition Loan Commitment"; collectively,
as to all such Lenders, the "Acquisition Loan Commitments".
"Acquisition Loan Commitment Percentage": as to any Acquisition Loan
Lender at any time, the percentage which (a) the sum of (i) the aggregate
then outstanding principal amount of such Acquisition Loan Lender's
Acquisition Loans and (ii) such Acquisition Loan Lender's Available
Acquisition Loan Commitment at such time then constitutes of (b) the sum
of (i) the aggregate then outstanding principal amount of Acquisition
Loans of all the Acquisition Loan
<PAGE> 10
3
Lenders and (ii) the aggregate Available Acquisition Loan Commitments of
all the Acquisition Loan Lenders at such time.
"Acquisition Loan Lender": any Lender having an Acquisition Loan
Commitment hereunder or that holds outstanding Acquisition Loans.
"Acquisition Loan Maturity Date": December 31, 2003.
"Acquisition Note": as defined in subsection 6.1(e).
"Addendum": an instrument, substantially in the form of Exhibit A,
by which a Lender becomes a party to this Agreement.
"Adjustment Date": the second Business Day following receipt by the
Administrative Agent of both (a) the financial statements required to be
delivered pursuant to subsection 9.1(a) or 9.1(b), as the case may be, for
the most recently completed fiscal period and (b) the compliance
certificate required to be delivered pursuant to subsection 9.2(b) with
respect to such fiscal period.
"Administrative Agent": Bank of America, together with its
affiliates, as the administrative agent for the Lenders under this
Agreement and the other Loan Documents.
"Administrative Agent's Payment Office": (a) in respect of payments
in Dollars, the address for payments set forth in subsection 14.2 or such
other address as the Administrative Agent may from time to time specify in
accordance with subsection 14.2, and (b) in the case of payments in any
Eligible Offshore Currency, such address as the Administrative Agent may
from time to time specify in accordance with subsection 14.2.
"Affected Eurodollar Loans": as defined in subsection 6.3(h).
"Affected Offshore Currency": as defined in subsection 6.8.
"Affected Offshore Loans:" as defined in subsection 6.3(h).
"Affiliate": 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. For purposes of this
definition, "control" of a Person means the power, directly or indirectly,
either to (a) vote 20% or more of the securities having ordinary voting
power for the election of directors of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether by
contract or otherwise.
"Agent-Related Persons": the Agents and any successor agent pursuant
to subsection 12.9, together with their respective Affiliates (including
BRS and BT Alex. Brown), and the officers, directors, employees, agents
and attorneys-in-fact of such Persons and Affiliates.
"Agents": collectively, the Administrative Agent and the Syndication
Agent.
"Aggregate Revolving Credit Outstandings": as to any Revolving
Credit Lender at any time, an amount equal to the sum of (a) the aggregate
principal amount (or the Dollar Equivalent thereof, in the case of
Revolving Offshore Loans) of all Revolving Loans made by such Revolving
Credit Lender then outstanding, (b) such Revolving Credit Lender's
Revolving Credit Commitment Percentage of the L/C Obligations then
outstanding, (c) such Revolving Credit Lender's Revolving Credit
Commitment Percentage of the aggregate principal amount of all Swing Line
Loans then outstanding and (d) such Revolving Credit Lender's Revolving
Credit Commitment Percentage of the Dollar Equivalent of the aggregate
principal amount of all Fronted Offshore Loans then outstanding.
"Agreement": this Credit and Guarantee Agreement, as amended,
restated, supplemented or otherwise modified from time to time.
<PAGE> 11
4
"Agreement Currency": as defined in subsection 14.16.
"Applicable Creditor": as defined in subsection 14.16.
"Applicable Margin": (a) in the case of the Revolving Loans
(excluding Revolving Offshore Loans), Tender Loans, Tranche A Term Loans
and Acquisition Loans, (i) 1.25%, if such Loans are Base Rate Loans and
(ii) 2.25%, if such Loans are Eurodollar Loans, (b) in the case of the
Tranche B Term Loans, (i) 1.50% if such Loans are Base Rate Loans and (ii)
2.50% if such Loans are Eurodollar Loans, (c) in the case of Tranche C
Term Loans, (i) 1.75% if such Loans are Base Rate Loans and (ii) 2.75% if
such Loans are Eurodollar Loans; and (d) if such Loans are Revolving
Offshore Loans, 2.25%; provided that, (x) from and after the last day of
the second full fiscal quarter after the Closing Date, the Applicable
Margin for all Loans will be adjusted, on each Adjustment Date, to the
Applicable Margin set forth on Annex A opposite the Leverage Ratio Level
of the Company in effect on such Adjustment Date, and, provided, further,
that, in the event the financial statements required to be delivered
pursuant to subsection 9.1(a) or 9.1(b), as applicable, and the related
compliance certificate required pursuant to subsection 9.2(b) are not
delivered when due, then, during the period from the date on which such
financial statements were required to be delivered until two Business Days
following the date upon which they actually are delivered, the Applicable
Margin shall be (w) in the case of Revolving Loans (excluding Revolving
Offshore Loans), Tranche A Term Loans and Acquisition Loans, (i) 1.25% if
such Loans are Base Rate Loans, and (ii) 2.25% if such Loans are
Eurodollar Loans, (x) in the case of Tranche B Term Loans, (i) 1.50% if
such Loans are Base Rate Loans, and (ii) 2.50% if such Loans are
Eurodollar Loans, (y) in the case of Tranche C Term Loans (i) 1.75% if
such Loans are Base Rate Loans, and (ii) 2.75% if such Loans are
Eurodollar Loans and (z) in the case of Revolving Offshore Loans, 2.25%
and (y) if any Event of Default shall have occurred and be continuing on
any Adjustment Date, no reduction in the Applicable Margin on any Loan
which would otherwise become effective on such Adjustment Date pursuant to
clause (x) above shall become effective unless such Event of Default is
cured or waived prior to the next succeeding Adjustment Date.
"Applicable Rate": 0.50%, provided that, from and after the last day
of the second full fiscal quarter after the Closing Date, the Applicable
Rate will be adjusted, on each Adjustment Date, to the Applicable Rate set
forth on Annex A opposite the Leverage Ratio Level of the Company in
effect on such Adjustment Date, and, provided, further, that, (x) in the
event the financial statements required to be delivered pursuant to
subsection 9.1(a) or 9.1(b), as applicable, and the related compliance
certificate required pursuant to subsection 9.2(b) are not delivered when
due, then, during the period from the date on which such financial
statements were required to be delivered until two Business Days following
the date upon which they actually are delivered, the Applicable Rate shall
be 0.50% and (y) if any Event of Default shall have occurred and be
continuing on any Adjustment Date, no reduction in the Applicable Rate
which would otherwise become effective on such Adjustment Date pursuant to
clause (x) above shall become effective unless such Event of Default is
cured or waived prior to the next succeeding Adjustment Date.
"Assignee": as defined in subsection 14.6(c).
"Available Acquisition Loan Commitment": as to any Acquisition Loan
Lender at any time, an amount equal to the excess, if any, of (a) the
amount of such Acquisition Loan Lender's Acquisition Loan Commitment in
effect at such time over (b) the aggregate principal amount of all
Acquisition Loans made by such Acquisition Loan Lender (calculated without
duplication of Acquisition Loans repaid and reborrowed as contemplated by
subsection 4.3); collectively, as to all the Acquisition Loan Lenders, the
"Available Acquisition Loan Commitments".
"Available Cash": at any time, (a) the sum of (i) so long as no
Default or Event of Default shall have then occurred and be continuing,
the aggregate Available Revolving Credit Commitments of the Revolving
Credit Lenders at such time and (ii) the aggregate amount of unrestricted
cash and Cash Equivalents of the Company and its Subsidiaries at such time
minus (b) the aggregate amount of taxes that would then be payable if the
cash or Cash Equivalents of the Foreign Subsidiaries were paid as a
dividend to the Company or any of its Domestic Subsidiaries
<PAGE> 12
5
as a result of the payment of such dividend.
"Available Revolving Credit Commitment": as to any Revolving Credit
Lender at any time, an amount equal to the excess, if any, of (a) the
amount of such Revolving Credit Lender's Revolving Credit Commitment in
effect at such time over (b) the Aggregate Revolving Credit Outstandings
of such Revolving Credit Lender at such time; collectively, as to all the
Revolving Credit Lenders, the "Available Revolving Credit Commitments".
"Bank of America": as defined in the preamble to this Agreement.
"Bankers Trust": as defined in the preamble to this Agreement.
"Banking Day": (a) with respect to any borrowings, disbursements and
payments in respect of and calculations and interest rates pertaining to
Base Rate Loans, any Business Day, (b) with respect to any borrowings,
disbursements and payments in respect of and calculations, interest rates
and Interest Periods pertaining to Eurodollar Loans, any Business Day
which is also a day on which dealings are carried on in the London
Interbank market, (c) with respect to any disbursements and payments in
respect of and calculations, interest rates and Interest Periods
pertaining to any Revolving Offshore Loan, any Business Day which is also
a day on which commercial banks are open for foreign exchange business in
London, England, and on which dealings in the relevant Offshore Currency
are carried on in the applicable offshore foreign exchange interbank
market in which disbursement of or payment in such Offshore Currency will
be made or received hereunder and (d) with respect to any borrowings,
disbursements and payments in and calculations, interest rates and
Interest Periods pertaining to any Fronted Offshore Loan, any Business Day
which is also a day on which commercial banks are open for in, and on
which dealings in the relevant Fronted Offshore Currency are carried on
in, the location of the Fronting Lender's Payment Office with respect to
such Fronted Offshore Currency.
"Base Rate": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (i) the rate
of interest publicly announced by Bank of America as its "reference rate"
and (ii) the Federal Funds Effective Rate in effect from time to time plus
0.5%; any change in the Base Rate due to a change in the Federal Funds
Effective Rate shall be effective as of the opening of business on the
effective day of such change in the Federal Funds Effective Rate.
"Base Rate Loans": Loans the rate of interest applicable to which is
based upon the Base Rate.
"Base Year": as defined in subsection 6.3(b).
"Borrowing Date": any Banking Day specified in a notice pursuant to
subsection 2.2, 2.14, 2.18, 3.2, 4.2 or 5.2 as a date on which the Company
requests the Lenders to make Loans hereunder.
"Borrowing Subsidiary Agreement": a Borrowing Subsidiary Agreement,
substantially in the form of Exhibit B hereto.
"Borrowing Subsidiary Termination": a Borrowing Subsidiary
Termination, substantially in the form of Exhibit C hereto.
"BRS": BancAmerica Robertson Stephens.
"BT Alex. Brown": BT Alex. Brown Incorporated.
"Business": as defined in subsection 7.18.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close.
<PAGE> 13
6
"Buyers": as defined in the recitals to this Agreement.
"Calculation Date": with respect to each Offshore Currency, the
fifteenth and last day of each calendar month (or, if such day is not a
Business Day, the next succeeding Business Day), provided that the second
Banking Day preceding each Borrowing Date with respect to any Offshore
Currency Loans in an Offshore Currency shall also be a "Calculation Date"
with respect to such Offshore Currency.
"Capital Expenditures": as to any Person for any period, the
aggregate amount paid or accrued by such Person and its Subsidiaries for
the rental, lease, purchase (including by way of the acquisition of
securities of a Person), construction or use of any property during such
period, the value or cost of which, in accordance with GAAP, would appear
on such Person's consolidated balance sheet in the category of property,
plant or equipment at the end of such period.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"Cash Collateral Account": as defined in subsection 6.3(a).
"Cash Equivalents": (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by
the United States Government or any agency thereof, (b) certificates of
deposit and eurodollar time deposits with maturities of one year or less
from the date of acquisition and overnight bank deposits of any Lender or
of any commercial bank having capital and surplus in excess of
$500,000,000, (c) repurchase obligations of any Lender or of any
commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than 30 days with respect to
securities issued or fully guaranteed or insured by the United States
Government, (d) commercial paper of a domestic issuer rated at least A-2
by Standard and Poor's Rating Group ("S&P") or at least P-2 by Moody's
Investors Service, Inc. ("Moody's"), (e) securities with maturities of one
year or less from the date of acquisition issued or fully guaranteed by
any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state, commonwealth
or territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or at
least A by Moody's, (f) securities with maturities of one year or less
from the date of acquisition backed by standby letters of credit issued by
any Lender or any commercial bank satisfying the requirements of clause
(b) of this definition or (g) shares of money market mutual or similar
funds which invest exclusively in assets satisfying the requirements of
clauses (a) through (f) of this definition.
"Cash Interest Expense": of the Company for any period, Consolidated
Interest Expense of the Company for such period minus, in each case to the
extent included in determining such Consolidated Interest Expense for such
period, the sum of the following: (a) non-cash expenses for interest
payable in kind and (b) amortization of debt discount and fees.
"Casualty Event": with respect to any property of any Person, the
receipt by such Person of insurance proceeds, or proceeds of a
condemnation award or other compensation in connection with any loss of or
damage to, or any condemnation or other taking of, such property.
"Closing Date": the date on which the conditions precedent set forth
in subsection 8.1 shall be satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all assets of the Loan Parties, now owned or
hereinafter acquired, upon which a Lien is purported to be created by any
Security Document.
"Commitments": the collective reference to the Revolving Credit
Commitments, the Term
<PAGE> 14
7
Loan Commitments, the Tender Loan Commitments and the Acquisition Loan
Commitments; individually, a "Commitment".
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Company within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Company and which is treated as a single employer under Section 414 of the
Code.
"Company": as defined in the preamble to this Agreement.
"Consolidated": means such term as it applies to the Company and its
Subsidiaries on a consolidated basis, after eliminating all intercompany
items.
"Continuing Directors": as defined in Section 11(m).
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Cost of Funds": with respect to any Offshore Currency, the rate of
interest determined by the Administrative Agent or the relevant Fronting
Lender in respect thereof (which determination shall be conclusive absent
manifest error) to be the cost to the Administrative Agent or such
Fronting Lender of obtaining funds denominated in such Offshore Currency
for the period or, if applicable, the relevant Interest Period or Periods
during which any relevant amount in such Offshore Currency is outstanding.
"Default": any of the events specified in Section 11, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Designated Lenders": as defined in subsection 8.1(a).
"Dollar Equivalent": at any time as to any amount denominated in an
Offshore Currency, the equivalent amount in Dollars as determined by the
Administrative Agent at such time on the basis of the Spot Rate for the
purchase of Dollars with such Offshore Currency on the most recent
Calculation Date for such Offshore Currency.
"Dollars" and "$": dollars in lawful currency of the United States
of America.
"Domestic Subsidiary": any Subsidiary of the Company organized under
the laws of any jurisdiction within the United States.
"EBITDA": with respect to any period, the sum of, without
duplication, (a) Consolidated Net Income of the Company for such period
plus, in each case to the extent deducted in determining such Consolidated
Net Income for such period, the sum of the following (without
duplication): (i) Consolidated Interest Expense of the Company, (ii)
consolidated income tax expense of the Company and its Consolidated
Subsidiaries, (iii) consolidated depreciation and amortization expense of
the Company and its Consolidated Subsidiaries, (iv) all other non-cash
charges and expenses of the Company and its Consolidated Subsidiaries and
(v) any Transaction Expenses and minus, to the extent included in
determining such Consolidated Net Income for such period, any non-cash
income or non-cash gains, all as determined on a consolidated basis in
accordance with GAAP, provided that with respect to any period during
which the Recapitalization is consummated, EBITDA for the portion of such
period prior to the end of the first full fiscal quarter after the fiscal
quarter in which the Closing Date occurs shall be calculated after giving
effect to on a pro forma basis (as if they occurred at the beginning of
such period) any projected cost savings planned by the Company and its
Subsidiaries in connection with the Recapitalization of up to $2,500,000
in the aggregate that are disclosed in writing to the Lenders prior to the
Closing Date plus (b) with respect to the RIK Acquisition or any Permitted
Acquisitions made by the Company or any of its Subsidiaries during such
period, the Acquired EBITDA of the Capital
<PAGE> 15
8
Stock or assets acquired pursuant to the RIK Acquisition or such Permitted
Acquisitions, as the case may be, while under the ownership of the Prior
Owner thereof for the portion of such period prior to the consummation of
the RIK Acquisition or such Permitted Acquisition, as the case may be,
provided that EBITDA with respect to any period during which the RIK
Acquisition or any Permitted Acquisition is consummated shall not include
any interest income in respect of any cash (other than proceeds of
Indebtedness incurred to finance any such Permitted Acquisition) used to
finance the RIK Acquisition or such Permitted Acquisition, as the case may
be.
"Eligible L/C Currency": each of the lawful currencies of Canada
(Canadian Dollar), the Republic of France (French Franc), the Federal
Republic of Germany (German Mark), the Republic of Italy (Italian Lira)
and the United Kingdom of Great Britain and Northern Ireland (British
Pounds Sterling).
"Eligible Offshore Currency": each of the lawful currencies of the
United Kingdom of Great Britain and Northern Ireland (British Pounds
Sterling), the Republic of France (French Franc), the Federal Republic of
Germany (German Mark) and any other currency approved by all the Revolving
Credit Lenders.
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of the
environment, or of human health or employee health and safety as they may
be affected by the environment or by Materials of Environmental Concern,
as has been, is now, or may at any time hereafter be, in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan or a Revolving Offshore Loan, the aggregate (without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on such day (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the
Board of Governors of the Federal Reserve System or other Governmental
Authority having jurisdiction with respect thereto) dealing with reserve
requirements prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum equal
to the rate for deposits in Dollars for the period commencing on the first
day of such Interest Period and ending on the last day of such Interest
Period which appears on Telerate Page 3750 as of 11:00 A.M., London time,
two Business Days prior to the beginning of such Interest Period. If at
least two rates appear on such Telerate Page for such Interest Period, the
"Eurodollar Base Rate" shall be the arithmetic mean of such rates. If the
"Eurodollar Base Rate" cannot be determined in accordance with the
immediately preceding sentences with respect to any Interest Period, the
"Eurodollar Base Rate" with respect to each day during such Interest
Period shall be the rate per annum equal to the rate at which Bank of
America is offered Dollar deposits at or about 10:00 A.M., San Francisco
time, two Banking Days prior to the beginning of such Interest Period in
the interbank eurodollar market where the eurodollar and foreign currency
and exchange operations in respect of its Eurodollar Loans are then being
conducted for delivery on the first day of such Interest Period for the
number of days comprised therein and in an amount comparable to the amount
of its Eurodollar Loan to be outstanding during such Interest Period.
"Eurodollar Loans": Loans the rate of interest applicable to which
is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following
<PAGE> 16
9
formula (rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 11,
provided that any requirement for the giving of notice, the lapse of time,
or both, or any other condition, has been satisfied.
"Excess Cash Flow": for any fiscal year of the Company:
(a) the sum of (i) EBITDA for such fiscal year, plus (ii) any
decreases in Working Capital during such fiscal year,
minus
(b) the sum of, without duplication, (i) to the extent deducted in
determining Consolidated Net Income of the Company for such fiscal
year, the aggregate amount of Cash Interest Expense for such fiscal
year plus (ii) scheduled principal amortization of Term Loans and
Acquisition Loans during such fiscal year (whether or not such
payments are made, but after giving effect to any reduction in such
scheduled principal amortization as a result of voluntary
prepayments), plus (iii) any voluntary prepayments of Term Loans and
Acquisition Loans made during such fiscal year, plus (iv) the
aggregate amount of all prepayments of Revolving Loans borrowed on
the Closing Date to finance a portion of the Recapitalization to the
extent such prepayments are made during such fiscal year, but on or
prior to December 31, 1998 and all other prepayments of Revolving
Loans to the extent the Revolving Credit Commitments were
concurrently reduced at the option of the Company by a like amount
during such fiscal year, plus (v) the sum of, without duplication,
(A) the aggregate amount paid, or required to be paid, in cash in
respect of income taxes during such fiscal year and (B) the
aggregate amount of taxes that would be payable if the portion of
Consolidated Net Income of the Company for such fiscal year which
was earned by Foreign Subsidiaries was paid as a dividend to the
Company or any of its Domestic Subsidiaries during such fiscal year
plus (vi) the aggregate amount of all Capital Expenditures made
during such fiscal year plus (vii) any increases in Working Capital
during such fiscal year, plus (viii) the Acquired EBITDA of all
Capital Stock or assets acquired pursuant to the RIK Acquisition or
any Permitted Acquisitions made during such fiscal year while under
the ownership of the Prior Owner thereof for the portion of such
fiscal year prior to the consummation of each such Permitted
Acquisition plus (ix) the excess of (A) the aggregate amount of cash
used to consummate Permitted Acquisitions during such fiscal year
over (B) the increase in Working Capital during such fiscal year
which is attributable to such Permitted Acquisitions.
"Federal Funds Effective Rate": for any day, the weighted average of
the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by
the Administrative Agent from three federal funds brokers of recognized
standing selected by it.
"Fee Payment Date": the fifteenth Banking Day of each April, July,
October and January.
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"Foreign Currency Protection Agreements": as to any Person, all
foreign exchange contracts, currency swap agreements or other similar
agreements or arrangements designed to protect such Person against
fluctuations in currency values.
<PAGE> 17
10
"Foreign Subsidiary": any Subsidiary of the Company organized under
the laws of any jurisdiction outside the United States of America.
"Fremont": as defined in the recitals to this Agreement.
"Fronted Loan Note": as defined in subsection 6.1(e).
"Fronted Loan Participants": with respect to each Fronted Offshore
Loan, the collective reference to all Revolving Credit Lenders.
"Fronted Offshore Currency": with respect to each Fronting Lender,
the Offshore Currency or Currencies specified in the applicable Fronting
Lender Addendum executed by such Fronting Lender.
"Fronted Offshore Currency Subfacility": the lending facility
described in subsection 2.13.
"Fronted Offshore Currency Sublimit": with respect to each Fronting
Lender and any Fronted Offshore Currency, the amount specified by such
Fronting Lender for such Fronted Offshore Currency in the applicable
Fronting Lender Addendum executed by such Fronting Lender.
"Fronted Offshore Loans": as defined in subsection 2.13.
"Fronting Lender": with respect to a particular Fronted Offshore
Currency, each Lender (or an Affiliate thereof) which executes and
delivers a Fronting Lender Addendum with respect to such Fronted Offshore
Currency, provided that, unless the Administrative Agent otherwise agrees,
there shall be no more than one Fronting Lender for any Fronted Offshore
Currency.
"Fronting Lender Addendum": a Fronting Lender Addendum,
substantially in the form of Exhibit D hereto (with such changes as may be
agreed by the Administrative Agent, the relevant Fronting Lender and the
relevant Subsidiary Borrower).
"Fronting Lender's Payment Office": in the case of payments in a
Fronted Offshore Currency, such address as the relevant Fronting Lender
may from time to time specify for such purpose pursuant to the applicable
Fronting Lender Addendum executed by such Fronting Lender.
"FX Trading Office": the Bank of America Foreign Exchange Trading
Desk in Chicago, Illinois, or such other of Bank of America's offices as
the Administrative Agent may designate as such from time to time.
"GAAP": generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee": (a) the Guarantee and Collateral Agreement or (b) any
other guarantee delivered to the Administrative Agent (including the
guarantee of the Company set forth in Section 13 of this Agreement)
guaranteeing the Obligations.
"Guarantee and Collateral Agreement": the Guarantee and Collateral
Agreement to be executed and delivered by the Company and each of the
Domestic Subsidiaries, substantially in the form of Exhibit E, as the same
may be amended, restated, supplemented or otherwise modified from time to
time.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of
<PAGE> 18
11
(a) the guaranteeing person or (b) another Person (including, without
limitation, any bank under any letter of credit) to induce the creation of
which the guaranteeing person has issued a reimbursement, counterindemnity
or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other third Person (the "primary obligor")
in any manner, whether directly or indirectly, including, without
limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) 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 (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements
of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the
stated or determinable amount of the primary obligation in respect of
which such Guarantee Obligation is made and (b) the maximum amount for
which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may
be liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum
reasonably anticipated liability in respect thereof as determined by the
guaranteeing person in good faith.
"Guarantor": any Person (other than the Company) which is now or
hereafter becomes a party to the Guarantee and Collateral Agreement.
"Indebtedness": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced
by a note, bond, debenture or similar instrument, (c) all obligations of
such Person under Financing Leases, (d) all obligations of such Person in
respect of acceptances issued or created for the account of such Person,
(e) all obligations of such Person in respect of Foreign Currency
Protection Agreements, Interest Rate Protection Agreements and any other
commodity or other hedging arrangement and (f) all liabilities secured by
any Lien on any property owned by such Person even though such Person has
not assumed or otherwise become liable for the payment thereof (the amount
of any Indebtedness pursuant to this clause (f) shall be equal to the
lesser of (i) the amount of such liabilities and (ii) the fair market
value of such property). For purposes of this Agreement, the amount of any
Indebtedness referred to in clause (e) of the preceding sentence shall be
the net amounts (including by offset of amounts payable thereunder),
including any net termination payments, required to be paid to a
counterparty rather than any notional amount with regard to which payments
may be calculated.
"Initial Mortgaged Real Property": the parcels of real property
described in Schedule 7.9 (other than the Welcome Lodge).
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in subsection 7.10.
"Interest Expense": of the Company for any period, the sum of (a)
the amount of interest expense, both expensed and capitalized, of the
Company and its Consolidated Subsidiaries determined on a consolidated
basis in accordance with GAAP for such period, plus, without duplication,
that portion of payments under Financing Leases of the Company and its
Consolidated
<PAGE> 19
12
Subsidiaries attributable to interest expense of the Company and its
Consolidated Subsidiaries for such period in accordance with GAAP and (b)
the Acquired Interest Expense of the Company and its Subsidiaries for such
period.
"Interest Payment Date": (a) as to any Base Rate Loan or Swing Line
Loan, the fifteenth Banking Day of each March, June, September and
December, (b) as to any Eurodollar Loan or Revolving Offshore Loan having
an Interest Period of three months or less, the last day of such Interest
Period, (c) as to any Eurodollar Loan or Revolving Offshore Loan having an
Interest Period longer than three months, each day which is three months,
or a whole multiple thereof, after the first day of such Interest Period
and the last day of such Interest Period, and (d) as to any Fronted
Offshore Loan, the date or dates specified in the applicable Fronting
Lender Addendum.
"Interest Period": (a) with respect to any Eurodollar Loan or
Revolving Offshore Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan or Revolving Offshore Loan and ending one, two, three or six
months thereafter, as selected by the Company in its notice of
borrowing or notice of conversion, as the case may be, given with
respect thereto; and
(ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan or
Revolving Offshore Loan and ending one, two, three or six months
thereafter, as selected by the Company by irrevocable notice to the
Administrative Agent not less than three Banking Days prior to the
last day of the then current Interest Period with respect thereto;
provided that, the foregoing provisions relating to Interest Periods are
subject to the following:
(1) if any Interest Period pertaining to a Eurodollar Loan
would otherwise end on a day that is not a Banking Day, such
Interest Period shall be extended to the next succeeding Banking 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 Banking Day;
(2) any Interest Period pertaining to a Eurodollar Loan that
begins on the last Banking 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
Banking Day of a calendar month;
(3) so long as any Tender Loan is outstanding, the Company
will be permitted to select Interest Periods of one week with
respect to Tender Loans and any Acquisition Loans and Revolving
Loans made on the Closing Date; and
(4) the Company shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
(b) with respect to any Fronted Offshore Loan, the interest periods
(if any) specified in the applicable Fronting Lender Addendum.
"Interest Rate Protection Agreement": any interest rate protection
agreement, interest rate future, interest rate option, interest rate cap
or collar or other interest rate hedge arrangement, to or under which the
Company or any of its Subsidiaries is a party or a beneficiary.
"Investments": as defined in subsection 10.9.
"Issuing Bank": Bank of America, any of its affiliates or any other
Lender which shall be appointed in accordance with the provisions hereof
to act as Issuing Bank.
"Judgment Currency": as defined in subsection 14.16.
<PAGE> 20
13
"L/C Obligations": at any time, the sum of (a) the aggregate amount
then available to be drawn under all outstanding Letters of Credit (or the
Dollar Equivalent thereof, in the case of Letters of Credit issued in
Offshore Currencies) and (b) the aggregate amount of Reimbursement
Obligations in respect of Letters of Credit (or the Dollar Equivalent
thereof, in the case of Letters of Credit issued in Offshore Currencies)
which have not then been reimbursed by the Company pursuant to subsection
2.9.
"L/C Participants": the collective reference to all the Revolving
Credit Lenders other than the Issuing Bank.
"L/C Sublimit": at any time, the lesser of (a) $10,000,000 and (b)
the Revolving Credit Commitments then in effect.
"Lenders": as defined in the preamble to this Agreement and
including, without limitation, the Issuing Bank, provided that, for
purposes of subsections 6.10, 6.11, 6.12 and 6.13, all Fronting Lenders
shall be deemed to be "Lenders".
"Letter of Credit Application": an application in such form as the
Issuing Bank may specify from time to time, requesting the Issuing Bank to
open a Letter of Credit.
"Letters of Credit": as defined in subsection 2.5(a).
"Leverage Ratio": at any time, the ratio of (a) Total Funded Debt at
such time to (b) EBITDA for the most recent period of four consecutive
fiscal quarters.
"Leverage Ratio Level": as to the Company, the existence of Leverage
Ratio Level I, Leverage Ratio Level II, Leverage Ratio Level III, Leverage
Ratio Level IV, Leverage Ratio Level V or Leverage Ratio Level VI, as the
case may be.
"Leverage Ratio Level I": as to the Company, shall exist on an
Adjustment Date if the Leverage Ratio for the period of four consecutive
fiscal quarters ending on the last day of the period covered by the
financial statements relating to such Adjustment Date is greater than or
equal to 5.50 to 1.00.
"Leverage Ratio Level II": as to the Company, shall exist on an
Adjustment Date if the Leverage Ratio for the period of four consecutive
fiscal quarters ending on the last day of the period covered by the
financial statements relating to such Adjustment Date is less than 5.50 to
1.00 but greater than or equal to 5.00 to 1.00.
"Leverage Ratio Level III": as to the Company, shall exist on an
Adjustment Date if the Leverage Ratio for the period of four consecutive
fiscal quarters ending on the last day of the period covered by the
financial statements relating to such Adjustment Date is less than 5.00 to
1.00 but greater than or equal to 4.50 to 1.00.
"Leverage Ratio Level IV": as to the Company, shall exist on an
Adjustment Date if the Leverage Ratio for the period of four consecutive
fiscal quarters ending on the last day of the period covered by the
financial statements relating to such Adjustment Date is less than 4.50 to
1.00 but greater than or equal to 4.00 to 1.00.
"Leverage Ratio Level V": as to the Company, shall exist on an
Adjustment Date if the Leverage Ratio for the period of four consecutive
fiscal quarters ending on the last day of the period covered by the
financial statements relating to such Adjustment Date is less than 4.00 to
1.00 but greater than or equal to 3.50 to 1.00.
"Leverage Ratio Level VI": as to the Company, shall exist on an
Adjustment Date if the Leverage Ratio for the period of four consecutive
fiscal quarters ending on the last day of the period covered by the
financial statements relating to such Adjustment Date is less than 3.50 to
<PAGE> 21
1.00 14
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention
agreement and any Financing Lease having substantially the same economic
effect as any of the foregoing).
"Loan": any loan made by any Lender, Swing Line Lender or Fronting
Lender pursuant to this Agreement.
"Loan Documents": this Agreement, any Notes, any Borrowing
Subsidiary Agreements, any Letter of Credit Applications, any Fronting
Lender Addenda, any Letters of Credit, any Swing Line Loan Participation
Certificates and the Security Documents.
"Loan Parties": the Company and each Subsidiary of the Company which
is a party to a Loan Document; individually, a "Loan Party".
"Material Adverse Effect": a material adverse effect on (a) the
Recapitalization, (b) the business, assets, property, condition (financial
or otherwise) or prospects of the Company and its Subsidiaries taken as a
whole whether prior to or following the consummation of the
Recapitalization or (c) the validity or enforceability of this or any of
the other Loan Documents or the rights or remedies of the Administrative
Agent or the Lenders hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes (including, without
limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde
insulation), that is regulated pursuant to or could give rise to liability
under any applicable Environmental Law, whether or not such substance,
material, or waste is defined as hazardous or toxic under any applicable
Environmental Law.
"Merger": as defined in the recitals to this Agreement.
"Merger Date": as defined in the recitals to this Agreement.
"Moody's": as defined in the definition of "Cash Equivalents."
"Mortgages": the collective reference to the fee and ground
leasehold mortgages, deeds of trust and other similar documents executed
and delivered from time to time by the Company and the Guarantors in favor
of the Administrative Agent, substantially in the form of Exhibit F or, if
such Exhibit is not appropriate under applicable law in the jurisdiction
in which the relevant real property is located, in such other form as
shall be reasonably satisfactory to the Company and the Administrative
Agent, as each of the same may be amended, restated, supplemented or
otherwise modified from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) with respect to any sale or other
disposition of assets by the Company or any of its Subsidiaries, the net
amount equal to the aggregate amount received in cash (including Cash
Equivalents and any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or purchase price
adjustment receivable or the subsequent sale or disposition of any
non-cash consideration or Investments received in connection therewith or
otherwise, but only as and when received) minus the sum of (i) the fees,
commissions and other out-of-pocket expenses incurred by the Company or
such Subsidiary in connection with such sale or other disposition, (ii)
federal, state and local taxes incurred in connection with such sale or
other disposition, whether payable at such time or thereafter, (iii)
purchase price adjustments reasonably expected to be payable by such Loan
Party in connection
<PAGE> 22
15
therewith (it being understood that if such amount is not subsequently
paid, such amount shall constitute "Net Cash Proceeds" at the time such
payment is no longer required) and (iv) in the case of any such sale or
other disposition of assets subject to a Lien securing any Indebtedness
(which Lien and Indebtedness are permitted by this Agreement), any amounts
required to be repaid by the Company or such Subsidiary in respect of such
Indebtedness (other than Indebtedness under this Agreement) in connection
with such sale or other disposition;
(b) with respect to any issuance of any Indebtedness or Capital
Stock by any Loan Party or any of its Subsidiaries or any capital
contribution made to any Loan Party or any of its Subsidiaries, the net
amount equal to the aggregate amount received in cash (including Cash
Equivalents and any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or purchase price
adjustment receivable or the subsequent sale or disposition of any
non-cash consideration or Investments received in connection therewith or
otherwise, but only as and when received) in connection with such issuance
or capital contribution minus the documented fees, commissions and other
out-of-pocket expenses incurred by such Loan Party and its Subsidiaries in
connection with such issuance or capital contribution; and
(c) with respect to proceeds received by any Loan Party or any of
its Subsidiaries in respect of a Casualty Event, the amount of such
proceeds minus (i) the documented out-of-pocket fees and expenses incurred
by such Loan Party and its Subsidiaries in connection with the collection
of such proceeds, (ii) any such proceeds received in respect of insurance
which are required to be paid to any co-insured Persons or other loss
payees with respect to such insurance, and (iii) in the case of any
Casualty Event relating to any asset subject to a Lien securing any
Indebtedness (which Lien and Indebtedness are permitted by this
Agreement), any amounts required to be repaid by the Company or such
Subsidiary in respect of such Indebtedness (other than Indebtedness under
this Agreement) in connection with such Casualty Event.
"Net Income": of the Company for any period, the net income of the
Company and its Consolidated Subsidiaries, determined on a consolidated
basis in accordance with GAAP for such period.
"New Investor Group": as defined in the recitals to this Agreement.
"New Investor Shares": as defined in the recitals to this Agreement.
"Non-Excluded Taxes": as defined in subsection 6.12(a).
"Non-Executing Persons": as defined in subsection 8.1(a)
"Notes": the collective reference to the Revolving Credit Notes, the
Swing Line Note, the Term Notes, the Tender Notes, the Fronted Loan Notes
and the Acquisition Notes.
"Obligations": the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Company or any
Subsidiary Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the Loans and all
other obligations and liabilities of the Company and the Subsidiary
Borrowers to the Agents, or the Issuing Bank or to any Lender or Fronting
Lender (or to any Affiliate of a Lender which enters into any Foreign
Currency Protection Agreement or Interest Rate Protection Agreement with
the Company or any Subsidiary Borrower), whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, this
Agreement, any other Loan Document, any Letters of Credit, any Foreign
Currency Protection Agreement or Interest Rate Protection Agreement
entered into with any Lender or any Affiliate of any Lender or any other
document made, delivered or given in connection herewith or therewith,
whether on account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses (including, without limitation, all
fees, charges and disbursements of counsel to any Agent or to any Lender
that are required to be paid by the Company or any Subsidiary Borrower
<PAGE> 23
16
pursuant hereto) or otherwise.
"Offshore Base Rate": with respect to each day during each Interest
Period pertaining to a Revolving Offshore Loan, the rate of interest per
annum (rounded upwards to the nearest 1/32 of 1%) determined by the
Administrative Agent as the rate at which deposits in the applicable
Eligible Offshore Currency in the approximate amount of Bank of America's
Revolving Offshore Loan for such Interest Period would be offered by Bank
of America (or such other office as may be designated for such purpose by
Bank of America) to major banks in the interbank market where Bank of
America conducts its foreign currency operations in respect of such
Eligible Offshore Currency at their request at approximately 11:00 a.m.
(local time) two Banking Days prior to the commencement of such Interest
Period (or such other time as shall be customary for funding in such
currency in such market).
"Offshore Currency": a currency other than Dollars that is freely
tradeable or exchangeable into Dollars.
"Offshore Currency Equivalent": at any time as to any amount
denominated in Dollars, the equivalent amount in the relevant Offshore
Currency or Currencies as determined by the Administrative Agent at such
time on the basis of the Spot Rate for the purchase of such Offshore
Currency or Currencies with Dollars on the date of determination thereof.
"Offshore Currency Loans": Loans denominated in an Offshore
Currency.
"Offshore Currency Sublimit": at any time, the lesser of (a)
$20,000,000 and (b) the Revolving Credit Commitments then in effect.
"Offshore Rate": with respect to each day during each Interest
Period pertaining to a Revolving Offshore Loan, a rate per annum
determined for such day in accordance with the following formula (rounded
upward to the nearest 1/100th of 1%):
Offshore Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Outstanding Swing Line Loans": as defined in subsection 2.19.
"Participant": as defined in subsection 14.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Acquisition": any Acquisition, provided that (a) the
Company satisfies, and will continue to satisfy, after giving effect (on a
pro forma basis) to such Acquisition and any Indebtedness incurred in
connection therewith, the financial covenants set forth in subsection 10.1
through the Tranche C Maturity Date as set forth in a certificate of the
Chief Financial Officer of the Company delivered to the Administrative
Agent at least five Business Days prior to the consummation of such
Acquisition, (b) such Acquisition is approved by the Board of Directors
(or a majority of holders of the Capital Stock of such Person) of the
Person whose assets or Capital Stock are being acquired pursuant to such
Acquisition, (c) no Default or Event of Default has then occurred and is
continuing or would result therefrom, (d) the purchase price (including
assumed indebtedness and the fair market value of any non-cash
consideration in connection with such Acquisition) of such Acquisition
does not exceed $25,000,000 individually and the purchase price of all
such Acquisitions since the Closing Date does not exceed $70,000,000 in
the aggregate (provided that, if the Company or any of its Subsidiaries
receives Net Cash Proceeds of capital contributions by, or from the
issuance of any Capital Stock to, the Buyers after the Merger Date which
are not used to repay Senior Subordinated Bridge Loans, such aggregate
limitation shall be increased by the aggregate amount of such Net Cash
Proceeds, but such increase shall not be in excess of $25,000,000 in the
aggregate), (e) the Available Cash in effect at the time of such
Acquisition (and after giving effect thereto) is at least $10,000,000 and
(f) the Company and its
<PAGE> 24
17
Subsidiaries shall be in compliance with the requirements of subsection
9.10 after giving effect to such Acquisition.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Company or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Prior Owner": with respect to any Permitted Acquisition by the
Company or any of its Subsidiaries, the Person or Persons which was or
were the owner(s) of the Capital Stock or assets acquired by the Company
or such Subsidiary pursuant to such Permitted Acquisition.
"Projections": as defined in subsection 7.20.
"Properties": as defined in subsection 7.18(a).
"RCBA": as defined in the recitals to this Agreement.
"Recapitalization": as defined in the recitals to this Agreement.
"Recapitalization Documentation": as defined in subsection 8.1(c).
"Register": as defined in subsection 14.6(d).
"Regulation G": Regulation G of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Regulation S-X": Regulation S-X under the Securities Act as in
effect from time to time.
"Regulation T": Regulation T of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Regulation U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Regulation X": Regulation X of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Reimbursement Obligations": the obligation of the Company to
reimburse the Issuing Bank pursuant to subsection 2.9 for amounts drawn
under Letters of Credit.
"Related Fund": with respect to any Lender that is a fund, any other
fund that invests in loans and is managed by the same investment adviser
that manages such Lender or by an affiliate of such investment adviser.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c)
of ERISA, other than those events as to which the thirty day notice period
is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
Section 2615.
"Required Acquisition Loan Lenders": at any time, Acquisition Loan
Lenders the Acquisition Loan Commitment Percentages of which aggregate at
least 51%.
<PAGE> 25
18
"Required Lenders": at any time, Lenders the Voting Percentages of
which aggregate at least 51%.
"Required Revolving Credit Lenders": at any time, Revolving Credit
Lenders the Revolving Credit Commitment Percentages of which aggregate at
least 51%.
"Required Tender Loan Lenders": at any time, Tender Loan Lenders the
Tender Loan Commitment Percentages of which aggregate at least 51%.
"Required Tranche A Lenders": at any time, Tranche A Lenders the
Tranche A Commitment Percentages of which aggregate at least 51%.
"Required Tranche B Lenders": at any time, Tranche B Lenders the
Tranche B Commitment Percentages of which aggregate at least 51%.
"Required Tranche C Lenders": at any time, Tranche C Lenders the
Tranche C Commitment Percentages of which aggregate at least 51%.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws 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.
"Reset Date": as defined in subsection 6.14(a).
"Responsible Officer": (a) with respect to the Company, 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 of accounting or the vice president of finance
of the Company and (b) with respect to any Subsidiary Borrower, the chief
executive officer, the president or manager or comparable officer of such
Subsidiary Borrower or, with respect to financial matters, the chief
financial officer of such Subsidiary Borrower.
"Revolving Credit Commitment": as to any Lender, the obligation of
such Lender to (a) make Revolving Loans, (b) issue or participate in
Letters of Credit, (c) participate in Fronted Offshore Loans and (d)
participate in Swing Line Loans, in an aggregate principal and/or face
amount at any one time outstanding not to exceed the amount set forth
under such Lender's name in Schedule 1.1(a) opposite the heading
"Revolving Credit Commitment" (in each case as such amount may be adjusted
from time to time as provided herein); collectively, as to all such
Lenders, the "Revolving Credit Commitments".
"Revolving Credit Commitment Percentage": as to any Revolving Credit
Lender:
(a) at any time prior to the termination of the Revolving
Credit Commitments, the percentage which (i) such Revolving Credit
Lender's Revolving Credit Commitment then constitutes of (ii) the
Revolving Credit Commitments of all the Lenders, and
(b) at any time after the termination of the Revolving Credit
Commitments, the percentage which (i) the aggregate principal amount
(or the Dollar Equivalent thereof, in the case of Offshore Currency
Loans) of such Revolving Credit Lender's Revolving Loans then
outstanding plus (y) the product of (A) such Revolving Credit
Lender's Revolving Credit Commitment Percentage immediately prior to
the termination of the Revolving Credit Commitments (giving effect
to any permitted assignments after such termination) times (B) the
sum of (1) the L/C Obligations, (2) the aggregate principal amount
of Swing Line Loans then outstanding and (3) the Dollar Equivalent
of the aggregate principal amount of Fronted Offshore Loans then
outstanding then constitutes of (ii) the sum of (w) the aggregate
principal amount (or the Dollar Equivalent thereof, in the case of
Offshore
<PAGE> 26
19
Currency Loans) of Revolving Loans of all the Revolving Credit Lenders
then outstanding plus (x) the aggregate L/C Obligations of all the
Revolving Credit Lenders then outstanding plus (y) the aggregate principal
amount of Swing Line Loans then outstanding plus (z) the Dollar Equivalent
of the aggregate principal amount of Fronted Offshore Loans then
outstanding.
"Revolving Credit Commitment Period": the period from and including
the Closing Date to but not including the Revolving Credit Termination
Date.
"Revolving Credit Lender": any Lender having a Revolving Credit
Commitment or that holds outstanding Revolving Loans hereunder.
"Revolving Credit Note": as defined in subsection 6.1(e).
"Revolving Credit Termination Date": the earlier of (a) December 31,
2003 and (b) the date upon which the Revolving Credit Commitments shall be
terminated pursuant to this Agreement.
"Revolving Loans": as defined in subsection 2.1(a).
"Revolving Offshore Loan": Revolving Loans denominated in an
Eligible Offshore Currency the rate of interest applicable to which is
based upon the Offshore Rate with respect to such Eligible Offshore
Currency.
"RIK Acquisition": the acquisition by KCI-RIK Acquisition Corp., a
Delaware corporation ("KCI-RIK"), a Subsidiary of the Company, of the
assets of RIK Medical, L.L.C., a Delaware limited liability company
("RIK") and RIK Medical East, L.L.C., a Colorado limited liability company
("RIK East") pursuant to that certain Asset Purchase Agreement, dated as
of October 1, 1997, by and among RIK, RIK East, Eric C. Jay and KCI-RIK.
"Rollover Shareholders": as defined in the recitals to this
Agreement.
"Rollover Shares": as defined in the recitals to this Agreement.
"Securities Act": the Securities Act of 1933, as amended from time
to time.
"Security Documents": the collective reference to the Mortgages, the
Guarantee and Collateral Agreement and all other security documents
hereafter delivered to the Administrative Agent granting a Lien on any
asset or assets of any Person to secure the obligations and liabilities of
the Company and its Subsidiaries hereunder and under any of the other Loan
Documents or to secure any guarantee of any such obligations and
liabilities, including, without limitation, any security document
delivered pursuant to subsection 9.10.
"Senior Subordinated Bridge Loans": the bridge loans made pursuant
to the Senior Subordinated Credit Agreement.
"Senior Subordinated Credit Agreement": as defined in the recitals
to this Agreement.
"Senior Subordinated Debt Escrow Amount": as defined in subsection
6.3(f).
"Senior Subordinated Lenders": as defined in the recitals to this
Agreement.
"Senior Subordinated Note Indenture": as defined in subsection
8.1(d).
"Senior Subordinated Notes": as defined in the recitals to this
Agreement.
"Shares": as defined in the recitals to this Agreement.
<PAGE> 27
20
"Shareholder Support Agreement": as defined in subsection 8.1(f).
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Solvent": with respect to any Person on a particular date, the
condition that on such date, (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair
salable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond
such Person's ability to pay as such debts and liabilities mature, and (d)
such Person is not engaged in business or a transaction, and is not about
to engage in business or a transaction, for which such Person's property
would constitute an unreasonably small amount of capital.
"Sponsors": as defined in the recitals to this Agreement.
"Spot Rate": (a) as to any Eligible Offshore Currency, the rate
quoted by Bank of America as the spot rate for the purchase by Bank of
America of Dollars with such Eligible Offshore Currency or the purchase by
Bank of America of such Eligible Offshore Currency with Dollars, as the
case may be, through its FX Trading Office at approximately 8:00 a.m., San
Francisco time, on such date as of which the foreign exchange computation
is made for delivery two Banking Days later and (b) as to any Fronted
Offshore Currency, the rate quoted by the relevant Fronting Lender as the
spot rate for the purchase by such Fronting Lender of Dollars with such
Fronted Offshore Currency or the purchase by such Fronting Lender of such
Fronted Offshore Currency with Dollars, as the case may be, at the time
specified in such Fronting Lender's Fronting Lender Addendum and on such
date as of which the foreign exchange computation is made for delivery two
Banking Days later.
"Subordinated Debt": (a) any unsecured Indebtedness of the Company
with terms and conditions at least as favorable to the Lenders as those
applicable to the Senior Subordinated Notes and (b) any other unsecured
Indebtedness of the Company: no part of the principal of which is required
to be paid (whether by way of mandatory sinking fund, mandatory
redemption, mandatory prepayment or otherwise) prior to the earlier of (i)
the tenth anniversary of the Closing Date and (ii) one year after the date
of the final scheduled installment of Loans under this Agreement; the
payment of the principal of and interest on which and other obligations of
the Company in respect thereof are subordinated to the prior payment in
full of the Obligations on terms and conditions at least as favorable to
the Lenders as those applicable to the Senior Subordinated Notes; and all
other terms and conditions of which are reasonably satisfactory in form
and substance to the Required Lenders (as evidenced by their prior written
approval thereof).
"Subordinated Debt Documentation": the agreements, indentures and
other documentation pursuant to which any Subordinated Debt is issued.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
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, partnership or other entity 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. 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 Borrower": at any time, any Foreign Subsidiary of the
Company designated as a Subsidiary Borrower by the Company pursuant to
subsection 6.15 that has not ceased to be a Subsidiary Borrower pursuant
to such subsection or Section 11.
"Subsidiary Borrower Obligations": the unpaid principal of and
interest on the Fronted
<PAGE> 28
21
Offshore Loans and all other obligations and liabilities of the Subsidiary
Borrowers to the Agents, the Lenders and the Fronting Lenders (including,
without limitation, interest accruing at the then applicable rate provided
in this Agreement after the maturity of the Fronted Offshore Loans and
interest accruing at the then applicable rate provided in this Agreement
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the relevant
Subsidiary Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with,
this Agreement, the other Loan Documents, or any other document made,
delivered or given in connection herewith or therewith, in each case
whether on account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to any Agent or any
Lender that are required to be paid by the Subsidiary Borrowers pursuant
to the terms of this Agreement of any other Loan Document).
"Subsidiary Guarantor": any Domestic Subsidiary.
"Swing Line Commitment": at any time, the obligation of the Swing
Line Lender to make Swing Line Loans pursuant to subsection 2.17.
"Swing Line Lender": Bank of America, in its capacity as provider of
the Swing Line Loans.
"Swing Line Loans": as defined in subsection 2.17.
"Swing Line Loan Participation Certificate": a certificate,
substantially the form of Exhibit K.
"Swing Line Note": as defined in subsection 6.1(e).
"Syndication Agent": Bankers Trust Company, together with its
affiliates, as the syndication agent for the Lenders under this Agreement.
"S&P": as defined in the definition of "Cash Equivalents."
"Tender Loan": as defined in subsection 5.1.
"Tender Loan Commitment": as to any Lender, the obligation of such
Lender to make a Tender Loan to the Company pursuant to subsection 5.1 in
an amount equal to the amount set forth under such Lender's name in
Schedule 1.1(a) opposite the heading "Tender Loan Commitment";
collectively, as to all such Lenders, the "Tender Loan Commitments".
"Tender Loan Commitment Percentage": as to any Tender Loan Lender,
the percentage which such Tender Loan Lender's Tender Loan Commitment then
constitutes of the Tender Loan Commitments of all the Tender Loan Lenders
(or, after the Tender Loans are made, the percentage which the outstanding
principal amount of such Tender Loan Lender's Tender Loan then constitutes
of the aggregate principal amount of Tender Loans of all the Tender Loan
Lenders then outstanding).
"Tender Loan Lender": any Lender having a Tender Loan Commitment
hereunder or that holds outstanding Tender Loans.
"Tender Loan Maturity Date": the earlier of (a) the date that is 21
days after the Closing Date and (b) the date on which the Company receives
Net Cash Proceeds from the sale of Senior Subordinated Notes or from the
making of the Senior Subordinated Bridge Loans.
"Tender Note": as defined in subsection 6.1(e).
<PAGE> 29
22
"Tender Offer": as defined in the recitals to this Agreement.
"Term Loan Commitments": the collective reference to the Tranche A
Commitments, the Tranche B Commitments and the Tranche C Commitments.
"Term Loan Lenders": the collective reference to the Tranche A
Lenders, the Tranche B Lenders and the Tranche C Lenders.
"Term Loans": collectively, the Tranche A Term Loans, the Tranche B
Term Loans and the Tranche C Terms Loans; individually, a "Term Loan".
"Term Notes": as defined in subsection 6.1(e).
"Title Insurance Company": as defined in subsection 8.1(w).
"Total Funded Debt": on any date, with respect to the Company and
its Subsidiaries on a Consolidated basis, all Indebtedness of the Company
and its Subsidiaries which by its terms or by the terms of any instrument
or agreement relating thereto matures more than one year after the date of
incurrence thereof, and any such Indebtedness maturing within one year
from the date of incurrence which is directly or indirectly renewable or
extendible at the option of such Person to a date more than one year from
such date of incurrence (including an option of such Person under a
revolving credit or similar agreement obligating the lender or lenders to
extend credit over a period of more than one year from such date of
incurrence) and all Guarantee Obligations of the Company and its
Subsidiaries on such date in respect of any such Indebtedness of Persons
other than the Company and its Subsidiaries.
"Tranche": the collective reference to Eurodollar Loans or Revolving
Offshore Loans of the same currency the then current Interest Periods with
respect to all of which begin on the same date and end on the same later
date (whether or not such Loans shall originally have been made on the
same day); Tranches may be identified as "Eurodollar Tranches" or
"Offshore Tranches", as the case may be.
"Tranche A Commitment": as to any Lender, the obligation of such
Lender to make a Tranche A Term Loan to the Company pursuant to subsection
3.1 in an amount equal to the amount set forth under such Lender's name in
Schedule 1.1(a) opposite the heading "Tranche A Commitment"; collectively,
as to all such Lenders, the "Tranche A Commitments".
"Tranche A Commitment Percentage": as to any Tranche A Lender, the
percentage which such Tranche A Lender's Tranche A Commitment then
constitutes of the Tranche A Commitments of all the Tranche A Lenders (or,
after the Tranche A Term Loans are made, the percentage which the
outstanding principal amount of such Tranche A Lender's Tranche A Term
Loan then constitutes of the aggregate principal amount of Tranche A Term
Loans of all the Tranche A Lenders then outstanding).
"Tranche A Lender": any Lender having a Tranche A Commitment
hereunder or that holds outstanding Tranche A Term Loans.
"Tranche A Term Loan": as defined in subsection 3.1.
"Tranche A Term Note": as defined in subsection 6.1(e).
"Tranche B/C Escrow Account": as defined in subsection 6.3(i).
"Tranche B/C Prepayment Date": as defined in subsection 6.3(i).
"Tranche B/C Prepayment Option Notice": as defined in subsection
6.3(i).
"Tranche B Commitment": as to any Lender, the obligation of such
Lender to make a
<PAGE> 30
23
Tranche B Term Loan to the Company pursuant to subsection 3.1 in an amount
equal to the amount set forth under such Lender's name in Schedule 1.1(a)
opposite the heading "Tranche B Commitment"; collectively, as to all such
Lenders, the "Tranche B Commitments".
"Tranche B Commitment Percentage": as to any Tranche B Lender, the
percentage which such Tranche B Lender's Tranche B Commitment then
constitutes of the Tranche B Commitments of all the Tranche B Lenders (or,
after the Tranche B Term Loans are made, the percentage which the
outstanding principal amount of such Tranche B Lender's Tranche B Term
Loan then constitutes of the aggregate principal amount of Tranche B Term
Loans of all the Tranche B Lenders then outstanding).
"Tranche B Lender": any Lender having a Tranche B Commitment
hereunder or that holds outstanding Tranche B Term Loans.
"Tranche B Prepayment Amount": as defined in subsection 6.3(i).
"Tranche B Term Loan": as defined in subsection 3.1.
"Tranche B Term Note": as defined in subsection 6.1(e).
"Tranche C Commitment": as to any Lender, the obligation of such
Lender to make a Tranche C Term Loan to the Company pursuant to subsection
3.1 in an aggregate amount equal to the amount set forth under such
Lender's name in Schedule 1.1(a) opposite the heading "Tranche C
Commitment"; collectively, as to all such Lenders, the "Tranche C
Commitments".
"Tranche C Commitment Percentage": as to any Tranche C Lender, the
percentage which such Tranche C Lender's Tranche C Commitment then
constitutes of the Tranche C Commitments of all the Tranche C Lenders (or,
after the Tranche C Term Loans are made, the percentage which the
outstanding principal amount of such Tranche C Lender's Tranche C Term
Loan then constitutes of the aggregate principal amount of Tranche C Term
Loans of all the Tranche C Lenders then outstanding).
"Tranche C Lender": any Lender having a Tranche C Commitment
hereunder or that holds outstanding Tranche C Term Loans.
"Tranche C Prepayment Amount": as defined in subsection 6.3(i).
"Tranche C Term Loan": as defined in subsection 3.1.
"Tranche C Term Note": as defined in subsection 6.1(e).
"Transaction Agreement": as defined in the recitals to this
Agreement.
"Transaction Expenses": as defined in subsection 8.1(g).
"Transferee": as defined in subsection 14.6(f).
"Type": as to any Loan, its nature as an Base Rate Loan, a
Eurodollar Loan, a Revolving Offshore Loan or a Fronted Offshore Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended from time to time.
"Voting Percentage": as to any Lender:
(a) at any time prior to the termination of the Revolving
Credit Commitments and the Acquisition Loan Commitments, the
percentage which (i) the sum of (w) such Lender's
<PAGE> 31
24
Revolving Credit Commitment plus (x) such Lender's Term Loan
Commitments (or, after the Term Loans are made, the outstanding
principal amount of such Lender's Term Loans) plus (y) the sum of
(A) such Lender's Available Acquisition Loan Commitment and (B) the
outstanding principal amount of such Lender's Acquisition Loans plus
(z) such Lender's Tender Loan Commitment (or, after the Tender Loans
are made, the outstanding principal amount of such Lender's Tender
Loan) then constitutes of (ii) the sum of (w) the Revolving Credit
Commitments of all the Lenders plus (x) the Term Loan Commitments of
all the Lenders (or, after the Term Loans are made, the aggregate
principal amount of Term Loans of all the Lenders then outstanding)
plus (y) the sum of (A) the Available Acquisition Loan Commitments
of all the Acquisition Lenders and (B) the outstanding principal
amount of Acquisition Loans of all the Acquisition Lenders plus (z)
the Tender Loan Commitments of all the Lenders (or, after the Tender
Loans are made, the aggregate principal amount of Tender Loans of
all the Lenders then outstanding), and
(b) at any time after the termination of the Revolving Credit
Commitments and the Acquisition Loan Commitments, the percentage
which (i) the sum of (x) the aggregate principal amount (or the
Dollar Equivalent thereof, in the case of Offshore Currency Loans)
of such Lender's Loans (other than Swing Line Loans and Fronted
Offshore Loans) then outstanding plus (y) the product of (A) such
Lender's Revolving Credit Commitment Percentage immediately prior to
the termination of the Revolving Credit Commitments (giving effect
to any permitted assignments after such termination) times (B) the
sum of (1) the L/C Obligations, (2) the aggregate principal amount
of Swing Line Loans then outstanding and (3) the Dollar Equivalent
of the aggregate principal amount of Fronted Offshore Loans then
outstanding then constitutes of (ii) the sum of (x) the aggregate
principal amount (or the Dollar Equivalent thereof, in the case of
Offshore Currency Loans) of Loans of all the Lenders then
outstanding plus (y) the aggregate L/C Obligations of all the
Lenders then outstanding.
"Working Capital": at any date, the sum of (a) all amounts which
would, in conformity with GAAP, be included under current assets (other
than cash and Cash Equivalents) on a balance sheet of the Company and its
Subsidiaries on a Consolidated basis on such date minus (b) all amounts
which would, in conformity with GAAP, be included under current
liabilities on a balance sheet (other than Indebtedness) of the Company
and its Subsidiaries on a Consolidated basis on such date.
"Welcome Lodge": the parcel of real property located at 4040 High
Ridge Circle, San Antonio, Texas 78229.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Notes, any other Loan Documents or any certificate or other
document made or delivered pursuant hereto.
(b) As used herein and in any other Loan Document, and any
certificate or other document made or delivered pursuant hereto, accounting
terms relating to the Company and its Subsidiaries not defined in subsection 1.1
and accounting terms partly defined in subsection 1.1, to the extent not
defined, shall have the respective meanings given to them under 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,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
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SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
2.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans (each a "Revolving Loan") to the Company (and, in the
case of Revolving Offshore Loans, to the Subsidiary Borrowers) from time to time
during the Revolving Credit Commitment Period in an aggregate principal amount
(or the Dollar Equivalent thereof, in the case of Revolving Offshore Loans) at
any one time outstanding which, when added to such Revolving Credit Lender's
Revolving Credit Commitment Percentage of the sum of (i) the then outstanding
L/C Obligations, (ii) the aggregate principal amount of Swing Line Loans then
outstanding and (iii) the Dollar Equivalent of the then aggregate outstanding
principal amount of Fronted Offshore Loans, does not exceed the amount of such
Revolving Credit Lender's Revolving Credit Commitment, provided that, after
giving effect to such Revolving Loan and the use of proceeds thereof, the Dollar
Equivalent of the aggregate outstanding principal amount of Offshore Currency
Loans does not exceed the Offshore Currency Sublimit. During the Revolving
Credit Commitment Period, the Company (and, in the case of Revolving Offshore
Loans, the Subsidiary Borrowers) may use the Revolving Credit Commitments by
borrowing, prepaying and reborrowing the Revolving Loans in whole or in part,
all in accordance with the terms and conditions hereof.
(b) The Revolving Loans may from time to time be (i) Eurodollar
Loans, (ii) Base Rate Loans, (iii) (subject to the limitations set forth herein)
Revolving Offshore Loans or (iv) a combination thereof, as determined by the
Company and notified to the Administrative Agent in accordance with subsections
2.2 and 6.4, provided that no Revolving Loan shall be made as a Eurodollar Loan
or a Revolving Offshore Loan after the day that is one month prior to the
Revolving Credit Termination Date.
2.2 Procedure for Revolving Credit Borrowing. The Company (and, in
the case of Revolving Offshore Loans, the Subsidiary Borrowers) may borrow under
the Revolving Credit Commitments during the Revolving Credit Commitment Period
on any Banking Day, provided that the Company shall give the Administrative
Agent irrevocable notice (which notice must be received by the Administrative
Agent prior to 10:00 A.M., San Francisco time, (a) three Banking Days prior to
the requested Borrowing Date, if all or any part of the requested Revolving
Loans are to be initially Eurodollar Loans, (b) four Banking Days prior to the
requested Borrowing Date, if all or any part of the requested Revolving Loans
are to be initially Revolving Offshore Loans or (c) one Banking Day prior to the
requested Borrowing Date, otherwise), specifying (i) the amount to be borrowed,
(ii) the requested Borrowing Date, (iii) whether the borrowing is to be of
Eurodollar Loans, Base Rate Loans, Revolving Offshore Loans or a combination
thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar
Loans or Revolving Offshore Loans, the respective amounts of each such Type of
Loan and the respective lengths of the initial Interest Periods therefor and, in
the case of Revolving Offshore Loans, the type and amount of the Eligible
Offshore Currency or Currencies in which such Revolving Offshore Loans are to be
denominated. Each borrowing under the Revolving Credit Commitments shall be in
an amount equal to (x) in the case of Base Rate Loans, $1,000,000 or a whole
multiple of $500,000 in excess thereof (or, if the then Available Revolving
Credit Commitments are less than $1,000,000, such lesser amount) and (y) in the
case of Eurodollar Loans or Revolving Offshore Loans, $1,000,000 (or the
Offshore Currency Equivalent thereof, in the case of Revolving Offshore Loans)
or a whole multiple of $1,000,000 (or the lesser of (i) 1,000,000 units of the
relevant Eligible Offshore Currency and (ii) the Offshore Currency Equivalent of
$1,000,000 in the relevant Eligible Offshore Currency, in the case of Revolving
Offshore Loans) in excess thereof. Upon receipt of any such notice from the
Company, the Administrative Agent shall promptly notify each Revolving Credit
Lender thereof. Each Revolving Credit Lender will make the amount of its pro
rata share of each borrowing available to the Administrative Agent for the
account of the Company or the relevant Subsidiary Borrower, as the case may be,
at the office of the Administrative Agent specified in subsection 14.2 prior to
11:00 A.M., San Francisco time, on the Borrowing Date requested by the Company
in funds immediately available to the Administrative Agent in Dollars or in the
Eligible Offshore Currency, as the case may be. Such borrowing will then be made
available to the Company or the relevant Subsidiary Borrower by the
Administrative Agent crediting the account of the Company or the relevant
Subsidiary Borrower on the books of such office (or such other account as may be
designated by the Company or the relevant Subsidiary Borrower and as may be
acceptable to the Administrative Agent) with the aggregate of the amounts made
available to the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent.
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2.3 Commitment Fee. The Company shall pay to the Administrative
Agent for the account of each Revolving Credit Lender a commitment fee for the
period from and including the first day of the Revolving Credit Commitment
Period to the Revolving Credit Termination Date, computed at a rate per annum
equal to the Applicable Rate on the average daily amount of such Revolving
Credit Lender's Available Revolving Credit Commitment during the period for
which payment is made (calculated as if no Swing Line Loans were outstanding
during such period), payable quarterly in arrears on each Fee Payment Date and
on the Revolving Credit Termination Date (or such earlier date on which the
Revolving Credit Commitments terminate as provided herein), commencing on the
first of such dates to occur after the date hereof.
2.4 Termination or Reduction of Commitments; Repayment of Revolving
Loans. (a) The Company shall have the right, upon not less than five Business
Days' notice to the Administrative Agent (which will promptly notify the
Revolving Credit Lenders thereof), to terminate the Revolving Credit Commitments
or, from time to time, to reduce the amount of the Revolving Credit Commitments,
provided that no such termination or reduction shall be permitted if, after
giving effect thereto and to any prepayments of Loans made on the effective date
thereof, the Aggregate Revolving Credit Outstandings of all the Revolving Credit
Lenders would exceed the Revolving Credit Commitments then in effect. Any such
reduction shall be in an amount equal to $5,000,000 or a whole multiple of
$1,000,000 in excess thereof and shall reduce permanently the Revolving Credit
Commitments then in effect.
(b) The Revolving Credit Commitments shall also be automatically
reduced as provided in subsection 6.3. Any such reduction shall ratably and
permanently reduce the Revolving Credit Commitments then in effect.
(c) The Company hereby unconditionally promises to pay to the
Administrative Agent on the Revolving Credit Termination Date (or such earlier
date on which the Revolving Loans become due and payable pursuant to Section 11)
for the account of each Revolving Credit Lender the then unpaid principal amount
of each Revolving Loan of such Revolving Credit Lender made to the Company. Each
Subsidiary Borrower hereby unconditionally promises to pay to the Administrative
Agent on the Revolving Credit Termination Date (or such earlier date on which
the Revolving Loans become due and payable pursuant to Section 11) for the
account of each Revolving Credit Lender the then unpaid principal amount of each
Revolving Offshore Loan of such Revolving Credit Lender made to such Subsidiary
Borrower. The Company hereby further agrees to pay interest on the unpaid
principal amount of the Revolving Loans made to it from time to time outstanding
from the date hereof until payment in full thereof at the rates per annum, and
on the dates, set forth in subsections 6.6 and 6.9. Each Subsidiary Borrower
hereby further agrees to pay interest on the unpaid principal amount of the
Revolving Offshore Loans made to it from time to time outstanding from the date
hereof until payment in full thereof at the rates per annum, and on the dates,
set forth in subsections 6.6 and 6.9.
2.5 L/C Commitment. (a) Subject to the terms and conditions hereof,
the Issuing Bank, in reliance on the agreements of the other Revolving Credit
Lenders set forth in subsection 2.8(a), agrees to issue letters of credit
("Letters of Credit") for the account of the Company on any Business Day during
the Revolving Credit Commitment Period in such form as may be approved from time
to time by the Issuing Bank, provided that (i) the Issuing Bank shall have no
obligation to issue any Letter of Credit if, after giving effect to such
issuance, (A) the L/C Obligations would exceed the L/C Sublimit or (B) the
Aggregate Revolving Credit Outstandings of all the Revolving Credit Lenders at
such time would exceed the Revolving Credit Commitments at such time and (ii)
the Issuing Bank shall not issue any Letter of Credit unless it shall have
received notice from the Administrative Agent that the issuance of such Letter
of Credit will not violate clause (i) above.
(b) Each Letter of Credit shall (i) be denominated in Dollars, an
Eligible L/C Currency or such other Offshore Currency as the Company, the
Issuing Bank and the Administrative Agent may from time to time agree, (ii) be
either (x) a standby letter of credit issued to support obligations of the
Company or any of its Subsidiaries, contingent or otherwise or (y) a commercial
letter of credit issued in respect of the purchase of goods or services by the
Company or any of its Subsidiaries in the ordinary course of business and (iii)
expire no later than the earlier of (x) the date that is 12 months after the
date of its issuance and (y) the thirtieth Business Day prior to the Revolving
Credit Termination Date, provided that, subject to the immediately preceding
clause (y), any standby Letter of Credit may, at the request of the
<PAGE> 34
27
Company as set forth in the applicable Letter of Credit Application, be
automatically extended on each anniversary of the issuance thereof for an
additional period of one year unless the Issuing Bank which issued such Letter
of Credit shall have given prior written notice to the Company and the
beneficiary of such Letter of Credit at least 30 Business Days prior to the date
of termination of such Letter of Credit that such Letter of Credit will not be
extended and the Issuing Bank shall permit such beneficiary, upon receipt of
such notice, to draw under such Letter of Credit prior to the date such Letter
of Credit otherwise would have been automatically renewed.
(c) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of New
York.
(d) The Issuing Bank shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Bank or any L/C Participant to exceed any limits imposed by any
applicable Requirement of Law.
2.6 Procedure for Issuance of Letters of Credit. The Company or any
Subsidiary may from time to time request that the Issuing Bank issue a Letter of
Credit by (a) delivering to the Issuing Bank at its address for notices
specified herein in such manner as may be agreed by or be acceptable to the
Issuing Bank (including by electronic transmission) a Letter of Credit
Application, completed to the reasonable satisfaction of the Issuing Bank, and
such other certificates, documents and other papers and information as the
Issuing Bank may reasonably request and (b) concurrently delivering a notice to
the Administrative Agent that such Letter of Credit has been requested. Upon
receipt of any such Letter of Credit Application, the Issuing Bank agrees to
process such Letter of Credit Application and the certificates, documents and
other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall promptly issue the Letter of
Credit requested thereby (but in no event shall the Issuing Bank be required to
issue any Letter of Credit earlier than three Business Days after its receipt of
the Letter of Credit Application therefor and all such other certificates,
documents and other papers and information relating thereto) by issuing the
original of such Letter of Credit to the beneficiary thereof or as otherwise may
be agreed by the Issuing Bank and the Company with respect thereto. The Issuing
Bank shall furnish a copy of each Letter of Credit issued by the Issuing Bank to
the Company and the Administrative Agent promptly following the issuance
thereof.
2.7 Letter of Credit Fees, Commissions and Other Charges. (a) The
Company shall pay to the Issuing Bank with respect to each Letter of Credit
issued by it under this Agreement, for the account of the Issuing Bank, a
fronting fee with respect to the period from the date of issuance of such Letter
of Credit to the expiration or termination date of such Letter of Credit,
computed at a rate of 0.25% per annum on the average aggregate amount available
to be drawn under such Letter of Credit during the period for which such fee is
calculated. Such fronting fee shall be payable in arrears on each Fee Payment
Date to occur after the issuance of such Letter of Credit and on the Revolving
Credit Termination Date (or on such earlier date as the Revolving Credit
Commitments shall terminate as provided herein) and shall be nonrefundable.
(b) The Company shall pay to the Administrative Agent, for the
account of the L/C Participants, a letter of credit commission with respect to
each Letter of Credit issued under this Agreement with respect to the period
from the date of issuance of such Letter of Credit to the expiration or
termination date of such Letter of Credit, computed at a rate per annum equal to
the Applicable Margin in respect of Revolving Loans which are Eurodollar Loans
from time to time in effect on the average aggregate amount available to be
drawn under such Letter of Credit during the period for which such fee is
calculated. Such commission shall be shared ratably among the L/C Participants
in accordance with their respective Revolving Credit Commitment Percentages.
Such commission shall be payable in arrears on each Fee Payment Date to occur
after the issuance of such Letter of Credit and on the Revolving Credit
Termination Date (or on such earlier date as the Revolving Credit Commitments
shall terminate as provided herein) and shall be nonrefundable.
(c) In addition to the foregoing fees and commissions, the Company
shall pay or reimburse the Issuing Bank for such normal and customary costs and
expenses as are incurred or charged by the Issuing Bank in issuing, effecting
payment under, amending or otherwise administering any Letter of Credit.
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(d) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Bank and the L/C Participants all fees and
commissions received by the Administrative Agent for their respective accounts
pursuant to this subsection.
2.8 L/C Participations. (a) The Issuing Bank irrevocably agrees to
grant and hereby grants to each L/C Participant, and, to induce the Issuing Bank
to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to
accept and purchase and hereby accepts and purchases from the Issuing Bank, on
the terms and conditions hereinafter stated, for such L/C Participant's own
account and risk, an undivided interest equal to such L/C Participant's
Revolving Credit Commitment Percentage of the Issuing Bank's obligations and
rights under each Letter of Credit issued hereunder and the amount of each draft
paid by the Issuing Bank thereunder. Each L/C Participant unconditionally and
irrevocably agrees with the Issuing Bank that, if a draft is paid under any
Letter of Credit for which the Issuing Bank is not reimbursed in full by the
Company in accordance with the terms of this Agreement, such L/C Participant
shall pay to the Issuing Bank upon demand at the Issuing Bank's address for
notices specified herein an amount equal to such L/C Participant's then
Revolving Credit Commitment Percentage of the amount of such draft, or any part
thereof, which is not so reimbursed. Each L/C Participant's obligation to make
the payment referred to in the immediately preceding sentence shall be absolute
and unconditional and shall not be affected by any circumstance, including,
without limitation, (i) any set-off, counterclaim, recoupment, defense or other
right which such L/C Participant or the Company may have against the Issuing
Bank or any other Person for any reason whatsoever, (ii) the occurrence or
continuance of a Default or an Event of Default, (iii) any adverse change in the
condition (financial or otherwise) of the Company or any of its Subsidiaries,
(iv) any breach of this Agreement by any Loan Party or any other Lender or (v)
any other circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to subsection 2.8(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Letter of Credit is
paid to the Issuing Bank within three Business Days after the date such payment
is due, such L/C Participant shall pay to the Issuing Bank on demand an amount
equal to the product of (i) such amount, times (ii) the daily average Federal
Funds Effective Rate during the period from and including the date such payment
is required to the date on which such payment is immediately available to the
Issuing Bank, times (iii) a fraction, the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any L/C Participant pursuant to subsection
2.8(a) is not in fact made available to the Issuing Bank by such L/C Participant
within three Business Days after the date such payment is due, the Issuing Bank
shall be entitled to recover from such L/C Participant, on demand, such amount
with interest thereon calculated from such due date at the rate per annum
applicable to Base Rate Loans hereunder. A certificate of the Issuing Bank
submitted to any L/C Participant with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Bank has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with subsection 2.8(a), the Issuing
Bank receives any payment related to such Letter of Credit (whether directly
from the Company or otherwise, including proceeds of collateral applied thereto
by the Issuing Bank), or any payment of interest on account thereof, the Issuing
Bank will distribute to such L/C Participant its pro rata share thereof,
provided, however, that in the event that any such payment received by the
Issuing Bank shall be required to be returned by the Issuing Bank, such L/C
Participant shall return to the Issuing Bank the portion thereof previously
distributed by the Issuing Bank to it.
2.9 Reimbursement Obligation of the Company. (a) The Company agrees
to reimburse the Issuing Bank on each date on which the Issuing Bank notifies
the Company of the date and amount of a draft presented under any Letter of
Credit and paid by the Issuing Bank for the amount of such draft so paid and any
taxes, fees, charges or other costs or expenses incurred by the Issuing Bank in
connection with such payment. Each such payment shall be made to the Issuing
Bank at its address for notices specified herein in the currency in which the
relevant Letter of Credit is issued and in immediately available funds, provided
that if the Company does not reimburse the Issuing Bank for any draft paid by
the Issuing Bank under any Letter of Credit issued by such Issuing Bank in an
Offshore Currency on the date required pursuant to subsection 2.9(b), the
Issuing Bank shall convert such Reimbursement Obligation into Dollars
<PAGE> 36
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at the rate of exchange then available to the Issuing Bank in the interbank
market where its foreign currency exchange operations in respect of such
Offshore Currency are then being conducted and the Company shall thereafter be
required to reimburse the Issuing Bank in Dollars for such Reimbursement
Obligation with interest pursuant to subsection 2.9(b)
(b) If any draft shall be presented for payment under any Letter of
Credit, the Issuing Bank shall promptly notify the Company of the date and
amount thereof. If the Issuing Bank notifies the Company prior to 8:30 A.M., San
Francisco time, on any Business Day, of any drawing under any Letter of Credit
issued by it in Dollars, the Company shall reimburse the Issuing Bank pursuant
to subsection 2.9(a) with respect to such drawing on such Business Day. If the
Issuing Bank notifies the Company after 8:30 A.M., San Francisco time, on any
Business Day of any drawing under any Letter of Credit issued in Dollars or, if
the Issuing Bank notifies the Company on any Business Day of any drawing under
any Letter of Credit issued in an Offshore Currency, the Company shall reimburse
the Issuing Bank pursuant to subsection 2.9(a) with respect to such drawing on
the next succeeding Business Day and interest shall be payable on the amount of
such drawing for such period at the rate then applicable to Base Rate Loans
hereunder or, in the case of any such amount due in respect of a Letter of
Credit issued in an Offshore Currency, the rate which is equal to the sum of (i)
the rate of interest determined by the Issuing Bank (which determination shall
be conclusive absent manifest error) to be the cost to the Issuing Bank of
obtaining such funds for such period, plus, (ii) the Applicable Margin for
Revolving Offshore Loans in effect at such time. If any amount payable under
this subsection is not paid when due, interest shall be payable on such amount
from the date such amount becomes payable under this subsection until payment in
full thereof at the rate which would be payable on any outstanding Base Rate
Loans which were then overdue.
2.10 Obligations Absolute. (a) The Company's obligations under
subsections 2.5, 2.6, 2.7, 2.8, 2.9, 2.10 and 2.11 shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment which the Company may have or have had
against the Issuing Bank, any L/C Participant or any beneficiary of a Letter of
Credit.
(b) The Company also agrees with the Issuing Bank that the Issuing
Bank shall not be responsible for, and the Company's Reimbursement Obligations
under subsection 2.9(a) shall not be affected by, among other things, (i) the
validity or genuineness of documents or of any endorsements thereon, even though
such documents shall in fact prove to be invalid, fraudulent or forged, or (ii)
any dispute between or among any Loan Party and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
(iii) any claims whatsoever of any Loan Party against any beneficiary of such
Letter of Credit or any such transferee.
(c) Neither the Issuing Bank nor any L/C Participant shall be liable
for any error, omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in connection with any
Letter of Credit, except for errors or omissions caused by the Issuing Bank's
gross negligence or willful misconduct.
(d) The Company agrees that any action taken or omitted by the
Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on the Company and
shall not result in any liability of the Issuing Bank or any L/C Participant to
any Loan Party.
2.11 Letter of Credit Payments. If any draft shall be presented for
payment under any Letter of Credit, the responsibility of the Issuing Bank to
the Loan Parties in connection with such draft shall, in addition to any payment
obligation expressly provided for in such Letter of Credit, be limited to
determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are in conformity with such
Letter of Credit.
2.12 Application. To the extent that any provision of any Letter of
Credit Application related to any Letter of Credit is inconsistent with the
provisions of this Section 2, the provisions of this Section 2 shall apply.
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2.13 Fronted Offshore Currency Subfacility. Subject to the terms and
conditions hereof, each Fronting Lender agrees to make loans ("Fronted Offshore
Loans") to the Subsidiary Borrowers from time to time during the Revolving
Credit Commitment Period in an aggregate principal amount at any one time
outstanding the Dollar Equivalent of which shall not exceed, with respect to
each Fronted Offshore Currency, the related Fronted Offshore Currency Sublimit
of such Fronting Lender with respect to such Fronted Offshore Currency, provided
that, (i) after giving effect to any such Fronted Offshore Loan, the Aggregate
Revolving Credit Outstandings of all the Revolving Credit Lenders at such time
do not exceed the Revolving Credit Commitments at such time, (ii) after giving
effect to such Fronted Offshore Loan and the use of proceeds thereof, the Dollar
Equivalent of the aggregate outstanding principal amount of Offshore Currency
Loans does not exceed the Offshore Currency Sublimit and (iii) no Fronting
Lender shall make any Fronted Offshore Loan unless it shall have received notice
from the Administrative Agent that the making of such Fronted Offshore Loan will
not violate clause (i) or (ii) above. During the Revolving Credit Commitment
Period, the Subsidiary Borrowers may use the Fronted Offshore Currency
Subfacility by borrowing, prepaying and reborrowing Fronted Offshore Loans in
whole or in part, all in accordance with the terms and conditions hereof.
2.14 Procedure for Fronted Offshore Loan Borrowings. Each Subsidiary
Borrower may borrow under the Fronted Offshore Currency Subfacility during the
Revolving Credit Commitment Period on any Banking Day, provided that such
Subsidiary Borrower or its authorized designee shall give the relevant Fronting
Lender and the Administrative Agent irrevocable notice (which notice must be
received by the Fronting Lender and the Administrative Agent prior to the
applicable time specified therefor in such Fronting Lender's Fronting Lender
Addendum) specifying (a) the amount to be borrowed and the Fronted Offshore
Currency with respect thereto, (b) the requested Borrowing Date and (c) the
initial Interest Periods (if any) with respect thereto, provided, further, that,
notwithstanding anything to the contrary in any Fronting Lender Addendum, no
Fronting Lender shall be required to make a Fronted Offshore Loan until it shall
have received the notice described in clause (iii) of the proviso to the first
sentence of subsection 2.13, upon receipt of which such Fronting Lender shall
make the relevant Fronted Offshore Loan in accordance with the terms of the
applicable Fronting Lender Addendum or as soon thereafter as practicable. Each
borrowing under the Fronted Offshore Currency Subfacility from a Fronting Lender
shall be in such minimum amounts as shall be specified in the applicable
Fronting Lender's Fronting Lender Addendum. The proceeds of each Fronted
Offshore Loan will be made available by the Fronting Lender in respect thereof
to the relevant Subsidiary Borrower at such Fronting Lender's Payment Office at
such time on the Borrowing Date and in such funds as are specified in such
Fronting Lender's Fronting Lender Addendum.
2.15 Fronted Offshore Loan Fees, Commissions and Other Charges. (a)
The Company shall (or shall cause the relevant Subsidiary Borrower to) pay to
the relevant Fronting Lender with respect to each Fronted Offshore Loan made by
such Fronting Lender, for the account of such Fronting Lender, a fronting fee
with respect to the period from and including the date of such Fronted Offshore
Loan to but excluding the date of repayment thereof computed at a rate of 0.25%
per annum on the average daily principal amount of such Fronted Offshore Loan
outstanding during the period for which such fee is calculated. Such fronting
fee shall be payable in arrears on each Fee Payment Date to occur after the
making of such Fronted Offshore Loan and on the Revolving Credit Termination
Date (or on such earlier date as the Revolving Credit Commitments shall
terminate as provided herein) and shall be nonrefundable.
(b) The Company shall pay to the Administrative Agent for the
account of the Fronted Loan Participants, a participation fee with respect to
each Fronted Offshore Loan for the period from and including the date of such
Fronted Offshore Loan to but excluding the date of repayment thereof, computed
at a rate per annum equal to the Applicable Margin in respect of Revolving
Offshore Loans from time to time in effect on the average daily principal amount
of such Fronted Offshore Loan outstanding during the period for which such fee
is calculated. Such fee shall be shared ratably among the Fronted Loan
Participants in accordance with their respective Revolving Credit Commitment
Percentages. Such commission shall be payable in arrears on each Fee Payment
Date to occur after the making of such Fronted Offshore Loan and on the
Revolving Credit Termination Date (or on such earlier date as the Revolving
Credit Commitments shall terminate as provided herein) and shall be
nonrefundable.
(c) The Administrative Agent shall, promptly following its receipt
thereof, distribute to each Fronting Lender and the Fronted Loan Participants
all fees received by the Administrative Agent for
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their respective accounts pursuant to this subsection.
2.16 Participations in Fronted Offshore Loans. (a) Each Fronting
Lender irrevocably agrees to grant and hereby grants to each Fronted Loan
Participant (other than such Fronting Lender), and, to induce such Fronting
Lender to make Fronted Offshore Loans hereunder, each such Fronted Loan
Participant irrevocably agrees to accept and purchase and hereby accepts and
purchases from such Fronting Lender, on the terms and conditions hereinafter
stated, for such Fronted Loan Participant's own account and risk, an undivided
interest equal to such Fronted Loan Participant's Revolving Credit Commitment
Percentage of such Fronting Lender's obligations and rights in respect of each
Fronted Offshore Loan made by such Fronting Lender hereunder. Each such Fronted
Loan Participant unconditionally and irrevocably agrees with each Fronting
Lender that, if any amount in respect of the principal, interest or fees owing
to such Fronting Lender in respect of a Fronted Offshore Loan is not paid when
due in accordance with the terms of this Agreement, such Fronted Loan
Participant shall pay to the Administrative Agent for the account of such
Fronting Lender upon demand an amount in the relevant Offshore Currency equal to
such Fronted Loan Participant's Revolving Credit Commitment Percentage of such
unpaid amount. Each Fronted Loan Participant's obligation to make the payment
referred to in the immediately preceding sentence shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which such Fronted Loan Participant or any Subsidiary Borrower may have against
the Fronting Lender, any Subsidiary Borrower or any other Person for any reason
whatsoever, (ii) the occurrence or continuance of a Default or an Event of
Default, (iii) any adverse change in the condition (financial or otherwise) of
the Company or any Subsidiary Borrower, (iv) any breach of this Agreement or any
other Loan Document by any Loan Party or any other Lender or (v) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing. In the event that it would be illegal for a Fronted Loan
Participant to purchase and remit to the Fronting Lender the relevant Offshore
Currency or the relevant Offshore Currency is not available to it, the Fronted
Loan Participant may pay the Fronting Lender the Dollar Equivalent of the amount
in the relevant Offshore Currency, determined as of the date of the relevant
payment.
(b) If any amount required to be paid by any Fronted Loan
Participant to any Fronting Lender pursuant to subsection 2.16(a) is not paid to
such Fronting Lender when due but is paid within three Banking Days after the
date such payment is due, such Fronted Loan Participant shall pay to such
Fronting Lender on demand an amount equal to the product of (i) such amount,
times (ii) the Cost of Funds in respect of the related Offshore Currency
determined by such Fronting Lender during the period from and including the date
such payment is required to the date on which such payment is immediately
available to such Fronting Lender, times (iii) a fraction, the numerator of
which is the number of days that elapse during such period and the denominator
of which is 360. If any such amount required to be paid by any Fronted Loan
Participant pursuant to subsection 2.16(a) is not in fact made available to any
Fronting Lender by such Fronted Loan Participant within three Banking Days after
the date such payment is due, such Fronting Lender shall be entitled to recover
from such Fronted Loan Participant, on demand, such amount with interest thereon
calculated from such due date at the rate per annum equal to the rate applicable
thereto in accordance with the preceding sentence plus the Applicable Margin in
respect of Revolving Offshore Loans. A certificate of any Fronting Lender
submitted to any Fronted Loan Participant with respect to any amounts owing
under this subsection shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after any Fronting Lender has received
from any Fronted Loan Participant the full amount owing by such Fronted Loan
Participant pursuant to and in accordance with subsection 2.16(a) in respect of
any Fronted Offshore Loan, such Fronting Lender receives any payment related to
such Fronted Offshore Loan (whether directly from the relevant Subsidiary
Borrower or otherwise, including proceeds of collateral applied thereto by such
Fronting Lender), or any payment of interest on account thereof, such Fronting
Lender will distribute to such Fronted Loan Participant its pro rata share
thereof.
(d) If any payment received by any Fronting Lender pursuant to
subsection 2.16(c) with respect to any Fronted Offshore Loan made by it shall be
required to be returned by such Fronting Lender, each Fronted Loan Participant
shall pay to such Fronting Lender its pro rata share thereof.
<PAGE> 39
32
2.17 Swing Line Commitment. Subject to the terms and conditions
hereof, the Swing Line Lender agrees to make swing line loans in Dollars ("Swing
Line Loans") to the Company from time to time during the Revolving Credit
Commitment Period in an aggregate principal amount at any one time outstanding
not to exceed $5,000,000, provided that, (a) after giving effect to any such
Swing Line Loans, the Aggregate Revolving Credit Outstandings of all the
Revolving Credit Lenders at such time do not exceed the Revolving Credit
Commitments at such time and (b) the Swing Line Lender shall not make any Swing
Line Loan unless it shall have received notice from the Administrative Agent
that the making of such Swing Line Loan will not violate clause (a) above.
During the Revolving Credit Commitment Period, the Company may use the Swing
Line Commitment by borrowing, prepaying the Swing Line Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof.
All Swing Line Loans shall be Base Rate Loans and may not be converted into
Loans that bear interest at any other rate.
2.18 Procedure for Swing Line Borrowing; Prepayment of Swing Line
Loans. The Company may borrow under the Swing Line Commitment during the
Revolving Credit Commitment Period on any Business Day, provided that the
Company shall give the Swing Line Lender and the Administrative Agent
irrevocable notice (which notice must be received by the Swing Line Lender prior
to 10:00 A.M., San Francisco time) on the requested Borrowing Date specifying
the amount of the requested Swing Line Loan which shall be in an aggregate
minimum amount of $500,000 or a whole multiple of $50,000 in excess thereof. The
proceeds of the Swing Line Loan will be made available by the Swing Line Lender
to the Company at the office of the Swing Line Lender by 12:00 Noon (San
Francisco time) on the Borrowing Date by crediting the account of the Company at
such office with such proceeds. The Company may at any time and from time to
time, prepay the Swing Line Loans, in whole or in part, without premium or
penalty, by notifying the Swing Line Lender prior to 11:00 A.M. (San Francisco
time) on any Business Day of the date and amount of prepayment. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date specified therein. Partial prepayments shall be in an aggregate
principal amount of $500,000 or a whole multiple of $50,000 in excess thereof.
2.19 Repayment of Swing Line Loans; Participations in Swing Line
Borrowings. (a) The Company hereby unconditionally promises to pay to the
Administrative Agent for the account of the Swing Line Lender the then unpaid
principal amount of the Swing Line Loans on the Revolving Credit Termination
Date (or such earlier date on which the Swing Line Loans become due and payable
pursuant to Section 11). The Company hereby further agrees to pay interest on
the unpaid principal amount of Swing Line Loans from time to time outstanding
from the date of borrowing thereof until payment in full thereof at the rates
per annum, and on the dates, set forth in subsections 6.6 and 6.9. The Swing
Line Lender, at any time in its sole and absolute discretion may, on behalf of
the Company (which hereby irrevocably authorizes the Swing Line Lender to act on
its behalf) request each Revolving Credit Lender (including the Swing Line
Lender) to make a Revolving Loan (which shall be a Base Rate Loan) in an amount
equal to such Revolving Credit Lender's Revolving Credit Commitment Percentage
of the aggregate principal amount of the Swing Line Loans outstanding on the
date such notice is given (the "Outstanding Swing Line Loans"). Unless any of
the events described in paragraph (f) of Section 11 shall have occurred with
respect to the Company (in which event the procedures of paragraph (c) of this
subsection 2.19 shall apply) each Revolving Credit Lender shall make the
proceeds of its Revolving Loan available to the Administrative Agent for the
account of the Swing Line Lender at the Administrative Agent's Payment Office
prior to 11:00 A.M. (San Francisco time) in funds immediately available in
Dollars on the Business Day next succeeding the date such notice is given. The
proceeds of such Revolving Loans shall be immediately applied to repay the
outstanding Swing Line Loans. Effective on the day such Revolving Loans are
made, the portion of the Swing Line Loans so paid shall no longer be outstanding
as Swing Line Loans and shall no longer be due under the Swing Line Note. The
Company authorizes the Swing Line Lender to charge the Company's accounts with
the Swing Line Lender (up to the amount available in each such account) in order
to immediately pay the amount of its outstanding Swing Line Loans to the extent
amounts received from the Revolving Credit Lenders are not sufficient to repay
in full such outstanding Swing Line Loans.
(b) Notwithstanding anything herein to the contrary, the Swing Line
Lender shall not be obligated to make any Swing Line Loans if the conditions set
forth in subsection 8.2 have not been satisfied.
<PAGE> 40
33
(c) If prior to the making of a Revolving Loan pursuant to paragraph
(a) of this subsection 2.19 one of the events described in paragraph (f) of
Section 11 shall have occurred and be continuing with respect to the Company,
each Revolving Credit Lender will, on the date such Revolving Loan was to have
been made pursuant to the notice described in subsection 2.19(a), purchase an
undivided participating interest in the outstanding Swing Line Loans in an
amount equal to (i) its Revolving Credit Commitment Percentage times (ii) the
aggregate principal amount of Swing Line Loans then outstanding. Each Revolving
Credit Lender will immediately transfer to the Swing Line Lender, in immediately
available funds, the amount of its participation, and upon receipt thereof the
Swing Line Lender will deliver to such Revolving Credit Lender a Swing Line Loan
Participation Certificate dated the date of receipt of such funds and in such
amount.
(d) Whenever, at any time after any Revolving Credit Lender has
purchased a participating interest in a Swing Line Loan, the Swing Line Lender
receives any payment on account thereof, the Swing Line Lender will distribute
to such Revolving Credit Lender its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Revolving Credit Lender's participating interest was
outstanding and funded), provided, however, that in the event that such payment
received by the Swing Line Lender is required to be returned, such Revolving
Credit Lender will return to the Swing Line Lender any portion thereof
previously distributed by the Swing Line Lender to it.
(e) Each Revolving Credit Lender's obligation to make the Revolving
Loans referred to in subsection 2.19(a) and to purchase participating interests
pursuant to subsection 2.19(c) shall be absolute and unconditional and shall not
be affected by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such Revolving Credit
Lender or the Company may have against the Swing Line Lender, the Company or any
other Person for any reason whatsoever, (ii) the occurrence or continuance of a
Default or an Event of Default, (iii) any adverse change in the condition
(financial or otherwise) of the Company, (iv) any breach of this Agreement or
any other Loan Document by the Company, any Subsidiary or any other Lender, or
(v) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
SECTION 3. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS
3.1 Term Loans. Subject to the terms and conditions hereof, (a) each
Tranche A Lender severally agrees to make a term loan (a "Tranche A Term Loan")
to the Company on the Closing Date in a principal amount equal to such Tranche A
Lender's Tranche A Commitment, (b) each Tranche B Lender severally agrees to
make a term loan (a "Tranche B Term Loan") to the Company on the Closing Date in
a principal amount equal to such Tranche B Lender's Tranche B Commitment and (c)
each Tranche C Lender severally agrees to make a term loan (a "Tranche C Term
Loan") to the Company on the Closing Date in a principal amount equal to such
Tranche C Lender's Tranche C Commitment. The Term Loans may from time to time be
(i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as
determined by the Company and notified to the Administrative Agent in accordance
with subsections 3.2 and 6.4.
3.2 Procedure for Term Loan Borrowing. The Company shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., San Francisco time, (y) three Banking
Days prior to the Closing Date, if all or any part of the Term Loans are to be
initially Eurodollar Loans or (z) one Banking Day prior to the Closing Date,
otherwise) requesting that the Term Loan Lenders make the Term Loans on the
Closing Date and specifying (i) whether the Term Loans are to be initially
Eurodollar Loans, Base Rate Loans or a combination thereof and (ii) if the Term
Loans are to be entirely or partly Eurodollar Loans the amount of such Type of
Loan and the length of the initial Interest Periods therefor. Upon receipt of
such notice, the Administrative Agent shall promptly notify each Term Loan
Lender thereof. On the Closing Date, each Term Loan Lender shall make available
to the Administrative Agent at its office specified in subsection 14.2 the
amount in immediately available funds equal to the Term Loans to be made by such
Term Loan Lender. The Administrative Agent shall on such date credit the account
of the Company on the books of such office of the Administrative Agent with the
aggregate of the amounts made available to the Administrative Agent by such Term
Loan Lenders and in like funds as received by the Administrative Agent.
<PAGE> 41
34
3.3 Repayment of Tranche A Term Loans. The Company hereby
unconditionally promises to pay to the Administrative Agent for the account of
the Tranche A Lenders the principal amount of the Tranche A Term Loans in
twenty-four consecutive quarterly installments payable at the end of March,
June, September and December of each year (or such earlier date on which the
Tranche A Term Loans become due and payable pursuant to Section 11), commencing
March 31, 1998, with the aggregate amount payable in each year set forth below
equal to the amount set forth below opposite such year (and the installments in
each year being equal):
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 3,000,000
1999 7,000,000
2000 15,000,000
2001 30,000,000
2002 30,000,000
2003 35,000,000
</TABLE>
The Company hereby further agrees to pay interest on the unpaid principal amount
of the Tranche A Term Loans from time to time outstanding from the Closing Date
until payment in full thereof at the rates per annum, and on the dates, set
forth in subsections 6.6 and 6.9.
3.4 Repayment of Tranche B Term Loans. The Company hereby
unconditionally promises to pay to the Administrative Agent for the account of
the Tranche B Lenders the principal amount of the Tranche B Term Loans in
twenty-eight consecutive quarterly installments payable at the end of March,
June, September and December of each year (or such earlier date on which Tranche
B Term Loans become due and payable pursuant to Section 11), commencing March
31, 1998, with the aggregate amount payable in each year set forth below equal
to the amount set forth below opposite such year (and the installments in each
year being equal, except that the first three installments in 2004 shall be
equal to $225,000 and the final installment shall be equal to $83,925,000):
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 900,000
1999 900,000
2000 900,000
2001 900,000
2002 900,000
2003 900,000
2004 84,600,000
</TABLE>
The Company hereby further agrees to pay interest on the unpaid principal amount
of the Tranche B Term Loans from time to time outstanding from the Closing Date
until payment in full thereof at the rates per annum, and on the dates, set
forth in subsections 6.6 and 6.9.
3.5 Repayment of Tranche C Term Loans. The Company hereby
unconditionally promises to pay to the Administrative Agent for the account of
the Tranche C Lenders the principal amount of the Tranche C Term Loans in
thirty-two consecutive quarterly installments payable at the end of March, June,
September and December of each year (or such earlier date on which the Tranche C
Term Loans become due and payable pursuant to Section 11), commencing March 31,
1998, with the aggregate amount payable in each year set forth below equal to
the amount set forth below opposite such year (and the installments in each year
being equal, except that the first three installments in 2005 shall be equal to
$225,000 and the final installment shall be equal to $83,025,000):
<PAGE> 42
35
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 900,000
1999 900,000
2000 900,000
2001 900,000
2002 900,000
2003 900,000
2004 900,000
2005 83,700,000
</TABLE>
The Company hereby further agrees to pay interest on the unpaid principal amount
of the Tranche C Term Loans from time to time outstanding from the Closing Date
until payment in full thereof at the rates per annum, and on the dates, set
forth in subsections 6.6 and 6.9.
3.6 Reduction of Term Commitments. If the Company receives Net Cash
Proceeds in respect of the issuance of Senior Subordinated Notes on or prior to
the Closing Date, the Tranche A Commitments, the Tranche B Commitments and the
Tranche C Commitments shall be ratably reduced in an aggregate amount equal to
the amount by which such Net Cash Proceeds exceed $200,000,000 in the aggregate.
Any such reduction of the Tranche A Commitments, the Tranche B Commitments and
the Tranche C Commitments shall reduce ratably the installments of the Tranche A
Term Loans, Tranche B Term Loans and Tranche C Term Loans payable pursuant to
subsections 3.3, 3.4 and 3.5, respectively.
SECTION 4. AMOUNT AND TERMS OF ACQUISITION LOAN COMMITMENTS
4.1 Acquisition Loans. Subject to the terms and conditions hereof,
each Acquisition Loan Lender severally agrees to make one or more loans (each,
an "Acquisition Loan") during the Acquisition Loan Availability Period in an
aggregate principal amount at any time outstanding not to exceed such
Acquisition Loan Lender's Acquisition Loan Commitment. The Acquisition Loans may
from time to time be (i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a
combination thereof, as determined by the Company and notified to the
Administrative Agent in accordance with subsections 4.2 and 6.4. Except as
provided in subsection 4.3, Acquisition Loans, once made, may not be repaid and
reborrowed.
4.2 Procedure for Acquisition Loan Borrowing. The Company may borrow
under the Acquisition Loan Commitments during the Acquisition Loan Availability
Period on any Banking Day, provided that the Company shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., San Francisco time, (x) three Banking
Days prior to the requested Borrowing Date, if all or any part of the requested
Acquisition Loans are to be initially Eurodollar Loans or (y) one Banking Day
prior to the requested Borrowing Date, otherwise), specifying (i) the amount to
be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is
to be of Eurodollar Loans, Base Rate Loans or a combination thereof and (iv) if
the borrowing is to be entirely or partly of Eurodollar Loans, the respective
amount of such Type of Loan and the respective length of the initial Interest
Period therefor. Each borrowing (other than any borrowing on the Closing Date)
under the Acquisition Loan Commitments shall be in an amount equal to (A) in the
case of Base Rate Loans, $1,000,000 or a whole multiple of $1,000,000 in excess
thereof (or, if the aggregate Available Acquisition Loan Commitments then in
effect are less than $1,000,000, such lesser amount) and (B) in the case of
Eurodollar Loans, $1,000,000 or a whole multiple of $1,000,000 in excess
thereof. Upon receipt of any such notice from the Company, the Administrative
Agent shall promptly notify each Acquisition Loan Lender thereof. Each
Acquisition Loan Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the account of the Company
at the office of the Administrative Agent specified in subsection 14.2 prior to
11:00 A.M., San Francisco time, on the Borrowing Date requested by the Company
in funds immediately available to the Administrative Agent. Such borrowing will
then be made available to the Company by the Administrative Agent crediting the
account of the Company on the books of such office with the aggregate of the
amounts made available to the Administrative Agent by the Acquisition Loan
Lenders and in like funds as received by the Administrative Agent.
<PAGE> 43
36
4.3 Repayment of Acquisition Loans. The Company hereby
unconditionally promises to pay to the Administrative Agent for the account of
the Acquisition Loan Lenders the principal amount of the Acquisition Loans
outstanding on the last day of the Acquisition Loan Availability Period in
twelve consecutive equal quarterly installments, payable on the last day of
March, June, September and December of each year (or such earlier date on which
the Acquisition Loans become due and payable pursuant to Section 11), commencing
March 31, 2001, with each such installment being equal to 8.33% of the aggregate
principal amount of Acquisition Loans of the Acquisition Loan Lenders
outstanding on the last day of the Acquisition Loan Availability Period,
provided that, notwithstanding the foregoing, the final installment shall equal
the then aggregate unpaid principal amount of the Acquisition Loans of all the
Acquisition Loan Lenders. Amounts paid (including prepayments) in respect of the
principal of the Acquisition Loans may not be reborrowed, provided that, to the
extent Acquisition Loans are made on the Closing Date to finance a portion of
the Recapitalization and are subsequently repaid with the Net Cash Proceeds of
the Senior Subordinated Notes or the Subordinated Bridge Loans in accordance
with subsection 6.3(f), the Acquisition Loan Commitments in respect of such
Acquisition Loans shall be reinstated on the date of such repayment and shall
subsequently be available for borrowings of Acquisition Loans pursuant to
subsection 4.1 to finance Permitted Acquisitions and to pay related fees and
expenses. The Company hereby further agrees to pay interest on the unpaid
principal amount of the Acquisition Loans from time to time outstanding from the
date of the borrowing of each particular Acquisition Loan until payment in full
thereof at the rates per annum, and on the dates, set forth in subsections 6.6
and 6.9.
4.4 Commitment Fees. The Company shall pay to the Administrative
Agent for the account of each Acquisition Loan Lender a commitment fee for the
period from and including the first day of the Acquisition Loan Availability
Period to the last day of the Acquisition Loan Availability Period, computed at
a rate equal to the Applicable Rate per annum on the average daily amount of
such Acquisition Loan Lender's Available Acquisition Loan Commitment during the
period for which payment is made, payable quarterly in arrears on each Fee
Payment Date (or such earlier date on which the Acquisition Loan Commitments
terminate as provided herein), commencing on the first of such dates to occur
after the date hereof.
4.5 Termination or Reduction of Acquisition Loan Commitments. (a)
The Company shall have the right, upon not less than three Business Days' notice
to the Administrative Agent (which will promptly notify the Acquisition Loan
Lenders thereof), to terminate the Acquisition Loan Commitments or, from time to
time, to reduce the then unused amount of the Acquisition Loan Commitments. Any
such reduction shall be in an amount equal to $1,000,000 or a whole multiple of
$1,000,000 in excess thereof and shall reduce permanently the Acquisition Loan
Commitments then in effect. Any undrawn Acquisition Loan Commitments as of the
last day of the Acquisition Loan Availability Period shall terminate as of the
close of business on the last day of the Acquisition Loan Availability Period.
(b) The Acquisition Loan Commitments shall also be automatically
reduced as provided in subsection 6.3. Except as provided in subsection 4.3, any
such reduction shall ratably and permanently reduce the Acquisition Loan
Commitments then in effect.
SECTION 5. AMOUNT AND TERMS OF TENDER LOAN COMMITMENTS
5.1 Tender Loans. Subject to the terms and conditions hereof, each
Tender Loan Lender severally agrees to make a loan (a "Tender Loan") on the
Closing Date in a principal amount equal to such Tender Loan Lender's Tender
Loan Commitment, provided that, if any Senior Subordinated Notes are issued, or
any Senior Subordinated Bridge Loans are made, on or prior to the Closing Date,
no Tender Loans shall be made hereunder. The Tender Loans may from time to time
be (i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as
determined by the Company and notified to the Administrative Agent in accordance
with subsections 5.2 and 6.4.
5.2 Procedure for Tender Loan Borrowing. The Company shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., San Francisco time, (y) three Banking
Days prior to the Closing Date, if all or any part of the Tender Loans are to be
initially Eurodollar Loans or (z) one Banking Day prior to the Closing Date,
otherwise) requesting that the Tender Loan Lenders make the Tender Loans on the
Closing Date and specifying (i)
<PAGE> 44
37
whether the Tender Loans are to be initially Eurodollar Loans, Base Rate Loans
or a combination thereof and (ii) if the Tender Loans are to be entirely or
partly Eurodollar Loans the amount of such Type of Loan and the length of the
initial Interest Periods therefor. Upon receipt of such notice, the
Administrative Agent shall promptly notify each Tender Loan Lender thereof. On
the Closing Date, each such Tender Loan Lender shall make available to the
Administrative Agent at its office specified in subsection 14.2 the amount in
immediately available funds equal to the Tender Loan to be made by such Tender
Loan Lender. The Administrative Agent shall on such date credit the account of
the Company on the books of such office of the Administrative Agent with the
aggregate of the amounts made available to the Administrative Agent by such
Tender Loan Lenders and in like funds as received by the Administrative Agent.
5.3 Repayment of Tender Loans; Expiration of Tender Loan
Commitments. The Company hereby unconditionally promises to pay to the
Administrative Agent for the account of the Tender Loan Lenders the principal
amount of the Tender Loans on the Tender Loan Maturity Date. The Company hereby
further agrees to pay interest on the unpaid principal amount of the Tender
Loans from time to time outstanding from the date hereof until payment in full
thereof at the rates per annum, and on the dates, set forth in subsections 6.6
and 6.9. The Tender Loan Commitments shall terminate as of the close of business
on the Closing Date.
SECTION 6. GENERAL PROVISIONS APPLICABLE TO LOANS
AND LETTERS OF CREDIT
6.1 Evidence of Debt. (a) Each Lender shall maintain in accordance
with its usual practice an account or accounts evidencing indebtedness of the
Company (and, in the case of Revolving Offshore Loans, the relevant Subsidiary
Borrower) to such Lender resulting from each Loan of such Lender from time to
time, including the amounts of principal and interest payable and paid to such
Lender from time to time under this Agreement.
(b) Each Fronting Lender shall maintain in accordance with its usual
practice an account in which shall be recorded (i) the amount of each Fronted
Offshore Loan made by it hereunder, the identity of the Subsidiary Borrower in
respect thereof, the Type thereof and each Interest Period (if any) applicable
thereto, (ii) the amount of any principal or interest due and payable or to
become due and payable from each such Subsidiary Borrower to such Fronting
Lender hereunder and (iii) the amount of any sum received by the Fronting Lender
hereunder from such Subsidiary Borrower in respect of any such Fronted Offshore
Loan. At the request of the Administrative Agent, each Fronting Lender will
provide to the Administrative Agent a copy of its records maintained pursuant to
this subsection.
(c) The Administrative Agent shall maintain the Register pursuant to
subsection 14.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Acquisition Loan, Revolving Loan, Swing Line
Loan, Tender Loan and Term Loan made hereunder, the Type thereof and each
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable to the Lenders hereunder, (iii) the
amount of each Revolving Credit Lender's participation in outstanding Letters of
Credit, Swing Line Loans and Fronted Offshore Loans and (iv) both the amount of
any sum received by the Administrative Agent hereunder from the Company and the
Subsidiary Borrowers and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant hereto shall, to the extent permitted by applicable law, be
prima facie evidence of the existence and amounts of the obligations of the
Company and the Subsidiary Borrowers therein recorded, provided, however, that
the failure of any Lender or the Administrative Agent to maintain the Register
or any such account, or any error therein, shall not in any manner affect the
obligation of the Company or any Subsidiary Borrower to repay (with applicable
interest) the Loans made to the Company or to such Subsidiary Borrower in
accordance with the terms of this Agreement.
(e) The Company agrees that, upon the request to the Administrative
Agent by any applicable Lender, the Company will execute and deliver to such
Lender, as appropriate, (i) a promissory note of the Company evidencing the
Revolving Loans of such Lender, substantially in the form of Exhibit G-1 with
appropriate insertions as to date and principal amount (a "Revolving Credit
Note"), (ii) a
<PAGE> 45
38
promissory note of the Company evidencing the Tranche A Term Loan of such
Lender, substantially in the form of Exhibit G-2 with appropriate insertions as
to date and principal amount (a "Tranche A Term Note"), (iii) a promissory note
of the Company evidencing the Tranche B Term Loan of such Lender, substantially
in the form of Exhibit G-3 with appropriate insertions as to date and principal
amount (a "Tranche B Term Note"), (iv) a promissory note of the Company
evidencing the Tranche C Term Loan of such Lender, substantially in the form of
Exhibit G-4 with appropriate insertions as to date and principal amount (a
"Tranche C Term Note," and together with the Tranche A Term Notes and the
Tranche B Term Notes, the "Term Notes"), (v) a promissory note of the Company
evidencing the Tender Loans of such Lender, substantially in the form of Exhibit
G-5 with appropriate insertions as to date and principal amount (a "Tender
Note"), (vi) a promissory note of the Company evidencing each Acquisition Loan
of such Lender, substantially in the form of Exhibit G-6 with appropriate
insertions as to date and principal amount (an "Acquisition Note") and (vii) a
promissory note of the Company evidencing the Swing Line Loans of the Swing Line
Lender, substantially in the form of Exhibit G-7 with appropriate insertions as
to date and principal amount (the "Swing Line Note"). Each Subsidiary Borrower
agrees that, upon the request to the Administrative Agent by any applicable
Lender, such Subsidiary Borrower will execute and deliver to such Lender (x) a
promissory note of such Subsidiary Borrower evidencing the Fronted Offshore
Loans of such Lender, substantially in the form of Exhibit G-8 with appropriate
insertions as to date and principal amount (a "Fronted Loan Note") and (y) if
such Subsidiary Borrower borrows any Revolving Offshore Loans, a Revolving
Credit Note. Each Lender and Fronting Lender is hereby authorized to record the
Borrowing Date, the amount of each relevant Loan and the date and amount of each
payment or prepayment of principal thereof, on the schedule annexed to and
constituting a part of the Note evidencing such Loan and any such recordation
shall constitute prima facie evidence of the accuracy of the information so
recorded, provided that the failure by a Lender or a Fronting Lender to make any
such recordation (or any error therein) shall not affect any of the obligations
of the Company or any Subsidiary Borrower under such Note or this Agreement.
6.2 Optional Prepayments. (a) The Company or any Subsidiary Borrower
may prepay the Loans made to it in whole or in part without premium or penalty,
in the case of Eurodollar Loans and Revolving Offshore Loans on the last day of
any Interest Period with respect thereto (except that the Company may make a
prepayment of Eurodollar Loans and Revolving Offshore Loans on a day other than
the last day of the Interest Period with respect thereto as long as it complies
with subsection 6.13(c)) and, in the case of Base Rate Loans (other than Swing
Line Loans), on any Business Day, provided that (i) the Company shall have given
(x) at least three Business Days' irrevocable notice to the Administrative Agent
(in the case of Eurodollar Loans and Revolving Offshore Loans) and (y) one
Business Day's irrevocable notice to the Administrative Agent (in the case of
Base Rate Loans), (ii) such notice specifies, in the case of any prepayment of
Loans, the date and amount of prepayment and whether the prepayment is (x) of
Term Loans, Revolving Loans, Tender Loans, Acquisition Loans or a combination
thereof, and in each case if a combination thereof, the amount allocable to
each, (y) of Eurodollar Loans, Revolving Offshore Loans, Base Rate Loans or a
combination thereof, and, in each case if a combination thereof, the principal
amount allocable to each, (iii) each prepayment is in a minimum principal amount
of $1,000,000 (or the Offshore Currency Equivalent thereof, in the case of
Revolving Offshore Loans) and a multiple of $1,000,000 in excess thereof (or the
lesser of (A) 1,000,000 units in the relevant Eligible Offshore Currency and (B)
the Offshore Currency Equivalent of $1,000,000 in the relevant Eligible Offshore
Currency, in the case of Revolving Offshore Loans) and (iv) no prepayment of
Term Loans or Acquisition Loans shall be permitted under this subsection if any
Tender Loans shall be outstanding after giving effect to such prepayment. Upon
the receipt of any such notice, the Administrative Agent shall promptly notify
each of the relevant Lenders thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified therein,
together with any amounts payable pursuant to subsection 6.13 and, in the case
of prepayments of the Term Loans, Tender Loans and Acquisition Loans only,
accrued interest to such date on the amount prepaid. Subject to subsection
6.3(i), partial prepayments of the Term Loans and the Acquisition Loans pursuant
to this subsection shall be applied first to the prepayment in full of
outstanding Acquisition Loans, and second to the prepayment in full of
outstanding Term Loans pro rata (based on outstanding principal amount). Any
such prepayment of Acquisition Loans, Tranche A Term Loans, Tranche B Term Loans
and Tranche C Term Loans shall first be applied to any installment thereof due
within 90 days of the date of such prepayment and second to the respective then
remaining installments of principal thereof pro rata. Amounts prepaid pursuant
to this subsection 6.2 on account of the Term Loans, Tender Loans and
Acquisition Loans may not be reborrowed. Revolving Loans may not be prepaid if
any Swing Line Loans are outstanding at such time.
<PAGE> 46
39
(b) A Subsidiary Borrower may at any time and from time to time
prepay Fronted Offshore Loans, in whole or in part, without premium or penalty
except as specified in subsection 6.13, upon at least four Banking Days'
irrevocable notice (or such other number of days as may be specified in the
Fronting Lender Addendum of such Fronting Lender in its reasonable discretion)
to the relevant Fronting Lender and the Administrative Agent, specifying the
date and amount of prepayment. If any such notice is given, the amount specified
in such notice shall be due and payable on the date specified therein, together
with any amounts payable pursuant to subsection 6.13 and accrued interest to
such date on the amount prepaid. Partial prepayments of Fronted Offshore Loans
shall be in such minimum amounts as shall be specified in the Fronting Lender
Addendum of the relevant Fronting Lender.
6.3 Mandatory Prepayments of Loans and Reductions of Revolving
Credit Commitments and Acquisition Loan Commitments. (a) If, on any day, (i) the
Dollar Equivalent of the aggregate outstanding principal amount of Offshore
Currency Loans exceeds an amount equal to 103% of the Offshore Currency Sublimit
or (ii) the Aggregate Revolving Credit Outstandings of all the Revolving Credit
Lenders exceeds the Revolving Credit Commitments on such date, the Company
shall, without notice or demand, immediately repay (or cause the relevant
Subsidiary Borrower to repay) such of the outstanding Loans in an aggregate
principal amount such that, after giving effect thereto, (x) the Dollar
Equivalent of the aggregate outstanding principal amount of Offshore Currency
Loans does not exceed the Offshore Currency Sublimit and (y) the Aggregate
Revolving Credit Outstandings of all the Revolving Credit Lenders do not exceed
the Revolving Credit Commitments, together with interest accrued to the date of
such payment or prepayment on the principal so prepaid and any amounts payable
under subsection 6.13 in connection therewith. Any prepayment of Revolving Loans
pursuant to clause (ii) of the immediately preceding sentence shall first be
applied to prepay any outstanding Swing Line Loans. The Company may in lieu of
prepaying Offshore Currency Loans in order to comply with this paragraph deposit
amounts in the relevant Offshore Currencies in a Cash Collateral Account in
accordance with the next succeeding sentence equal to the aggregate principal
amount of Offshore Currency Loans required to be prepaid. To the extent that
after giving effect to any prepayment of Loans required by this paragraph, the
Aggregate Revolving Credit Outstandings of all the Revolving Credit Lenders at
such time exceed the Revolving Credit Commitments at such time, the Company
shall, without notice or demand, immediately deposit in a Cash Collateral
Account upon terms reasonably satisfactory to the Administrative Agent an amount
equal to the lesser of (A) the sum of the aggregate then outstanding L/C
Obligations and the aggregate principal amount of Offshore Currency Loans then
outstanding and (B) the amount of such remaining excess. The Administrative
Agent shall apply any cash deposited in the Cash Collateral Account (to the
extent thereof) to pay any Reimbursement Obligations which are or become due
thereafter and/or to repay Offshore Currency Loans at the end of the Interest
Periods therefor, provided that, (x) the Administrative Agent shall release to
the Company from time to time such portion of the amount on deposit in the Cash
Collateral Account to the extent such amount is not required to be so deposited
in order for the Company to be in compliance with this paragraph and (y) the
Administrative Agent may so apply such cash at any time after the occurrence and
during the continuation of an Event of Default. "Cash Collateral Account" means
an account established by the Company with the Administrative Agent and over
which the Administrative Agent shall have exclusive dominion and control,
including the right of withdrawal for application in accordance with this
subsection 6.3(a).
(b) On the earlier of (i) the date of receipt by the Lenders of the
financial statements required to be delivered pursuant to subsection 9.1(a) as
to any fiscal year of the Company (the "Base Year") and (ii) the 90th day of the
fiscal year of the Company next succeeding the Base Year, the Loans shall be
prepaid and/or the Commitments shall be reduced in an amount equal to 50% of
Excess Cash Flow for the Base Year (commencing with the fiscal year ending
December 31, 1998) in accordance with paragraph (e) of this subsection, provided
that, (A) if the Applicable Margin is on any Adjustment Date determined by
reference to Leverage Ratio Level V, the foregoing percentage shall be reduced
to 25% from and after such Adjustment Date and (B) if the Applicable Margin is
on any Adjustment Date determined by reference to Leverage Ratio Level VI, no
prepayment of Loans and/or reduction of Commitments shall be required pursuant
to this paragraph from and after such Adjustment Date.
(c) On the day upon which the Company or any of its Subsidiaries
receives Net Cash Proceeds from the issuance of any Indebtedness permitted under
subsection 10.2(k) or Capital Stock or from any capital contribution (other than
(i) any issuance of Capital Stock or any capital contribution to the
<PAGE> 47
40
extent the Net Cash Proceeds of such issuance of Capital Stock or capital
contributions are used to repay any outstanding Senior Subordinated Bridge
Loans, and (ii) any issuance of Capital Stock to, or any capital contribution
by, the Sponsors and/or their Affiliates to the extent (A) the Net Cash Proceeds
of such issuance of Capital Stock and/or capital contribution are used to
finance Permitted Acquisitions and to pay related fees and expenses and (B) the
aggregate Net Cash Proceeds in respect of all such issuances of Capital Stock
and/or capital contributions does not exceed $25,000,000), the Loans shall be
prepaid and/or the Commitments shall be reduced in an amount equal to 100% (or
50%, in the case of issuances of Capital Stock and capital contributions) of the
Net Cash Proceeds of such issuance or capital contribution in accordance with
paragraph (e) of this subsection.
(d) If the Company or any of its Subsidiaries sells, assigns,
transfers, leases or otherwise disposes of any of its assets pursuant to
subsection 10.6(g), or any of its assets becomes the subject of a Casualty
Event, no later than three Business Days after receipt of the Net Cash Proceeds
therefrom, the Loans shall be prepaid and/or the Commitments shall be reduced in
an amount equal to 100% of such Net Cash Proceeds in accordance with paragraph
(e) of this subsection, provided that, at the option of the Company and so long
as no Default or Event of Default shall have occurred and be continuing or would
be caused thereby, (i) the Company and its Subsidiaries may use up to
$20,000,000 of the Net Cash Proceeds realized in the aggregate subsequent to the
Closing Date from any such sales, assignments, transfers, leases or other
dispositions to purchase assets used in the Company's business, in each case
within twelve months (or if such purchase is to be made pursuant to a binding
commitment entered into within such twelve-month period, eighteen months) after
the consummation of the relevant sale, assignment, lease, transfer or other
disposition, subject to the following conditions: (w) in the event the Company
or any of its Subsidiaries elects to exercise its rights pursuant to this clause
(i), the Company or such Subsidiary, as the case may be, shall promptly deliver
a certificate of a Responsible Officer to the Administrative Agent setting forth
the amount of the Net Cash Proceeds which the Company or such Subsidiary, as the
case may be, expects to so use during the subsequent twelve month period or
eighteen-month period, as the case may be, and (x) on the date which is twelve
months or eighteen months, as the case may be, after the relevant sale or other
disposition, the Company or such Subsidiary, as the case may be, shall (I)
deliver a certificate of a Responsible Officer to the Administrative Agent
certifying as to the amount and use of such Net Cash Proceeds actually so used
and (II) deliver to the Administrative Agent, for application in accordance with
(and to the extent required by) this subsection, an amount equal to the
remaining unused Net Cash Proceeds and (ii) the Company or any of its
Subsidiaries may use the Net Cash Proceeds of any Casualty Event to replace or
rebuild the property or assets which were the subject of the Casualty Event or
asset related or complementary thereto within twelve months (or if such
replacement or rebuilding is to be made pursuant to a binding commitment entered
into within such twelve-month period, eighteen months) after the occurrence of
such Casualty Event, subject to the following conditions: (y) in the event the
Company or any of its Subsidiaries elects to exercise its right pursuant to this
clause (ii), the Company or such Subsidiary, as the case may be, shall promptly
deliver a certificate of a Responsible Officer to the Administrative Agent
setting forth the amount of the Net Cash Proceeds which the Company or such
Subsidiary, as the case may be, expects to so use during the subsequent twelve
month period or eighteen month period, as the case may be, and (z) on the date
which is twelve months or eighteen months, as the case may be, after the
relevant Casualty Event, the Company or such Subsidiary, as the case may be,
shall (I) deliver a certificate of a Responsible Officer to the Administrative
Agent certifying as to the amount and use of such Net Cash Proceeds actually
used to replace or rebuild such property or assets and (II) deliver to the
Administrative Agent, for application in accordance with (and to the extent
required by) this subsection, an amount equal to the remaining unused Net Cash
Proceeds, provided, further that, notwithstanding anything to the contrary in
the immediately preceding proviso, the Loans shall be prepaid and/or the
Commitments shall be reduced in accordance with paragraph (e) of this subsection
to the extent the failure to do so would otherwise result in a "Net Proceeds
Offer" (as defined in the Senior Subordinated Note Indenture).
(e) Prepayments of the Loans and permanent reductions of Commitments
pursuant to subsections 6.3(b), (c) and (d) shall be applied, first, to the
payment in full of the Tender Loans then outstanding, second, to the payment in
full of the Acquisition Loans then outstanding, third, to the payment in full of
the Term Loans then outstanding, fourth, to the permanent reduction of any then
unused Acquisition Loan Commitments then in effect and to the permanent
reduction of the Revolving Credit Commitments then in effect. Prepayments of the
Term Loans pursuant to clause third of the immediately preceding sentence shall
be applied (x) pro rata (based on outstanding principal amount) to the Tranche A
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41
Term Loans, the Tranche B Term Loans and the Tranche C Term Loans then
outstanding, and (y) pro rata to the respective then remaining installments of
principal thereof. Reductions of the Revolving Credit Commitments and the
Acquisition Loan Commitments pursuant to clause third of the immediately
preceding sentence shall be applied pro rata to the Revolving Credit Commitments
then in effect and the then unused Acquisition Loan Commitments then in effect.
(f) Upon the receipt by the Company or any of its Subsidiaries of
any Net Cash Proceeds of the issuance of the Senior Subordinated Notes and/or
the Senior Subordinated Bridge Loans (other than Net Cash Proceeds of Senior
Subordinated Notes to the extent used to repay Senior Subordinated Bridge Loans)
after the Closing Date, then an amount equal to 100% of such Net Cash Proceeds
shall, on the date of receipt thereof, be applied as follows: first, to the
payment in full of the Tender Loans then outstanding, second, to the extent of
any amount remaining after repayment in full of the Tender Loans, the Company
shall deposit an amount (the "Senior Subordinated Debt Escrow Amount") equal to
the amount required to purchase any Shares (and related options) not acquired
pursuant to the Tender Offer (other than the Rollover Shares) in an escrow
account pending purchase of such Shares on terms and conditions reasonably
satisfactory to the Administrative Agent, third, to the payment of the
Acquisition Loans outstanding in such amount as the Company shall determine, and
fourth to the repayment of the then outstanding Revolving Loans (it being
understood that the Revolving Credit Commitments then in effect shall not be
reduced by operation of this clause fourth), provided that (i) to the extent the
aggregate Net Cash Proceeds of the issuance of Senior Subordinated Notes exceeds
$200,000,000, the Loans shall be prepaid and/or the Commitments shall be reduced
in accordance with paragraph (e) of this subsection and (ii) if the Merger is
not consummated on or prior to May 31, 1998, amounts on deposit in the Senior
Subordinated Debt Escrow Amount shall be applied to prepay Loans and/or reduce
Commitments in accordance with paragraph (e) of this subsection.
(g) Subject to subsection 4.3 (in the case of Acquisition Loans),
amounts prepaid on account of Term Loans, Tender Loans and Acquisition Loans
pursuant to this subsection may not be reborrowed.
(h) Notwithstanding the foregoing provisions of subsection 6.3(e),
if at any time the mandatory prepayment of Loans pursuant to subsection 6.3(b),
(c) or (d) would result, after giving effect to the procedures set forth above,
in the Company's incurring breakage costs under subsection 6.13 as a result of
Eurodollar Loans or Revolving Offshore Loans being prepaid other than on the
last day of an Interest Period applicable thereto (the "Affected Eurodollar
Loans" or "Affected Offshore Loans", as the case may be), then the Company may
in its sole discretion, so long as no Default or Event of Default shall have
then occurred and be continuing, initially deposit a portion (up to 100%) of the
amounts in Dollars or the relevant Eligible Offshore Currency, as applicable,
that otherwise would have been paid in respect of the Affected Eurodollar Loans
or Affected Offshore Loans, as the case may be, with the Administrative Agent
(which deposit must be equal in amount to the amount of the Affected Eurodollar
Loans or Affected Offshore Loans, as the case may be, not immediately prepaid)
in a Cash Collateral Account to be held as security for the Obligations, with
such cash collateral to be directly applied by the Administrative Agent to
prepay the relevant Affected Eurodollar Loans and Affected Offshore Loans on the
last day of the Interest Periods applicable thereto (or such earlier date or
dates as shall be requested by the Company or as shall be determined by the
Administrative Agent at any time after the occurrence and during the
continuation of a Default or Event of Default). Notwithstanding anything to the
contrary contained in the immediately preceding sentence, all amounts deposited
in such Cash Collateral Account pursuant to the immediately preceding sentence
shall be held for the sole benefit of the Lenders whose Loans would otherwise
have been immediately prepaid with the amounts deposited, and, upon the taking
of any action by the Administrative Agent or the Lenders pursuant to the
remedial provisions of Section 11, any amounts held as cash collateral pursuant
to this subsection 6.3(h) shall, subject to the requirements of applicable law,
be immediately applied to prepay such Loans.
(i) Notwithstanding (a) the provisions of this subsection 6.3 with
respect to the amount of any mandatory prepayment described herein or (b) the
provisions of subsection 6.2 with respect to the amount of any optional
prepayment described therein that is allocated to the then outstanding Tranche B
Term Loans and Tranche C Term Loans (such amounts, the "Tranche B Prepayment
Amount" and the "Tranche C Prepayment Amount", respectively), the Company may,
at its option so long as no Default or Event of Default has then occurred and is
continuing, in lieu of applying such amount to the prepayment of
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42
Tranche B Term Loans and Tranche C Term Loans as set forth in this subsection or
in subsection 6.2, (x) in the case of mandatory prepayments subject to this
subsection, on the date specified for such prepayment and (y) in the case of
optional prepayments subject to subsection 6.2, on the date on which the Company
gives irrevocable notice to the Administrative Agent of the such prepayment: (i)
deposit in the Tranche B/C Escrow Account the Tranche B Prepayment Amount and
the Tranche C Prepayment Amount and (ii) provide to each Tranche B Lender and
each Tranche C Lender a notice (each a "Tranche B/C Prepayment Option Notice")
as described below. Each Tranche B/C Prepayment Option Notice shall be in
writing, shall refer to this subsection 6.3(i) and shall (i) set forth the
Tranche B Prepayment Amount and the Tranche C Prepayment Amount and the portion
of each thereof that the applicable Tranche B Lender and Tranche C Lender will
be entitled to receive if it accepts such prepayment in accordance with this
subsection 6.3(i), (ii) offer to prepay on a specified date (each a "Tranche B/C
Prepayment Date"), which shall be not less than 10 days or more than 15 days
after the date of the Tranche B/C Prepayment Option Notice, the Tranche B Term
Loans of such Tranche B Lender and the Tranche C Term Loans of such Tranche C
Lender, as the case may be, in an amount equal to the portion of the Tranche B
Prepayment Amount or the Tranche C Prepayment Amount, as the case may be,
indicated in such Tranche B Lender's Tranche B/C Prepayment Option Notice as
being applicable to such Tranche B Lender or in such Tranche C Lender's Tranche
B/C Prepayment Option Notice, as the case may be, as being applicable to such
Tranche C Lender, (iii) request such Tranche B Lender or Tranche C Lender, as
the case may be, to notify the Company and the Administrative Agent in writing,
no later than the fifth day prior to the Tranche B/C Prepayment Date, of such
Tranche B Lender's or such Tranche C Lender's, as the case may be, acceptance or
rejection of such offer of prepayment and (iv) inform such Tranche B Lender or
such Tranche C Lender, as the case may be, that failure by such Lender to accept
such offer in writing on or before the fifth day prior to the Tranche B/C
Prepayment Date shall be deemed a rejection of such prepayment offer. Each
Tranche B/C Prepayment Option Notice shall be given by telecopy, confirmed by
hand delivery, overnight courier service or registered or certified mail, in
each case addressed as provided in subsection 14.2. On the Tranche B/C
Prepayment Date, the Administrative Agent shall withdraw from the Tranche B/C
Escrow Account (i) the aggregate amount necessary to prepay the portion of the
Tranche B Prepayment Amount in respect of which the Tranche B Lenders have
accepted prepayment as described above (such Tranche B Lenders, the "Accepting
Tranche B Lenders"), and shall apply such amount on behalf of the Company pro
rata against the remaining installments of principal due in respect of the
Tranche B Term Loans of the Accepting Tranche B Lenders and (ii) the aggregate
amount necessary to prepay the portion of the Tranche C Prepayment Amount in
respect of which the Tranche C Lenders have accepted prepayment as described
above (such Tranche C Lenders, the "Accepting Tranche C Lenders"), and shall
apply such amount on behalf of the Company pro rata against the remaining
installments of principal due in respect of the Tranche C Term Loans of the
Accepting Tranche C Lenders. The amount remaining in the Tranche B/C Escrow
Account after the payment of the amounts described in the immediately preceding
sentence shall be applied (i) (x) pro rata (based on outstanding principal
amount) to the then outstanding Tranche A Term Loans and Acquisition Loans and
(y) pro rata to the respective then remaining installments of principal thereof
and (ii) after the then outstanding Tranche A Term Loans and Acquisition Loans
have been paid in full, (x) pro rata (based on outstanding principal amount) to
the then outstanding Tranche B Term Loans and Tranche C Term Loans of the
Accepting Tranche B Lenders and the Accepting Tranche C Lenders, respectively,
and (y) pro rata to the respective then remaining installments of principal
thereof. For purposes of this Agreement, the term "Tranche B/C Escrow Account"
shall mean an account established by the Company with the Administrative Agent
for the benefit of the Tranche B Lenders and the Tranche C Lenders and over
which the Administrative Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal for application in accordance with
this subsection 6.3(i). The Administrative Agent will, at the request of the
Company, invest amounts on deposit in the Tranche B/C Escrow Account in Cash
Equivalents that mature prior to the Tranche B/C Prepayment Date, provided that
(i) the Administrative Agent shall not be required to make any investment that,
in its sole judgment, would require or cause the Administrative Agent to be in,
or would result in any, violation of any Requirement of Law and (ii) the
Administrative Agent shall have no obligation to invest amounts on deposit in
the Tranche B/C Escrow Account if a Default or Event of Default shall have
occurred and be continuing. The Company shall indemnify the Administrative Agent
for any losses relating to the investments so that the amount available to
prepay the Tranche B Term Loans of the Accepting Tranche B Lenders and the
Tranche C Term Loans of the Accepting Tranche C Lenders on the Tranche B/C
Prepayment Date is not less than the amount that would have been available had
no investments been made. Other than any interest earned on such investments,
the Tranche B/C Escrow Account shall not bear interest. Interest or profits, if
any, on such investments shall be deposited and reinvested and disbursed as
described above. If an Event of
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Default shall have occurred and be continuing, the Administrative Agent may
apply all amounts on deposit in the Tranche B/C Escrow Account to prepay
outstanding Tranche B Term Loans and Tranche C Term Loans which would have been
prepaid but for the delivery of a Tranche B/C Prepayment Option Notice pursuant
to this subsection and, after repayment in full of the Tranche B Term Loans and
Tranche C Term Loans, to the other Obligations in such order as the
Administrative Agent may determine. The Company hereby grants to the
Administrative Agent, for its benefit and the benefit of the Lenders, a security
interest in the Tranche B/C Escrow Account to secure the Obligations.
6.4 Conversion and Continuation Options. (a) The Company may elect
from time to time to convert Eurodollar Loans to Base Rate Loans by giving the
Administrative Agent at least two Banking Days' prior irrevocable notice of such
election, provided that any such conversion of Eurodollar Loans may only be made
on the last day of an Interest Period with respect thereto. The Company may
elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving
the Administrative Agent at least three Banking Days' prior irrevocable notice
of such election. Any such notice of conversion to Eurodollar Loans shall
specify the length of the initial Interest Period or Interest Periods therefor.
Upon receipt of any such notice, the Administrative Agent shall promptly notify
each Lender thereof. All or any part of outstanding Eurodollar Loans and Base
Rate Loans may be converted as provided herein, provided that (i) no Loan may be
converted into a Eurodollar Loan when any Event of Default has occurred and is
continuing and the Administrative Agent has or the Required Lenders have
determined that such a conversion is not appropriate and (ii) no Loan may be
converted into a Eurodollar Loan after the date that is one month prior to (a)
the Revolving Credit Termination Date (in the case of conversions of Revolving
Loans), (b) the date of the final installment of principal of the relevant Term
Loans (in the case of conversions of Term Loans) or (c) the date of the final
installment of principal of the Acquisition Loans (in the case of conversions of
Acquisition Loans).
(b) Any Eurodollar Loans or Revolving Offshore Loans may be
continued as such upon the expiration of the then current Interest Period with
respect thereto by giving notice to the Administrative Agent, in accordance with
the applicable provisions of the term "Interest Period" set forth in subsection
1.1, of the length of the next Interest Period to be applicable to such Loans,
provided that no Eurodollar Loan may be continued as such (i) when any Event of
Default has occurred and is continuing and the Administrative Agent has or the
Required Lenders have determined that such a continuation is not appropriate or
(ii) after the date that is one month prior to (a) the Revolving Credit
Termination Date (in the case of continuations of Revolving Loans), (b) the date
of the final installment of principal of the relevant Term Loans (in the case of
continuations of Term Loans) or (c) the date of the final installment of
principal of the Acquisition Loans (in the case of Acquisition Loans), and
provided, further, that if the Company shall fail to give such notice or if such
continuation is not permitted such Eurodollar Loans shall be automatically
converted to Base Rate Loans on the last day of such then expiring Interest
Period and, if the Company shall fail to give such notice of continuation of a
Revolving Offshore Loan, such Revolving Offshore Loan shall be automatically
continued for an Interest Period of one month.
6.5 Minimum Amounts and Maximum Number of Tranches. All borrowings,
conversions and continuations of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Eurodollar Tranche shall be equal to $10,000,000 or
a whole multiple of $1,000,000 in excess thereof. In no event shall there be
more than 15 Eurodollar Tranches outstanding at any time or more than 3 Offshore
Tranches in any single Eligible Offshore Currency at any time.
6.6 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per annum
equal to the Base Rate plus the Applicable Margin.
(c) Each Revolving Offshore Loan shall bear interest for each day
during each Interest Period with respect thereto at a rate per annum equal to
the Offshore Rate determined for such day plus the Applicable Margin.
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(d) Each Swing Line Loan shall bear interest at a rate per annum
equal to the Base Rate plus the Applicable Margin for Revolving Loans which are
Base Rate Loans.
(e) Each Fronted Offshore Loan shall bear interest for each day
during each Interest Period with respect thereto (or, if there is no Interest
Period with respect thereto, for each day such Loan is outstanding), at a rate
per annum equal to the Cost of Funds determined for such day.
(f) If all or a portion of (i) any principal of any Loan, (ii) any
interest payable thereon, (iii) any commitment fee or (iv) any other amount
payable hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), any such overdue principal, interest, commitment fee
or other amount shall bear interest at a rate per annum which is (x) in the case
of principal, the rate that would otherwise be applicable thereto pursuant to
the foregoing provisions of this subsection plus 2% or (y) in the case of any
such overdue interest, commitment fee or other amount, (A) the rate described in
paragraph (b) of this subsection plus 2%, in the case of amounts that are owing
in Dollars or (B) (I) the Cost of Funds determined by the Administrative Agent
in respect of the relevant Offshore Currency, plus (II) the Applicable Margin
for Revolving Offshore Loans in effect at such time, plus (III) 2%, in the case
of amounts owing that are denominated in Offshore Currencies, in each case from
the date of such non-payment until such overdue principal, interest, commitment
fee or other amount is paid in full (as well after as before judgment).
(g) Interest shall be payable in arrears on each Interest Payment
Date and on the Revolving Credit Termination Date (in the case of Revolving
Loans, Swing Line Loans and Fronted Offshore Loans) and the date of the final
installment of principal (in the case of Acquisition Loans and Term Loans) and
the Tender Loan Maturity Date (in the case of Tender Loans), provided that
interest accruing pursuant to paragraph (f) of this subsection shall be payable
from time to time on demand.
6.7 Computation of Interest and Fees. (a) Whenever it is calculated
on the basis of the reference rate referred to in the definition of "Base Rate,"
interest shall be calculated on the basis of a 365- (or 366-, as the case may
be) day year for the actual days elapsed; and, otherwise, interest, commitment
fees and letter of credit fees and commissions shall be calculated on the basis
of a 360-day year for the actual days elapsed. The Administrative Agent shall as
soon as practicable notify the Company and the Lenders of each determination of
a Eurodollar Rate or of an Offshore Rate. Any change in the interest rate on a
Loan resulting from a change in the Base Rate or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the day on
which such change becomes effective. The Administrative Agent shall as soon as
practicable notify the Company and the Lenders of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent or a Fronting Lender pursuant to any provision of this Agreement shall be
conclusive and binding on the Company, the Subsidiary Borrowers and the Lenders
in the absence of manifest error. The Administrative Agent shall, at the request
of the Company, deliver to the Company a statement showing the quotations used
by the Administrative Agent in determining any interest rate pursuant to
subsection 6.6(a) or (c).
6.8 Inability to Determine Interest Rate. If prior to the first day
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Company and the
Subsidiary Borrowers) that, by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period or the Offshore
Rate for such Interest Period in respect of any Eligible Offshore
Currency, or
(b) the Administrative Agent shall have received notice from the
Required Lenders that the Eurodollar Rate or Offshore Rate determined or
to be determined for such Interest Period in respect of any Eurodollar
Loan or Revolving Offshore Loan in an Eligible Offshore Currency will not
adequately and fairly reflect the cost to such Lenders (as conclusively
certified by such Lenders) of making or maintaining their affected Loans
during such Interest Period, or
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(c) a Fronting Lender shall have determined (which determination
shall be conclusive and binding upon the Company and the Subsidiary
Borrowers) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Cost of
Funds for such Interest Period in respect of any Fronted Offshore Currency
(any such Eligible Offshore Currency or Fronted Offshore Currency is
referred to as an "Affected Offshore Currency"),
then the Administrative Agent (or the relevant Fronting Lender in the cause of
clause (c) above) shall give telecopy or telephonic notice thereof to the
Company and the Lenders (and, in the case of any notice by a Fronting Lender,
the Administrative Agent) as soon as practicable thereafter. If such notice is
given (y) pursuant to either clause (a) or (b) of this subsection 6.8 in respect
of Eurodollar Loans, then (i) any Eurodollar Loans requested to be made on the
first day of such Interest Period shall be made as Base Rate Loans, (ii) any
Loans that were to have been converted on the first day of such Interest Period
to Eurodollar Loans shall be continued as Base Rate Loans and (iii) any
outstanding Eurodollar Loans shall be converted, on the first day of such
Interest Period, to Base Rate Loans and (z) in respect of any Offshore Currency
Loans, then (i) any Offshore Currency Loans in an Affected Offshore Currency
requested to be made on the first day of such Interest Period shall not be made
and (ii) any outstanding Offshore Currency Loans in an Affected Offshore
Currency shall be due and payable on the first day of such Interest Period.
Until such notice has been withdrawn by the Administrative Agent, no further
Eurodollar Loans or Offshore Currency Loans in an Affected Offshore Currency
shall be made or continued as such, nor shall the Company have the right to
convert Base Rate Loans to Eurodollar Loans.
6.9 Pro Rata Treatment and Payments. (a) Each borrowing of Revolving
Loans or Acquisition Loans by the Company (or, in the case of Revolving Offshore
Loans, any Subsidiary Borrower) from the Revolving Credit Lenders or Acquisition
Loan Lenders, as the case may be, hereunder shall be made, each payment by the
Company on account of any commitment fee in respect of the Revolving Credit
Commitments or Acquisition Loan Commitments, as the case may be, hereunder shall
be allocated by the Administrative Agent and any reduction of the Revolving
Credit Commitments or Acquisition Loan Commitments, as the case may be, shall be
allocated by the Administrative Agent, pro rata according to the Revolving
Credit Commitment Percentages of the Revolving Credit Lenders or Acquisition
Loan Commitment Percentages of the Acquisition Loan Lenders, as the case may be.
Each payment (including each prepayment) by the Company on account of principal
of and interest on any Revolving Loan shall be allocated pro rata according to
the Revolving Credit Commitment Percentages of the Revolving Credit Lenders.
Each payment (including each prepayment) by the Company on account of principal
of and interest on any Tranche A Term Loans, Tranche B Term Loans, Tranche C
Term Loans, Tender Loans or Acquisition Loans shall be allocated by the
Administrative Agent pro rata according to their respective Tranche A Commitment
Percentages, Tranche B Commitment Percentages, Tranche C Commitment Percentages,
Tender Loan Commitment Percentages or Acquisition Loan Commitment Percentages.
All payments (including prepayments) to be made by the Company or any Subsidiary
Borrower hereunder (other than payments on Fronted Offshore Loans as provided in
subsection 6.9(c)) and under any Notes, whether on account of principal,
interest, fees, Reimbursement Obligations or otherwise, shall be made without
set-off or counterclaim and shall be made prior to 12:00 Noon, San Francisco
time, on the due date thereof to the Administrative Agent, for the account of
the relevant Lenders at the Administrative Agent's Payment Office, in Dollars
or, in the case of payments of principal and interest on Offshore Currency
Loans, in the currency in which the Loans are denominated, and in immediately
available funds. Payments received by the Administrative Agent after such time
shall be deemed to have been received on the next Business Day. If any payment
hereunder (other than payments on Eurodollar Loans or Revolving Offshore Loans)
becomes due and payable on a day other than a Banking Day, the maturity of such
payment shall be extended to the next succeeding Banking Day, and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. If any payment on a Eurodollar Loan or a
Revolving Offshore Loan becomes due and payable on a day other than a Banking
Day, the maturity of such payment shall be extended to the next succeeding
Banking Day (and, with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension) unless the result
of such extension would be to extend such payment into another calendar month,
in which event such payment shall be made on the immediately preceding Banking
Day.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its portion of such
<PAGE> 53
46
borrowing available to the Administrative Agent, the Administrative Agent may
assume that such Lender is making such amount available to the Administrative
Agent and the Administrative Agent may, in reliance upon such assumption, make
available to the Company (or, in the case of Revolving Offshore Loans, the
relevant Subsidiary Borrower) a corresponding amount. If such amount is not made
available to the Administrative Agent by the required time on the Borrowing Date
therefor, such Lender shall pay to the Administrative Agent on demand (i) in the
case of Revolving Offshore Loans, such amount with interest thereon at a rate
equal to the daily average cost of funding such amount (as determined by the
Administrative Agent) for the period until such Lender makes such amount
immediately available to the Administrative Agent or (ii) otherwise, such amount
with interest thereon at a rate equal to the daily average Federal Funds
Effective Rate for the period until such Lender makes such amount immediately
available to the Administrative Agent, in each case with a customary
administrative fee with respect thereto. A certificate of the Administrative
Agent submitted to any Lender with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error. If such
Lender's portion of such borrowing is not made available to the Administrative
Agent by such Lender within three Banking Days of such Borrowing Date, the
Administrative Agent shall also be entitled to recover such amount with interest
thereon at the rate per annum equal to the higher of (i) the rate specified in
the second sentence of this paragraph and (ii) the rate applicable to Base Rate
Loans hereunder, on demand, from the Company (or, in the case of Revolving
Offshore Loans, the relevant Subsidiary Borrower).
(c) All payments (including prepayments) to be made by a Subsidiary
Borrower hereunder in respect of Fronted Offshore Loans, on account of principal
and interest thereon, shall be made without set off or counterclaim and shall be
made prior to 11:00 A.M., local time, on the due date thereof to the relevant
Fronting Lender, at the Fronting Lender's Payment Office in the currency in
which such Loans are denominated and in immediately available funds in such
currency. If any payment of principal or interest of a Fronted Offshore Loan
becomes due and payable on a day other than a Banking Day, such payment shall be
extended to the next succeeding Banking Day, and, with respect to payments of
principal, interest thereon shall be payable at the then applicable rate during
such extension.
6.10 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans or Offshore Currency Loans as contemplated by this Agreement,
(a) the commitment of such Lender hereunder to make such Type of Loans, continue
such Type of Loans as such and convert Base Rate Loans to Eurodollar Loans shall
forthwith be cancelled, (b) such Lender's Loans then outstanding as Eurodollar
Loans, if any, shall be converted automatically to Base Rate Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law and (c) such Lender's
Loans then outstanding as Offshore Currency Loans, if any, shall be due on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a Eurodollar Loan or repayment of an Offshore Currency Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, the Company shall (or shall cause the relevant Subsidiary Borrower to)
pay to such Lender such amounts, if any, as may be required pursuant to
subsection 6.13. During any such period of illegality, any Loans that, but for
the application of the preceding sentence would have been maintained as
Eurodollar Loans, shall be made and maintained by the affected Lender as Base
Rate Loans.
6.11 Requirements of Law. (a) If the adoption of or any change in
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement, any Note, any Offshore Currency Loan, any
Letter of Credit, any Letter of Credit Application or any Eurodollar Loan
made by it, or change the basis of taxation of payments to such Lender in
respect thereof (except for Non-Excluded Taxes covered by subsection 6.12
and changes in the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of
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47
such Lender (or any affiliate of such Lender from which such Lender
customarily obtains funds) which is not otherwise included in the
determination of the Eurodollar Rate, Offshore Rate or Cost of Funds
hereunder; or
(iii) shall impose on such Lender (or such affiliate) any other
condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or Offshore Currency Loans or issuing
or participating in Letters of Credit or participating in Fronted Offshore Loans
or to reduce any amount receivable hereunder in respect thereof, then, in any
such case, the Company shall (or shall cause the relevant Subsidiary Borrower
to) promptly pay such Lender such additional amount or amounts as will
compensate such Lender for such increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under any Letter of Credit to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change or compliance (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, the Company shall
promptly pay to such Lender such additional amount or amounts as will compensate
such Lender or such corporation for such reduction. In addition, if any Lender
becomes subject to any reserve, special deposit, compulsory loan or similar
requirement in respect of any Revolving Offshore Loans made by it (including,
without limitation, the Mandatory Liquid Asset requirements of the Bank of
England), the Company shall (or shall cause the relevant Subsidiary Borrower to)
promptly pay such Lender such additional amount or amounts as will compensate
such Lender for any increased costs attributable thereto.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, such Lender shall promptly notify the Company (with
a copy to the Administrative Agent) of the event by reason of which it has
become so entitled. A certificate as to any additional amounts payable pursuant
to this subsection submitted by such Lender to the Company (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
(d) Failure or delay on the part of any Lender to demand
compensation pursuant to this subsection shall not constitute a waiver of such
Lender's right to demand such compensation; provided that the Company or
relevant Subsidiary Borrower shall not be required to compensate a Lender
pursuant to this subsection 6.11 for any increased costs or reductions incurred
more than 180 days prior to the date that such Lender notifies the Company of
the event or occurrence giving rise to such increased costs or reductions and of
such Lender's intention to claim compensation therefor; provided further that,
if the event or occurrence giving rise to such increased costs or reductions is
retroactive, then the 180-day period referred to above shall be extended to
include the period of retroactive effect thereof.
6.12 Taxes. (a) All payments made by the Company or the Subsidiary
Borrowers under this Agreement, any Notes, any Letters of Credit or any Letter
of Credit Applications shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings
("Taxes"), now or hereafter imposed, levied, collected, withheld or assessed by
any Governmental Authority, excluding net income taxes and franchise taxes
(imposed in lieu of net income taxes) imposed on the Administrative Agent
or any Lender as a result of a present or former connection between the
Administrative Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from the
Administrative Agent or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
Note) (any such non-excluded Taxes, "Non-Excluded Taxes"). If any Taxes are
required to be withheld from any amounts payable to the Administrative Agent
<PAGE> 55
48
or any Lender hereunder or under any Note, any Letters of Credit or any Letter
of Credit Applications, (A) the Company or the relevant Subsidiary Borrower
shall withhold and deduct any such Taxes from such amounts, (B) the Company or
relevant Subsidiary Borrower shall pay or deposit with the appropriate taxing
authority in a timely manner the full amount of Taxes so withheld or deducted,
(C) the Company or the relevant Subsidiary Borrower shall promptly send to the
Administrative Agent a certified copy of an original official receipt received
by the Company or such Subsidiary Borrower (or other documentation reasonably
acceptable to the Administrative Agent) showing payment thereof, and (D) if such
Taxes are Non-Excluded Taxes, the amounts so payable to the Administrative Agent
or the relevant Lender shall be increased to the extent necessary to yield to
the Administrative Agent or such Lender (after payment of all Non-Excluded
Taxes) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement, provided, however, that the Company and
the Subsidiary Borrowers shall not be required to increase any such amounts
payable to any Lender that is not organized under the laws of the United States
of America or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this subsection. If the Company or any
Subsidiary Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the Company and such
Subsidiary Borrower shall indemnify the Administrative Agent and the relevant
Lenders for any incremental taxes, interest or penalties that may become payable
by the Administrative Agent or any Lender as a result of any such failure. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not organized under the laws of the United
States of America or a state thereof shall:
(i) if such Lender is a "bank" within the meaning of Section
881(c)(3)(A) of the Code, deliver to the Company and the Administrative
Agent (A) two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, or successor applicable form, as the case may
be, and (B) an Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be and if such Lender is not a "bank"
within the meaning of Section 881(c)(3)(A) of the Code, deliver to the
Administrative Agent an Internal Revenue Service Form W-8 or W-9, or
successor applicable form, as the case may be;
(ii) deliver to the Company and the Administrative Agent two further
copies of any such form or certification on or before the date that any
such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Company; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Company or
the Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Company and the
Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and (ii) in
the case of a Form W-8 or W-9, that it is entitled to an exemption from United
States backup withholding tax. Each Person that shall become a Lender or a
Participant pursuant to subsection 14.6 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms and statements
required pursuant to this subsection, provided that in the case of a Participant
such Participant shall furnish all such required forms and statements to the
Lender from which the related participation shall have been purchased.
(c) Failure or delay on the part of any Lender to demand additional
amounts pursuant to this subsection shall not constitute a waiver of such
Lender's right to demand such additional amounts; provided that the Company or
relevant Subsidiary Borrower shall not be required to compensate a Lender
pursuant to this subsection 6.12 for any Non-Excluded Taxes incurred more than
180 days prior to the date that such Lender notifies the Company thereof;
provided further that, if the Non-Excluded Taxes are
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retroactive, then the 180-day period referred to above shall be extended to
include the period of retroactive effect thereof.
6.13 Indemnity. The Company agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Company in making a borrowing
of, conversion into or continuation of Eurodollar Loans or Offshore Currency
Loans after the Company has given a notice requesting the same in accordance
with the provisions of this Agreement, (b) default by the Company in making any
prepayment after the Company has given a notice thereof in accordance with the
provisions of this Agreement or (c) the making of a prepayment of Eurodollar
Loans or Offshore Currency Loans on a day which is not the last day of an
Interest Period with respect thereto. Such indemnification may include an amount
equal to the excess, if any, of (i) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, converted or continued,
for the period from the date of such prepayment or of such failure to borrow,
convert or continue to the last day of such Interest Period (or, in the case of
a failure to borrow, convert or continue, the Interest Period that would have
commenced on the date of such failure) in each case at the applicable rate of
interest for such Loans provided for herein (excluding, however, the Applicable
Margin included therein, if any) over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank eurodollar market. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
6.14 Offshore Currency Spot Rate. (a) (i) No later than 2:00 P.M.,
San Francisco time, on each Calculation Date with respect to an Eligible
Offshore Currency, the Administrative Agent shall determine the Spot Rate as of
such Calculation Date with respect to such Eligible Offshore Currency and (ii)
no later than the time specified in the applicable Fronting Lender Addendum, on
each Calculation Date with respect to a Fronted Offshore Currency, the Fronting
Lender with respect to such Offshore Currency shall determine the Spot Rate as
of such Calculation Date with respect to such Fronted Offshore Currency and
shall promptly notify the Administrative Agent thereof, provided that, upon
receipt of a borrowing request pursuant to subsection 2.14, the relevant
Fronting Lender shall determine the Spot Rate with respect to the relevant
Fronted Offshore Currency in accordance with the Fronting Lender Addendum and
shall promptly notify the Administrative Agent thereof (it being acknowledged
and agreed that the Administrative Agent shall use such Spot Rate for the
purposes of determining compliance with subsection 2.13 with respect to such
borrowing request and issuing the notice described in clause (iii) of the
proviso to the first sentence of subsection 2.13). The Spot Rates so determined
shall become effective on the first Business Day immediately following the
relevant Calculation Date (a "Reset Date") and shall remain effective until the
next succeeding Reset Date.
(b) No later than 2:00 P.M., San Francisco time, on each Reset Date
and Borrowing Date (with respect to Offshore Currency Loans), the Administrative
Agent shall determine the Dollar Equivalent of the Offshore Currency Loans then
outstanding (after giving effect to any Offshore Currency Loans to be made or
repaid on such date).
(c) The Administrative Agent shall promptly notify the Company of
each determination of a Spot Rate hereunder.
6.15 Subsidiary Borrowers. The Company may designate any Foreign
Subsidiary of the Company as a Subsidiary Borrower by delivery to the
Administrative Agent of a Borrowing Subsidiary Agreement executed by such
Foreign Subsidiary and the Company and upon such delivery such Foreign
Subsidiary shall for all purposes of this Agreement be a Subsidiary Borrower and
a party to this Agreement until the Company shall have executed and delivered to
the Administrative Agent a Borrowing Subsidiary Termination with respect to such
Foreign Subsidiary, whereupon such Foreign Subsidiary shall cease to be a
Subsidiary Borrower and a party to this Agreement. The Administrative Agent
shall promptly notify the affected Lenders at each such designation.
Notwithstanding the preceding sentence, no Borrowing Subsidiary Termination will
become effective as to any Subsidiary Borrower at a time when any Subsidiary
Borrower Obligation of such Subsidiary Borrower shall be outstanding hereunder,
provided that such Borrowing Subsidiary Termination shall nevertheless be
effective to terminate such Subsidiary Borrower's right to make further
borrowings under this Agreement. Each Subsidiary Borrower shall be permitted
only to borrow Revolving Offshore Loans in the currency of the jurisdiction
which is both its
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jurisdiction of organization and the jurisdiction where it has its principal
operations.
6.16 Mitigation Obligations; Replacement of Lenders. (a) If any
Lender or a Participant in such Lender's Loans requests compensation under
subsection 6.11, if the adoption of or any change in any Requirement of Law or
in the interpretation or application thereof causes the occurrence of one of the
events described in clause (a), (b) or (c) of subsection 6.11, or if the Company
or any Subsidiary Borrower is required to pay any additional amount to any
Lender or a Participant in such Lender's Loans or any Governmental Authority for
the account of any Lender or Participant pursuant to subsection 6.12, then such
Lender or Participant shall use reasonable efforts to designate a different
lending office for funding or booking its Loans hereunder or to assign its
rights and obligations hereunder to another of its offices, branches or
Affiliates, if, in the reasonable judgment of such Lender or Participant, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to subsection 6.11 or 6.12 or would render inapplicable the adoption, change,
interpretation or application of the Requirement of Law that necessitated the
occurrence of one of the events described in clause (a), (b) or (c) of
subsection 6.11, as the case may be, in the future and (ii) would not subject
such Lender or Participant to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender or Participant. The Company hereby
agrees to pay all reasonable costs and expenses incurred by any Lender or
Participant in connection with any such designation or assignment.
(b) If any Lender or a Participant in such Lender's Loans requests
compensation under subsection 6.11, or if the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof causes the
occurrence of one of the events described in clause (a), (b) or (c) of
subsection 6.11, or if the Company or any Subsidiary Borrower is required to pay
any additional amount to any Lender or a Participant in such Lender's Loans or
any Governmental Authority for the account of any Lender or Participant pursuant
to subsection 6.12, then the Company shall have the right, at its sole expense,
upon notice to such Lender and the Administrative Agent, to require such Lender
to assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in subsection 14.6), all its interests, rights and
obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) the Company shall have received the prior written
consent of the Administrative Agent (and, if a Revolving Credit Commitment is
being assigned, the Issuing Bank, the Swing Line Lender and the Fronting
Lenders) which consent shall not unreasonably be withheld, (ii) such Lender
shall have received payment of an amount equal to the outstanding principal of
its Loans and participations in outstanding Letters of Credit, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Company (in the case of all other amounts) and (iii) (x) in the
case of any such assignment resulting from a claim for compensation under
subsection 6.11 or payments required to be made pursuant to subsection 6.12,
such assignment will result in a reduction in such compensation or payments and
(y) in the case of any such assignment resulting from the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
that causes the occurrence of one of the events described in clause (a), (b) or
(c) of subsection 6.11, such assignment will render inapplicable the adoption,
change, interpretation or application of the Requirement of Law that
necessitated the occurrence of one of the events described in clause (a), (b) or
(c) of subsection 6.11. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Company to require such
assignment and delegation cease to apply.
SECTION 7. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this Agreement
and to induce the Lenders to make their extensions of credit hereunder, the
Company hereby represents and warrants to the Administrative Agent and each
Lender that:
7.1 Financial Condition. (a) The Consolidated balance sheet of the
Company and its Consolidated Subsidiaries as at December 31, 1996 and the
related Consolidated statements of earnings and of cash flows for the fiscal
year ended on such date, reported on by KPMG Peat Marwick LLP, copies of which
have heretofore been furnished to each Lender, present fairly the Consolidated
financial condition of the Company and its Consolidated Subsidiaries as at such
date, and the Consolidated results of their
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operations and their Consolidated cash flows for the fiscal year then ended. The
unaudited Consolidated balance sheet of the Company and its Consolidated
Subsidiaries as at September 30, 1997 and the related unaudited Consolidated
statements of earnings and of cash flows for the nine-month period ended on such
date, certified by a Responsible Officer, copies of which have heretofore been
furnished to each Lender, present fairly the Consolidated financial condition of
the Company and its Consolidated Subsidiaries as at such date, and the
Consolidated results of their operations and their Consolidated cash flows for
the nine-month period then ended (subject to normal year-end audit adjustments
and the absence of notes). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved as required by GAAP (except as
approved by such accountants or Responsible Officer, as the case may be, and as
disclosed therein). Neither the Company nor any of its Consolidated Subsidiaries
had, at the date of the most recent balance sheet referred to above, any
material Guarantee Obligation, contingent liability or liability for taxes, or
any long-term lease or unusual forward or long-term commitment, including,
without limitation, any Interest Rate Protection Agreement or foreign currency
swap or exchange transaction, which is not reflected in the foregoing statements
or in the notes thereto. Except as set forth in Schedule 7.1, during the period
from December 31, 1996 to and including the date hereof there has been no sale,
transfer or other disposition by the Company or any of its Consolidated
Subsidiaries of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person other than the RIK Acquisition) material in relation to the
Consolidated financial condition of the Company and its Consolidated
Subsidiaries at December 31, 1996.
(b) The pro forma balance sheet of the Company and its Consolidated
Subsidiaries, copies of which have heretofore been furnished to each Lender, is
the balance sheet of the Company and its Consolidated Subsidiaries as of
September 30, 1997 (the "Pro Forma Date"), adjusted to give effect (as if such
events had occurred on such date) to (w) the consummation of the
Recapitalization, (x) the making of the Loans and other extensions of credit
hereunder to be made on the Closing Date and the application of the proceeds
thereof as contemplated hereby and (y) the payment of the fees and expenses paid
in connection with the consummation of the Recapitalization and the other
transactions contemplated by the Loan Documents and the Recapitalization
Documentation. Such balance sheet was prepared based on good faith assumptions
and on the best information available to the Company as of the date of delivery
thereof and fairly presents on a pro forma basis the Consolidated financial
position of the Company and its Consolidated Subsidiaries as at September 30,
1997, as adjusted, as described above, assuming such events had occurred at
September 30, 1997.
7.2 No Change; Solvency. Since December 31, 1996, there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect and during the period from December 31, 1996 to and
including the date hereof, except as provided in and pursuant to the
Recapitalization Documentation and except as set forth in Schedule 7.2, no
dividends or other distributions have been declared, paid or made upon the
Capital Stock of the Company or any of its Subsidiaries nor has any of the
Capital Stock of the Company or any of its Subsidiaries been redeemed, retired,
purchased or otherwise acquired for value by the Company or any of its
Subsidiaries. As of the Closing Date, after giving effect to the transactions
contemplated by the Loan Documents and the Recapitalization Documentation, and
as of each Borrowing Date, the Company and its Subsidiaries will be Solvent on a
Consolidated basis.
7.3 Corporate Existence; Compliance with Law. 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 organization, (b) has the corporate
power and authority, and the legal right, to own 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 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
except to the extent its failure to be so qualified and/or in good standing
could not reasonably be expected to have a Material Adverse Effect and (d) is in
compliance with all Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
7.4 Corporate Power; Authorization; Enforceable Obligations. The
Company has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to
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which it is a party and to borrow hereunder and has taken all necessary
corporate action to authorize the borrowings on the terms and conditions of this
Agreement and any Notes and to authorize the execution, delivery and performance
of the Loan Documents to which it is a party. No consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the borrowings
hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents other than filings and recordings to
perfect the Liens created by the Loan Documents. This Agreement has been, and
each other Loan Documents to which it is a party will be, duly executed and
delivered on behalf of the Company. This Agreement constitutes, and each other
Loan Document to which it is a party when executed and delivered will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
7.5 No Legal Bar. The execution, delivery and performance of the
Loan Documents, the borrowings hereunder and the use of the proceeds thereof
will not violate any Requirement of Law or Contractual Obligation of the Company
or of any of its Subsidiaries and will not result in, or require, the creation
or imposition of any Lien, except pursuant to the Security Documents, on any of
its or their respective properties or revenues pursuant to any such Requirement
of Law or Contractual Obligation.
7.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Company, threatened by or against the Company or any of
its Subsidiaries or against any of its or their respective properties or
revenues (a) with respect to any of the Loan Documents or any of the
transactions contemplated hereby or thereby or (b) which could reasonably be
expected to have a Material Adverse Effect.
7.7 No Labor Controversy. There are no strikes or other labor
disputes against the Company or any of its Subsidiaries pending or, to the
knowledge of the Company, threatened that (individually or in the aggregate)
could reasonably be expected to have a Material Adverse Effect. Hours worked by
and payment made to employees of the Company and its Subsidiaries have not been
in violation of the Fair Labor Standards Act or any other applicable Requirement
of Law dealing with such matters that (individually or in the aggregate) could
reasonably be expected to have a Material Adverse Effect. All payments due from
the Company or any of its Subsidiaries on account of employee health and welfare
insurance that (individually or in the aggregate) could reasonably be expected
to have a Material Adverse Effect if not paid have been paid or accrued as a
liability on the books of the Company or the relevant Subsidiary.
7.8 No Default. Neither the Company nor any of its Subsidiaries is
in default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
7.9 Ownership of Property; Liens. The Company and each of its
Subsidiaries has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to, or a valid
leasehold interest in, all its other property, and none of such property is
subject to any Lien except as permitted by subsection 10.3. Schedule 7.9 sets
forth a true and complete list of all real property owned by the Company and its
Subsidiaries as of the date hereof.
7.10 Intellectual Property. The Company and each of its Subsidiaries
owns, or is licensed to use, all trademarks, tradenames, patents, copyrights,
technology, know-how and processes necessary for the conduct of its business as
currently conducted except for those the failure to own or license which could
not reasonably be expected to have a Material Adverse Effect (the "Intellectual
Property"). No claim has been asserted and is pending by any Person challenging
or questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does the Company know of
any valid basis for any such claim. The use of such Intellectual Property by the
Company and its Subsidiaries does not infringe on the rights of any Person,
except for such claims and infringements that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
7.11 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of
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the Company or any of its Subsidiaries could reasonably be expected to have a
Material Adverse Effect.
7.12 Taxes. The Company and each of its Subsidiaries has filed or
caused to be filed all tax returns which, to the knowledge of the Company, are
required to be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any such taxes, fees and other charges, the
amount or validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Company or its Subsidiaries, as the
case may be); no tax Lien has been filed, and, to the knowledge of the Company,
no claim is being asserted, with respect to any such tax, fee or other charge.
7.13 Federal Regulations. No part of the proceeds of any Loans will
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation G or Regulation U in
violation of Regulation G or Regulation U. If requested by any Lender or the
Administrative Agent, the Company will furnish to the Administrative Agent and
each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form G-1 or FR Form U-1 referred to in said Regulation G or
Regulation U, as the case may be.
7.14 ERISA. Except for matters which could not reasonably be
expected to have a Material Adverse Effect, neither a Reportable Event nor an
"accumulated funding deficiency" (within the meaning of Section 412 of the Code
or Section 302 of ERISA) has occurred during the five-year period prior to the
date on which this representation is made or deemed made with respect to any
Plan (other than any Multiemployer Plan), and each Plan (other than any
Multiemployer Plan) has complied in all material respects with the applicable
provisions of ERISA and the Code. No termination of a Single Employer Plan under
Section 4041(c) or 4042 of ERISA has occurred, and no Lien in favor of the PBGC
or a Plan has arisen, during such five-year period. The present value of all
accrued benefits under each Single Employer Plan (based on those assumptions
used to fund such Plans) did not, as of the last annual valuation date prior to
the date on which this representation is made or deemed made, exceed the value
of the assets of such Plan allocable to such accrued benefits. Neither the
Company nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan, and, to the best of the Company's
knowledge, neither the Company nor any Commonly Controlled Entity would become
subject to any liability under ERISA if the Company or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans as of
the valuation date most closely preceding the date on which this representation
is made or deemed made. No such Multiemployer Plan is in Reorganization or
Insolvent.
7.15 Investment Company Act; Other Regulations. No Loan Party is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Federal or State statute or regulation
(other than Regulation X) which limits its ability to incur Indebtedness.
7.16 Subsidiaries. Schedule 7.16 sets forth all of the Subsidiaries
of the Company, and all of the joint ventures in which the Company or any of its
Subsidiaries has, or will have, an interest, at the Closing Date, both before
and after giving effect to the Recapitalization, the jurisdiction of their
incorporation and the direct or indirect ownership interest of the Company
therein.
7.17 Purpose of Loans. The proceeds of the Loans shall be used by
the Company (i) in the case of the Term Loans, to finance a portion of the
Recapitalization and to pay fees and expenses related to the Recapitalization,
(ii) in the case of the Tender Loans, to finance (A) the purchase of outstanding
Shares pursuant to the Tender Offer and (B) the payment of fees and expenses
related to the Recapitalization, (iii) in the case of the Revolving Loans and
Swing Line Loans, to finance (A) on the Closing Date the purchase of outstanding
Shares pursuant to the Tender Offer and to pay fees and expenses related to the
Recapitalization and (B) the working capital needs and general corporate
purposes of the Company and its Subsidiaries in the ordinary course of business
(including the financing of Permitted Acquisitions), (iv) in the case of the
Acquisition Loans, to finance (A) on the Closing Date the purchase of Shares
pursuant to the Tender Offer and to pay fees and expenses related to the
Recapitalization and (B) Permitted Acquisitions and (v) in the case of Fronted
Offshore Loans, to finance the working capital needs
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of the relevant Subsidiary Borrower.
7.18 Environmental Matters. Except as set forth in Schedule 7.18:
(a) The facilities and properties owned, leased or operated by the
Company or any of its Subsidiaries (the "Properties") do not contain, and have
not previously contained, any Materials of Environmental Concern in amounts or
concentrations which (i) constitute or constituted a violation of, or (ii) would
reasonably be expected to give rise to liability under, any applicable
Environmental Law, except in either case insofar as such violation or liability,
or any aggregation thereof, is not reasonably likely to result in a Material
Adverse Effect.
(b) The Properties and all operations at the Properties are in
compliance in all material respects, and have in the last five years been in
compliance in all material respects, with all applicable Environmental Laws, and
there is no contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the business operated by the
Company or any of its Subsidiaries (the "Business") which is reasonably likely
to result in a Material Adverse Effect.
(c) Neither the Company nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with Environmental Laws
(including, without limitation, the federal Comprehensive Environmental
Response, Compensation, and Liability Act) with regard to any of the Properties
or the Business, nor does the Company have knowledge or reason to believe that
any such notice will be received or is being threatened except insofar as such
notice or threatened notice, or any aggregation thereof, does not involve a
matter or matters that is or are reasonably likely to result in a Material
Adverse Effect.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a location
which would be expected to give rise to liability under, any Environmental Law,
nor have any Materials of Environmental Concern been generated, treated, stored
or disposed of at, on or under any of the Properties in violation of, or in a
manner that could reasonably be expected to give rise to liability under, any
applicable Environmental Law except insofar as such transportation, disposal,
generation, treatment or storage, individually or in the aggregate, is not
reasonably likely to result in a Material Adverse Effect.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of the Company, threatened, under any
Environmental Law to which the Company or any Subsidiary is or will be named as
a party with respect to the Properties or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business, nor has the
Company or any of its Subsidiaries assumed or retained, by contract or, to the
best knowledge of the Company, by operation of law, any liabilities of any kind,
fixed or contingent, known or unknown, under any Environmental Law or with
respect to any Material of Environmental Concern except insofar as such
proceeding, action, decree, order, requirement, assumption or retention,
individually or in the aggregate, is not reasonably likely to result in a
Material Adverse Effect.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations of the Company or any of its Subsidiaries in connection with the
Properties or otherwise in connection with the Business, in violation of or in
amounts or in a manner that could give rise to liability under Environmental
Laws except insofar as such release or threat of release is not reasonably
likely to result in a Material Adverse Effect.
7.19 Regulation H. No Mortgage encumbers improved real property
which is located in an area that has been identified by the Secretary of Housing
and Urban Development as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968.
7.20 No Material Misstatements. The written information, reports,
financial statements, exhibits and schedules furnished by or on behalf of the
Company and each other Loan Party to the Administrative Agent and the Lenders in
connection with the negotiation of any Loan Document or the
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Recapitalization Documentation or any document related thereto or included
therein or delivered pursuant thereto do not contain, and will not contain as of
the Closing Date, any material misstatement of fact and do not, taken as a
whole, omit, and will not, taken as a whole, omit as of the Closing Date, to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not materially misleading. It
is understood that no representation or warranty is made concerning the
forecasts, estimates, pro forma information, projections and statements as to
anticipated future performance or conditions (the "Projections"), and the
assumptions on which they were based, contained in any such information,
reports, financial statements, exhibits or schedules, except that, as of the
date such Projections were generated, (a) such Projections were based on the
good faith assumptions of the management of the Company, and (b) the assumptions
on which the Projections were based were believed by such management to be
reasonable (it being understood that the Projections are subject to significant
uncertainties and contingencies, many of which are beyond the control of the
Company and that no assurance is given by the Company that such Projections will
be realized).
7.21 Representations and Warranties Contained in the
Recapitalization Documentation. All of the Recapitalization Documentation has
been duly executed and delivered by each of the parties thereto. As of the
Closing Date, the representations and warranties of each of the Loan Parties
contained in the Recapitalization Documentation (after giving effect to any
amendments, supplements, waivers or other modifications of such Recapitalization
Documentation prior to such Closing Date in accordance with this Agreement) will
be true and correct in all material respects except as otherwise disclosed to
the Lenders in writing prior to the date hereof.
7.22 Ownership of the Company. Schedule 7.22 sets forth the number
of shares of the Capital Stock of the Company, and the type thereof, to be owned
by the Buyers both on the Closing Date and on the Merger Date, and, except as
set forth in Schedule 7.22, there will be no shares of the Capital Stock of the
Company issued and outstanding on the Closing Date or the Merger Date that are
not listed on such Schedule.
7.23 Collateral. The provisions of each of the Security Documents,
when executed and delivered, will constitute in favor of the Administrative
Agent for the ratable benefit of the Lenders, a legal, valid and enforceable
security interest in all right, title, and interest of the Company or any of the
other Loan Parties which is a party to such Security Document, as the case may
be, in the Collateral described in such Security Document. When financing
statements have been filed in the offices in the jurisdictions listed in
Schedule 3 to the Guarantee and Collateral Agreement, when appropriate filings
have been made in the U.S. Patent and Trademark Office and Copyright Office, and
when each of the Mortgages shall have been recorded in the appropriate recording
office, except as otherwise provided in the Security Documents, each of the
Security Documents shall constitute a perfected security interest in all right,
title and interest of the Company or such other Loan Parties, as the case may
be, in the Collateral described therein, and except for (i) Liens permitted by
subsection 10.3 which have priority over the Liens on the Collateral by
operation of law and (ii) Liens described in Schedule 10.3(f), a perfected first
Lien on all right, title and interest of the Company or such other Loan Parties,
as the case may be, in the Collateral described in each Security Document.
7.24 Senior Debt; No Other Designated Senior Debt. The Obligations
constitute "Senior Indebtedness", "Designated Senior Debt" and "Designated
Guarantor Senior Debt" under and as defined in the Senior Subordinated Note
Indenture (after the execution and delivery thereof), in the Senior Subordinated
Credit Agreement (after the execution and delivery thereof and for so long as
the Senior Subordinated Credit Agreement remains in effect) and in any other
Subordinated Debt Documentation. No other Indebtedness of any Loan Party
constitutes or has been designated as "Designated Senior Debt" or "Designated
Guarantor Senior Debt" under and as defined in the Senior Subordinated Note
Indenture (after the execution and delivery thereof), the Senior Subordinated
Credit Agreement (after the execution and delivery thereof) or any other
Subordinated Debt Documentation.
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SECTION 8. CONDITIONS PRECEDENT
8.1 Conditions to Initial Loans. The agreement of each Lender to
make the initial Loans or other extensions of credit requested to be made by it
hereunder and of the Issuing Bank to issue any Letter of Credit requested to be
issued by it on any date, is subject to the satisfaction, immediately prior to
or concurrently with the making of such Loans or other extensions of credit on
the Closing Date, of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of the
Company, with a counterpart for each Lender, (ii) for the account of each
of the Lenders which has requested a Note pursuant to subsections 6.1, a
Revolving Credit Note, a Fronted Loan Note, a Tranche A Term Note, a
Tranche B Term Note, a Tranche C Term Note, a Swing Line Note, a Tender
Note or an Acquisition Note, as the case may be, each conforming to the
requirements hereof and executed and delivered by a duly authorized
officer of the Company or the relevant Subsidiary Borrower, (iii) the
Guarantee and Collateral Agreement, executed and delivered by a duly
authorized officer of each party thereto, with a counterpart or a
conformed copy for each Lender, (iv) Mortgages executed and delivered by a
duly authorized officer of the applicable Loan Party with respect to each
parcel of Initial Mortgaged Real Property, with a counterpart or a
conformed copy for each Lender, and (v) an executed Addendum (or a copy
thereof by facsimile transmission) from each Person listed in Schedule
1.1(a), provided, that, notwithstanding the foregoing, in the event that
an Addendum has not been duly executed and delivered by each Person listed
in Schedule 1.1(a) on the date (which shall be no earlier than the date
hereof) on which this Agreement shall have been executed and delivered by
each of the Company, the Administrative Agent and the Syndication Agent,
the condition set forth in this subsection 8.1(a)(v) shall, subject to
satisfaction of the other conditions precedent set forth in subsections
8.1 and 8.2, nevertheless be satisfied on such date with respect to those
Persons which have executed and delivered an Addendum on or before such
date if on such date each of the Company, the Syndication Agent and the
Administrative Agent shall have designated one or more banks, financial
institutions or other entities ("Designated Lenders") to assume, in the
aggregate, all of the Commitments which would have been held by the
Persons listed in Schedule 1.1(a) (the "Non-Executing Persons") which have
not so executed an Addendum (subject to each such Designated Lender's
prior written consent in its sole discretion and its execution of an
Addendum) (Schedule 1.1(a) shall automatically be deemed to be amended to
reflect the respective Commitments of the Designated Lenders and the
omission of the Non-Executing Persons as Lenders hereunder).
(b) Proceeds of Issuance of New Investor Shares. The Administrative
Agent shall have received evidence satisfactory to it that the Company
shall have received at least $125,000,000 in cash proceeds from the sale
of the New Investor Shares prior to the consummation of the Tender Offer
on terms and conditions satisfactory to the Agents.
(c) Tender Offer; Transaction Agreement; Recapitalization
Documentation. The Tender Offer shall have been consummated in accordance
with applicable law and on terms reasonably satisfactory to the Agents and
all conditions to the Tender Offer contained in the Transaction Agreement
shall have been satisfied or complied with substantially on the terms set
forth therein and not waived without the Administrative Agent's consent
(which shall not be unreasonably withheld). The Transaction Agreement and
other documentation (collectively, the "Recapitalization Documentation")
relating to the Recapitalization shall have terms and conditions
reasonably satisfactory to the Agents, shall be in full force and effect
and no provision of such documentation shall have been waived, amended,
supplemented or otherwise modified in any material respect without the
prior written consent of the Required Lenders, which consent may not be
unreasonably withheld. Without limiting the foregoing, the Transaction
Agreement shall provide that, pursuant to the Merger, the Rollover Shares
(which shall have an aggregate value of approximately $352,794,990) shall
be converted to newly issued shares of the Company as the surviving
corporation of the Merger, which newly issued shares shall represent all
of the issued and outstanding common stock of the Company immediately
following the Merger. The Administrative Agent shall have received
certified copies of the Recapitalization Documentation (including all
exhibits, schedules and disclosure letters referred to therein or
delivered pursuant thereto, if any)
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and all amendments thereto, waivers relating thereto and other side
letters or agreements affecting the terms thereof in any respect. The
Administrative Agent shall have received evidence reasonably satisfactory
to it that neither the Company nor any Rollover Shareholder shall be in
breach or violation of any of its obligations under the Recapitalization
Documentation or the financing thereof, which breach or violation would
permit the Transaction Agreement or the Shareholder Support Agreement to
be terminated, and that neither the Company nor any of its Affiliates and
Subsidiaries shall be subject to material contractual or other material
restrictions that would be violated by the Recapitalization.
(d) Senior Subordinated Bridge Loans; Senior Subordinated Notes. (i)
(A) The Company shall have delivered to the Lenders a true and complete
copy of the Senior Subordinated Credit Agreement, which shall be
reasonably satisfactory in form and substance to the Lenders, (B) all
conditions precedent to the effectiveness of the Senior Subordinated
Credit Agreement shall have been satisfied and (C) the Company shall have
engaged one or more financial institutions satisfactory to the Lenders to
publicly sell or privately place at least $200,000,000 of Senior
Subordinated Notes in a public offering or Rule 144A private placement on
terms and conditions reasonably satisfactory to the Lenders or (ii) (A)
the Company shall have entered into an indenture (the "Senior Subordinated
Note Indenture") with respect to the issuance of the Senior Subordinated
Notes, which shall be reasonably satisfactory in form and substance to the
Lenders, and (B) the Administrative Agent shall have received evidence
satisfactory to it that the Company shall have received the Net Cash
Proceeds from the issuance of $200,000,000 of Senior Subordinated Notes
pursuant to the Senior Subordinated Note Indenture.
(e) Minimum Shares Tendered; Tender Offer Filings. At least
27,500,000 of the issued and outstanding Shares (other than the Rollover
Shares) shall have been validly tendered and accepted for payment pursuant
to the Tender Offer. All documents and materials filed publicly by the
Buyers in connection with the Tender Offer and the Merger shall have been
furnished to the Lenders and shall be reasonably satisfactory in form and
substance to the Lenders.
(f) New Investor Group. (i) The Administrative Agent shall have
received evidence reasonably satisfactory to it that, after giving effect
to the Tender Offer and the cancellation of the Shares purchased pursuant
to the Tender Offer, the New Investor Group and the other Rollover
Shareholders shall own at least 66-2/3% (or such greater percentage as
shall be required to approve the Merger), on a fully diluted basis, of the
aggregate voting power of the Shares which may be voted in connection with
the approval of the Merger and (ii) the Shareholder Support Agreement,
dated as of October 2, 1997 (the "Shareholder Support Agreement"), among
Fremont, RCBA and James R. Leininger, M.D., shall be in full force and
effect.
(g) Purchase Price of Shares; Fees and Expenses. The Lenders shall
have received evidence reasonably satisfactory to them that (i) the
aggregate purchase price for all of the issued and outstanding Shares and
related options shall not exceed $855,000,000 and (ii) the aggregate fees
and expenses with respect to the Recapitalization shall not exceed
$46,000,000 ("Transaction Expenses").
(h) Existing Indebtedness; Capitalization. The Administrative Agent
shall have received evidence reasonably satisfactory to it that
substantially all of the existing Indebtedness of the Company and its
Subsidiaries shall have been repaid on satisfactory terms. The
capitalization and structure of each Loan Party after the Recapitalization
shall be reasonably satisfactory in all respects to the Agents. The
Administrative Agent shall be satisfied with senior management of the
Company.
(i) Fees. The Lenders, the Administrative Agent, the Syndication
Agent, BRS and BT Alex. Brown shall have received all fees required to be
paid in connection with this Agreement, and all expenses for which
invoices have been presented, on or before the Closing Date.
(j) Governmental and Third Party Consents and Approvals. All
governmental and third party approvals and consents required in connection
with the Recapitalization (other than with respect to the Merger), the
financing contemplated hereby and the continuing operations of the
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Company and its Subsidiaries shall have been obtained on terms reasonably
satisfactory to the Administrative Agent and shall be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any Governmental Authority or other
competent authority which would restrain, prevent or otherwise impose
adverse conditions on the Recapitalization or the financing thereof,
except for such governmental and third party approvals the failure to
obtain which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(k) Related Agreements. The Administrative Agent shall have
received, with a copy for each Lender, true and correct copies, certified
as to authenticity by the Company, of the Senior Subordinated Note
Indenture or the Senior Subordinated Credit Agreement.
(l) Closing Certificates. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of the
Company, dated the Closing Date, substantially in the form of Exhibit H,
with appropriate insertions and attachments, satisfactory in form and
substance to the Administrative Agent.
(m) Corporate Proceedings of the Company. The Administrative Agent
shall have received, with a counterpart for the Administrative Agent and a
copy for each Lender, a copy of the resolutions, in form and substance
reasonably satisfactory to the Administrative Agent, of the Board of
Directors of the Company authorizing (i) the execution, delivery and
performance of this Agreement and the other Loan Documents to which it is
a party, (ii) the borrowings contemplated hereunder and (iii) the granting
by it of the Liens created pursuant to the Security Documents, which
certificate shall be in form and substance reasonably satisfactory to the
Administrative Agent and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded.
(n) Company Incumbency Certificate. The Administrative Agent shall
have received, with a counterpart for the Administrative Agent and a copy
for each Lender, a certificate of the Company, dated the Closing Date, as
to the incumbency and signature of the officers of the Company executing
any Loan Document satisfactory in form and substance to the Administrative
Agent.
(o) Proceedings of Subsidiaries. The Administrative Agent shall have
received, with a counterpart for the Administrative Agent and a copy for
each Lender, a copy of the resolutions, in form and substance reasonably
satisfactory to the Administrative Agent, of the Board of Directors of
each such Subsidiary of the Company which is a party to a Loan Document
authorizing (i) the execution, delivery and performance of the Loan
Documents to which it is a party and (ii) the granting by it of the Liens
created pursuant to the Security Documents to which it is a party,
certified by the Secretary or an Assistant Secretary of each such
Subsidiary as of the Closing Date, which certificate shall be in form and
substance reasonably satisfactory to the Administrative Agent and shall
state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded.
(p) Subsidiary Incumbency Certificates. The Administrative Agent
shall have received, with a counterpart for the Administrative Agent and a
copy for each Lender, a certificate of each Subsidiary of the Company
which is a Loan Party, dated the Closing Date, as to the incumbency and
signature of the officers of such Subsidiaries executing any Loan
Document, reasonably satisfactory in form and substance to the
Administrative Agent.
(q) Corporate Documents. The Administrative Agent shall have
received, with a counterpart for the Administrative Agent and a copy for
each Lender, true and complete copies (a) with respect to each Loan Party
which is a corporation, of the certificate of incorporation and by-laws of
each Loan Party, certified as of the Closing Date as complete and correct
copies thereof in a manner reasonably satisfactory to the Administrative
Agent and (b) with respect to each Loan Party which is a limited liability
company, of the articles of organization and regulations and other
governing documents and agreements of each such Loan Party, certified as
of the Closing Date as complete and correct copies thereof in a manner
reasonably satisfactory to the Administrative
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Agent.
(r) Solvency Certificate and Letter. The Lenders shall have received
(i) a solvency certificate of a Responsible Officer of the Company, and
(ii) a solvency opinion from Houlihan Lokey Howard & Zukin, in each case
which shall document the solvency of the Company and its Subsidiaries
after giving effect to the Recapitalization and the other transactions
contemplated hereby and each of which shall be reasonably satisfactory in
form and substance to the Lenders.
(s) Legal Opinions. The Administrative Agent shall have received,
with a counterpart for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Shearman & Sterling, counsel
to the Company and its Subsidiaries, substantially in the form of
Exhibit I-1;
(ii)(ii) the executed legal opinion of Dennis Noll, general
counsel of the Company and its Subsidiaries, substantially in the
form of Exhibit I-2;
(iii) the executed legal opinion of Cox & Smith Incorporated,
counsel to the Company and its Subsidiaries, substantially in the
form of Exhibit I-3; and
(iv) the executed legal opinion of Will Quirk, special
intellectual property counsel to the Company with respect to
intellectual property matters, substantially in the form of Exhibit
I-4.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent
may reasonably require. The Administrative Agent shall have received, if
reasonably available, letters entitling the Administrative Agent and the
Lenders to rely upon the opinions delivered pursuant to the Transaction
Agreement.
(t) Pledged Stock; Stock Powers. Except as provided in the Guarantee
and Collateral Agreement, the Administrative Agent shall have received the
certificates representing the shares of Capital Stock (to the extent
ownership interests are evidenced by certificates) pledged pursuant to the
Guarantee and Collateral Agreement, together with an undated stock power
for each such certificate executed in blank by a duly authorized officer
of the pledgor thereof.
(u) Actions to Perfect Liens. The Administrative Agent shall have
received evidence in form and substance reasonably satisfactory to it that
all filings, recordings, registrations and other actions, including,
without limitation, the filing of duly executed financing statements on
form UCC-1, necessary or, in the opinion of the Administrative Agent,
desirable to perfect the Liens created by the Security Documents shall
have been completed (or arrangements satisfactory to the Administrative
Agent for the prompt completion thereof shall have been made).
(v) Surveys. The Administrative Agent shall have received, and the
title insurance company issuing the policy referred to in subsection
8.1(w) (the "Title Insurance Company") shall have received, maps or plats
of an as-built survey of the sites of the property covered by each
Mortgage delivered pursuant to subsection 8.1(a)(iv) certified to the
Administrative Agent and the Title Insurance Company in a manner
satisfactory to them, dated a date satisfactory to the Administrative
Agent and the Title Insurance Company by an independent professional
licensed land surveyor satisfactory to the Administrative Agent and the
Title Insurance Company, which maps or plats and the surveys on which they
are based shall be made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and adopted by the
American Land Title Association and the American Congress on Surveying and
Mapping in 1992, and, without limiting the generality of the foregoing,
there shall be surveyed and shown on such maps, plats or surveys the
following: (i) the locations on such sites of all the buildings,
structures and other improvements and the established building setback
lines; (ii) the lines of streets abutting the sites and width thereof;
(iii) all access and other easements appurtenant to the sites or necessary
or desirable to use the sites; (iv) all roadways, paths, driveways,
easements, encroachments and overhanging projections and similar
encumbrances affecting the site, whether
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recorded, apparent from a physical inspection of the sites or otherwise
known to the surveyor; (v) any encroachments on any adjoining property by
the building structures and improvements on the sites; and (vi) if the
site is described as being on a filed map, a legend relating the survey to
said map.
(w) Title Insurance Policy. The Administrative Agent shall have
received in respect of each parcel covered by each Mortgage delivered
pursuant to subsection 8.1(a)(iv) a mortgagee's title policy (or policies)
or marked up unconditional binder for such insurance dated the Closing
Date. Each such policy shall (i) be in an amount satisfactory to the
Administrative Agent; (ii) be issued at ordinary rates; (iii) insure that
the Mortgage insured thereby creates a valid first Lien on such parcel
free and clear of all defects and encumbrances, except such as may be
approved by the Administrative Agent; (iv) name the Administrative Agent
for the benefit of the Lenders as the insured thereunder; (v) be in the
form of Texas Mortgage Policy Form T-2 (Revised 1-1-93); (vi) contain such
authorized endorsements and affirmative coverage as the Administrative
Agent may request and (vii) be issued by title companies satisfactory to
the Administrative Agent (including any such title companies acting as
co-insurers or reinsurers, at the option of the Administrative Agent). The
Administrative Agent shall have received evidence satisfactory to it that
all premiums in respect of each such policy, and all charges for mortgage
recording tax, if any, have been paid.
(x) Flood Insurance. If requested by the Administrative Agent, the
Administrative Agent shall have received (i) a policy of flood insurance
which (A) covers any parcel of improved real property which is encumbered
by any Mortgage delivered pursuant to subsection 8.1(a)(iv), (B) is
written in an amount not less than the outstanding principal amount of the
indebtedness secured by such Mortgage which is reasonably allocable to
such real property or the maximum limit of coverage made available with
respect to the particular type of property under the National Flood
Insurance Act of 1968, whichever is less, and (C) has a term ending not
earlier than the maturity of the indebtedness secured by such Mortgage and
(ii) confirmation that the Company has received the notice required
pursuant to Section 208(e)(3) of Regulation H of the Board of Governors of
the Federal Reserve System.
(y) Copies of Documents. The Administrative Agent shall have
received a copy of all recorded documents referred to, or listed as
exceptions to title in, the title policy or policies referred to in
subsection 8.1(w) and a copy, certified by such parties as the
Administrative Agent may deem appropriate, of all other documents
affecting the property covered by each Mortgage delivered pursuant to
subsection 8.1(a)(iv).
(z) Lien Searches. The Administrative Agent shall have received the
results of a recent search by a Person satisfactory to the Administrative
Agent, of the Uniform Commercial Code, judgement and tax lien filings
which may have been filed with respect to personal property of the Loan
Parties, and the results of such search shall be satisfactory to the
Administrative Agent.
(aa) Insurance. The Administrative Agent shall have received
evidence in form and substance reasonably satisfactory to it that all of
the requirements of subsection 5.3 of the Guarantee and Collateral
Agreement and of Section 5 of each of the Mortgages shall have been
satisfied.
(bb) Environmental Assessments. The Lenders shall have received one
or more environmental assessments, in form and substance satisfactory to
them, concerning environmental compliance and liability issues affecting
the Company and the other Loan Parties, and, from each consulting firm
that prepared such assessments, written authorization allowing the
Administrative Agent and the Lenders to rely on such assessments as if
prepared for and addressed to them.
(cc) Regulations of the Board of Governors of the Federal Reserve
System. The Lenders shall be satisfied that the making of the Loans will
not violate Regulation G, Regulation T, Regulation U or Regulation X.
(dd) Term Loan and Tender Loan Drawing. (i) As a condition to the
making of the Tender Loans, the amounts available to the Company on the
Closing Date under the Term Loan
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Commitments shall have been fully drawn on the Closing Date and (ii) as a
condition to the making of Acquisition Loans and Revolving Loans to
finance the Tender Offer and to pay fees and expenses related thereto, the
amounts available to the Company on the Closing Date under the Tender Loan
Commitments shall have been fully drawn or terminated.
8.2 Conditions to Each Extension of Credit. The agreement of each
Lender to make any Loan or any other extension of credit requested to be made by
it on any date (including, without limitation, its initial extension of credit),
and of the Issuing Bank to issue any Letter of Credit requested to be issued by
it on any date, is subject to the satisfaction of the following conditions
precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Company, its Subsidiaries and any other Loan Party
in or pursuant to the Loan Documents shall be true and correct in all
material respects on and as of such date as if made on and as of such
date, except for representations and warranties stated to relate to a
specific earlier date, in which case such representations and warranties
shall be true and correct in all material respects on and as of such
earlier date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extensions of
credit or the issuing of Letters of Credit requested to be made on such
date.
(c) Additional Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be reasonably satisfactory in form and substance to the
Administrative Agent, and the Administrative Agent shall have received
such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it shall
reasonably request.
Each borrowing by and Letter of Credit issued on behalf of the Company or any
Subsidiary Borrower hereunder shall constitute a representation and warranty by
the Company and such Subsidiary Borrower, as the case may be, as of the date
thereof that the conditions contained in this subsection have been satisfied.
8.3 Additional Conditions to Each Subsidiary Borrower Credit Event.
The agreement of each Lender to make the initial extension of credit requested
to be made by it to any Subsidiary Borrower on any date is also subject to the
satisfaction of the following conditions precedent:
(a) Borrowing Subsidiary Agreement. The Administrative Agent shall
have received the Borrowing Subsidiary Agreement for such Subsidiary
Borrower executed and delivered by the Company and such Subsidiary
Borrower.
(b) Opinions. The Administrative Agent shall have received a
favorable written opinion of counsel for such Subsidiary Borrower (which
counsel shall be reasonably acceptable to the Administrative Agent), in
form and substance reasonably satisfactory to the Administrative Agent,
and covering such other matters (including matters of the type described
in subsections 6.11 or 6.12) relating to such Subsidiary Borrower or its
Borrowing Subsidiary Agreement as the Required Lenders shall reasonably
request.
(c) Other Documents. The Administrative Agent shall have received
such documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and good
standing of such Subsidiary Borrower, the authorization of the
transactions contemplated hereby relating to such Subsidiary Borrower and
any other legal matters relating to such Subsidiary Borrower, its
Borrowing Subsidiary Agreement or such transactions, all in form and
substance satisfactory to the Administrative Agent and its counsel.
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SECTION 9. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in
effect or any Letter of Credit remains outstanding and unpaid or any amount is
owing to any Lender or the Administrative Agent hereunder or under any other
Loan Document, the Company shall and (except in the case of delivery of
financial information, reports and notices in respect of the Company) shall
cause each of its Subsidiaries to:
9.1 Financial Statements. Furnish to the Administrative Agent, with
a copy for each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Company, a copy of the Consolidated balance
sheet of the Company and its Consolidated Subsidiaries as at the end of
such year and the related Consolidated statements of earnings and of cash
flows for such year, setting forth in each case in comparative form the
figures for the previous year, reported on without a "going concern" or
like qualification or exception, or qualification arising out of the scope
of the audit, by independent certified public accountants of nationally
recognized standing; and
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Company, the unaudited Consolidated balance sheet of the
Company and its Consolidated Subsidiaries as at the end of such quarter
and the related unaudited Consolidated statements of earnings and of cash
flows of the Company and its Consolidated Subsidiaries for such quarter
and the portion of the fiscal year through the end of such quarter,
setting forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being fairly stated
in all material respects (subject to normal year-end audit adjustments and
the absence of notes);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
(except, in the case of any such unaudited financial statements, for the absence
of footnotes and, except as approved by such accountants or officer, as the case
may be, and disclosed therein).
9.2 Certificates; Other Information. Furnish to the Administrative
Agent, with a copy for each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 9.1(a), a compliance 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 subsections 9.1(a) and (b), a compliance certificate of a
Responsible Officer (i) stating that, to the best of such Responsible
Officer's knowledge, during such period (A) no Subsidiary has been formed
or acquired (or, if any such Subsidiary has been formed or acquired, the
Company has complied with the requirements of subsection 9.10 with respect
thereto), (B) neither the Company nor any of its Subsidiaries has changed
its name, its principal place of business, its chief executive office or
the location of any material item of tangible Collateral without complying
with the requirements of this Agreement and the Security Documents with
respect thereto and (C) the Company 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) setting forth in reasonable detail the calculations required to
determine (A) compliance with subsection 10.1, (B) the Applicable Margin
then in effect for each Type of Loan and (C) in the case of the compliance
certificate delivered in connection with the financial statements
delivered pursuant to subsection 9.1(a), the Excess Cash Flow for the
relevant fiscal year;
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(c) promptly after approval by the Board of Directors of the
Company, but in any event not later than the last Business Day of the
second calendar month of each fiscal year of the Company, a copy of the
projections by the Company of the operating budget and cash flow budget of
the Company and its Subsidiaries for such fiscal year, such projections to
be accompanied by a certificate of a Responsible Officer to the effect
that such projections have been prepared on the basis of sound financial
planning practice and that such Responsible Officer has no reason to
believe they are incorrect or misleading in any material respect;
(d) concurrently with the delivery of the financial statements
referred to in subsections 9.1(a) and (b), a comparison (with a discussion
of material differences) in reasonable detail of the revenues and EBITDA
(and, in the case of the financial statements referred to in subsection
9.1(a), asset utilization) of the Company and its Subsidiaries, on a
divisional basis, for the period covered by the financial statements to
the budgeted results for such period delivered to the Lenders prior to the
Closing Date or after the Closing Date, pursuant to paragraph (c) above
(it being understood that any such comparison and discussion shall be
prepared in a manner consistent with past practice as disclosed to the
Administrative Agent and any comparison so prepared shall satisfy the
requirements of this paragraph);
(e) within fifteen days after the same are sent, copies of all
financial statements and reports which the Company sends to its
stockholders, and within five days after the same are filed, copies of all
financial statements and reports which the Company may make to, or file
with, the Securities and Exchange Commission or any successor or analogous
Governmental Authority; and
(f) as soon as practicable, such additional financial and other
information as any Lender may from time to time reasonably request.
9.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Company and its Subsidiaries.
9.4 Conduct of Business and Maintenance of Existence. Continue to
(i) engage in businesses which are in the same, similar or reasonably related or
complementary businesses as the businesses in which the Company and its
Subsidiaries are engaged on the date hereof and (ii) preserve, renew and keep in
full force and effect its corporate existence and take all reasonable action to
maintain all rights, privileges and franchises necessary or desirable in the
normal conduct of its business except as otherwise permitted pursuant to
subsection 10.5 except to the extent that failure to do so could not, in the
aggregate, be reasonably expected to have a Material Adverse Effect; comply with
all Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not, in the aggregate, be reasonably expected
to have a Material Adverse Effect.
9.5 Maintenance of Property; Insurance. Keep all property useful and
necessary in its business in good working order and condition (ordinary wear and
tear excepted); maintain with financially sound and reputable insurance
companies (or, to the extent consistent with prudent business practice, a
program of self-insurance) insurance on all the Collateral in accordance with
the requirements of Section 5.3 of the Guarantee and Collateral Agreement and
the requirements of each of the Mortgages and on all its other property in at
least such amounts (including as to amounts of deductibles) and against at least
such risks (but including in any event commercial general liability, product
liability and business interruption) as are consistent with prudent business
practice; and furnish to each Lender, upon written request, full information as
to the insurance carried.
9.6 Inspection of Property; Books and Records; Discussions. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the Company and its
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Subsidiaries with officers and employees of the Company and its Subsidiaries and
with its independent certified public accountants.
9.7 Notices. Promptly give notice to the Administrative Agent, with
a copy for each Lender, of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Company or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between the
Company or any of its Subsidiaries and any Governmental Authority, which
in either case, if not cured or if adversely determined, as the case may
be, could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Company or any of its
Subsidiaries in which the amount involved is $5,000,000 or more and not
covered by insurance or in which injunctive or similar relief is sought
which, if granted, could reasonably be expected to have a Material Adverse
Effect;
(d) any of the following events where, individually or in the
aggregate with any other events, the liability that could result would
exceed $5,000,000, as soon as possible and in any event within 30 days
after the Company knows or has reason to know thereof: (i) the occurrence
or expected occurrence of any Reportable Event with respect to any Single
Employer Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal
from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or the taking of
any other action by the PBGC or the Company or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the withdrawal from, or
the terminating, Reorganization or Insolvency of, any Plan; and
(e) any development or event which could reasonably be expected to
have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer of the Company setting forth details of the occurrence
referred to therein and stating what action the Company proposes to take with
respect thereto.
9.8 Environmental Laws. (a) Comply with, and use its best efforts to
ensure compliance by all tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply with and maintain, and use its best
efforts to ensure that all tenants and subtenants obtain and comply with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws except to the extent that
failure to do so would not be reasonably expected to have a Material Adverse
Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives of
all Governmental Authorities regarding Environmental Laws except, in each case,
to the extent that the same are being contested in good faith by appropriate
proceedings and the pendency of such proceedings could not be reasonably
expected to have a Material Adverse Effect.
9.9 Further Assurances. Upon the reasonable request of the
Administrative Agent, promptly perform or cause to be performed any and all acts
and execute or cause to be executed any and all documents (including, without
limitation, financing statements and continuation statements) for filing under
the provisions of the Uniform Commercial Code or any other Requirement of Law
which are necessary or advisable to maintain in favor of the Administrative
Agent, for the benefit of the Lenders, Liens on the Collateral that are duly
perfected in accordance with all applicable Requirements of Law.
9.10 Additional Collateral. (a) With respect to any assets, other
than leasehold interests, acquired after the Closing Date by the Company or any
of its Domestic Subsidiaries that are intended to be subject to the Lien created
by any of the Security Documents but which are not so subject (other than any
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assets described in paragraph (b) or (c) of this subsection), promptly (and in
any event within 30 days after the acquisition thereof): (i) execute and deliver
to the Administrative Agent such amendments to the relevant Security Documents
or such other documents as the Administrative Agent (including Mortgages) shall
reasonably deem necessary or advisable to grant to the Administrative Agent, for
the benefit of the Lenders, a Lien on such assets, (ii) take all actions
reasonably necessary or advisable to cause such Lien to be duly perfected in
accordance with all applicable Requirements of Law as contemplated by such
Security Documents, including, without limitation, the filing of financing
statements in such jurisdictions as may be reasonably requested by the
Administrative Agent, (iii) in the case of a Mortgage, deliver to the
Administrative Agent such surveys, policies and other documents as the
Administrative Agent would have received pursuant to subsections 8.1(v), 8.1(w),
8.1(x) and 8.1(y) if the relevant parcel of real property has been subject to a
Mortgage on the Closing Date, all in form and substance reasonably satisfactory
to the Administrative Agent and (iv) if reasonably requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described in clauses (i) and (ii) immediately preceding,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
(b) With respect to any Person that, subsequent to the Closing Date,
becomes a Subsidiary (other than a Foreign Subsidiary), promptly: (i) execute
and deliver to the Administrative Agent, for the benefit of the Lenders, a new
pledge agreement or such amendments to the Guarantee and Collateral Agreement as
the Administrative Agent shall deem necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a Lien on the Capital
Stock of such Subsidiary which is owned by the Company or any of its
Subsidiaries, (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated stock powers executed and
delivered in blank by a duly authorized officer of the Company or such
Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a
party to the Guarantee and Collateral Agreement pursuant to an annex to the
Guarantee and Collateral Agreement which is in form and substance reasonably
satisfactory to the Administrative Agent, (B) to execute and deliver a Mortgage
with respect to any parcel of real property owned by it, (C) to take all actions
necessary or advisable to cause the Lien created by the Guarantee and Collateral
Agreement or any such Mortgage to be duly perfected in accordance with all
applicable Requirements of Law as contemplated by such Security Documents,
including, without limitation, the filing of financing statements in such
jurisdictions as may be requested by the Administrative Agent and (D) to execute
and deliver such documents and certificates as the Administrative Agent or its
counsel may reasonably request relating to the organization, existence and good
standing of such Subsidiary, the authorization of the transactions contemplated
hereby and by the other Loan Documents relating to such Subsidiary and any other
legal matters relating to such Subsidiary and the Loan Documents to which it is
or is to become a party (including, if requested by the Administrative Agent,
satisfactory environmental reports or assessments with respect to each parcel of
real property covered by a Mortgage), all in form and substance satisfactory to
the Administrative Agent and its counsel, (iv) in the case of a Mortgage,
deliver to the Administrative Agent such surveys, policies and other documents
as the Administrative Agent would have received pursuant to subsections 8.1(v),
8.1(w), 8.1(x) and 8.1(y) if the relevant parcel of real property has been
subject to a Mortgage on the Closing Date, all in form and substance reasonably
satisfactory to the Administrative Agent and (v) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described in clauses (i), (ii) and (iii) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
(c) With respect to any Person that, subsequent to the Closing Date,
becomes a Foreign Subsidiary, promptly upon the request of the Administrative
Agent: (i) to the extent permitted by applicable law, execute and deliver to the
Administrative Agent a new pledge agreement or such amendments to the Guarantee
and Collateral Agreement as the Administrative Agent shall deem necessary or
advisable to grant to the Administrative Agent, for the benefit of the Lenders,
a Lien on the Capital Stock of such Subsidiary which is owned by the Company or
any of its Domestic Subsidiaries (provided that in no event shall more than 65%
of the Capital Stock of any such Subsidiary be required to be so pledged), (ii)
deliver to the Administrative Agent any certificates representing such Capital
Stock, together with undated stock powers executed and delivered in blank by a
duly authorized officer of the Company or such Domestic Subsidiary, as the case
may be, and take or cause to be taken all such other actions under the law of
the jurisdiction of organization of such Foreign Subsidiary as may be necessary
or advisable to perfect such Lien on such Capital Stock and (iii) if requested
by the Administrative Agent, deliver to the
<PAGE> 73
66
Administrative Agent legal opinions relating to the matters described in clauses
(i) and (ii) immediately preceding, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
9.11 Senior Subordinated Debt Escrow Amount. Deposit the Senior
Subordinated Debt Escrow Amount in the Senior Subordinated Debt Escrow Account
pending purchase of such Shares on terms and conditions satisfactory to the
Administrative Agent and in accordance with the provisions of subsection 6.3(f).
9.12 Interest Rate Protection. No later than 90 days following the
Closing Date, enter into Interest Rate Protection Agreements which shall provide
interest rate protection in respect of at least 50% of the Term Loans then
outstanding and which shall be in form and substance reasonably satisfactory to
the Administrative Agent and for a term of at least three years.
SECTION 10. NEGATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in
effect or any Letter of Credit remains outstanding and unpaid or any amount is
owing to any Lender or the Administrative Agent hereunder or under any other
Loan Document, the Company shall not, and (except with respect to subsection
10.1) shall not permit any of its Subsidiaries to, directly or indirectly:
10.1 Financial Condition Covenants.
(a) Interest Coverage. Permit for any period of four consecutive
fiscal quarters ending at the end of any fiscal quarter set forth below the
ratio of (i) EBITDA of the Company for such period to (ii) Consolidated Cash
Interest Expense of the Company for such period to be less than the ratio set
forth opposite such period below:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Interest Coverage Ratio
--------------------- -----------------------
<S> <C>
March 31, 1998 1.75 to 1.00
June 30, 1998 1.75 to 1.00
September 30, 1998 1.75 to 1.00
December 31, 1998 1.75 to 1.00
March 31, 1999 1.75 to 1.00
June 30, 1999 1.75 to 1.00
September 30, 1999 1.75 to 1.00
December 31, 1999 2.00 to 1.00
March 31, 2000 2.00 to 1.00
June 30, 2000 2.00 to 1.00
September 30, 2000 2.00 to 1.00
December 31, 2000 2.25 to 1.00
March 31, 2001 2.25 to 1.00
June 30, 2001 2.25 to 1.00
September 30, 2001 2.25 to 1.00
December 31, 2001 2.50 to 1.00
March 31, 2002 2.50 to 1.00
June 30, 2002 2.50 to 1.00
September 30, 2002 2.50 to 1.00
December 31, 2002 2.75 to 1.00
March 31, 2003 2.75 to 1.00
June 30, 2003 2.75 to 1.00
September 30, 2003 2.75 to 1.00
December 31, 2003 and each
Fiscal Quarter ending
thereafter 3.00 to 1.00
</TABLE>
<PAGE> 74
67
(b) Leverage Ratio. Permit the Leverage Ratio at any time during any
fiscal quarter of the Company set forth below to be greater than the ratio set
forth opposite such period set forth below:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Ratio
--------------------- -----
<S> <C>
December 31, 1997 6.25 to 1.00
March 31, 1998 6.25 to 1.00
June 30, 1998 6.25 to 1.00
September 30, 1998 6.25 to 1.00
December 31, 1998 6.00 to 1.00
March 31, 1999 6.00 to 1.00
June 30, 1999 5.75 to 1.00
September 30, 1999 5.75 to 1.00
December 31, 1999 5.25 to 1.00
March 31, 2000 5.25 to 1.00
June 30, 2000 5.25 to 1.00
September 30, 2000 5.25 to 1.00
December 31, 2000 4.50 to 1.00
March 31, 2001 4.50 to 1.00
June 30, 2001 4.50 to 1.00
September 30, 2001 4.50 to 1.00
December 31, 2001 4.00 to 1.00
March 31, 2002 4.00 to 1.00
June 30, 2002 4.00 to 1.00
September 30, 2002 4.00 to 1.00
December 31, 2002 4.00 to 1.00
March 31, 2003 4.00 to 1.00
June 30, 2003 4.00 to 1.00
September 30, 2003 4.00 to 1.00
December 31, 2003 and each
Fiscal Quarter ending
thereafter 3.50 to 1.00
</TABLE>
(c) Minimum EBITDA. Permit EBITDA of the Company for any period of
four consecutive fiscal quarters ending at the end of any fiscal quarter set
forth below to be less than the amount set forth opposite such period:
<PAGE> 75
68
<TABLE>
<CAPTION>
Fiscal Quarter Ending EBITDA
--------------------- ------
<S> <C>
March 31, 1998 $ 87,000,000
June 30, 1998 87,000,000
September 30, 1998 87,000,000
December 31, 1998 87,000,000
March 31, 1999 87,000,000
June 30, 1999 87,000,000
September 30, 1999 87,000,000
December 31, 1999 100,000,000
March 31, 2000 100,000,000
June 30, 2000 100,000,000
September 30, 2000 100,000,000
December 31, 2000 115,000,000
March 31, 2001 115,000,000
June 30, 2001 115,000,000
September 30, 2001 115,000,000
December 31, 2001 117,000,000
March 31, 2002 117,000,000
June 30, 2002 117,000,000
September 30, 2002 117,000,000
December 31, 2002 120,000,000
March 31, 2003 120,000,000
June 30, 2003 120,000,000
September 30, 2003 120,000,000
December 31, 2003 125,000,000
March 31, 2004 125,000,000
June 30, 2004 125,000,000
September 30, 2004 125,000,000
December 31, 2004 and each
Fiscal Quarter ending
thereafter 130,000,000
</TABLE>
10.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness under this Agreement or any of the other Loan
Documents;
(b) Indebtedness of the Company to any Subsidiary of the Company and
of any Subsidiary of the Company to the Company or any other Subsidiary of
the Company;
(c) Indebtedness of the Company and any of its Subsidiaries incurred
to finance the acquisition of fixed or capital assets (whether pursuant to
a loan, a Financing Lease or otherwise) in an aggregate principal amount
not exceeding as to the Company and its Subsidiaries $15,000,000 at any
time outstanding;
(d) short-term Indebtedness of any Foreign Subsidiary incurred to
finance the working capital requirements of such Foreign Subsidiary in an
aggregate principal amount not exceeding, for all Foreign Subsidiaries at
any time outstanding $30,000,000;
(e) Indebtedness outstanding on the date hereof and listed in
Schedule 10.2(e) and, so long as the principal amount thereof is not
increased, any refinancings, refundings, renewals or extensions of such
Indebtedness;
(f) Indebtedness of a Person which becomes a Subsidiary after the
date hereof, provided that (i) such Indebtedness existed at the time such
corporation became a Subsidiary and was not created in anticipation
thereof and (ii) immediately after giving effect to the acquisition of
such Person by the Company or any of its Subsidiaries no Default or Event
of Default shall have occurred and be continuing;
<PAGE> 76
69
(g) Indebtedness of the Company and its Subsidiaries under Interest
Rate Protection Agreements contemplated by subsection 9.12 or otherwise
entered into in the ordinary course of business (and not for speculative
purposes) and Foreign Currency Protection Agreements entered into in the
ordinary course of business (and not for speculative purposes);
(h) Indebtedness arising from the honoring by a bank of a check or
similar instrument drawn against insufficient funds in the ordinary
course, so long as such Indebtedness is extinguished within two Business
Days of its incurrence;
(i) Indebtedness represented by performance bonds, warranty or
contractual service obligations or appeal bonds, in each case to the
extent incurred in the ordinary course of business in accordance with
customary industry practices in amounts customary in the Company's
industry;
(j) Indebtedness in respect of (i) the Senior Subordinated Notes in
an aggregate initial principal amount not to exceed $200,000,000, (ii) the
Senior Subordinated Bridge Loans (including the Term Loans and the
Exchange Notes (each as defined in the Senior Subordinated Credit
Agreement)) in an aggregate initial principal amount not to exceed
$200,000,000, and including any pay-in-kind notes issued in lieu of cash
interest thereon, and (iii) any other Subordinated Debt the Net Cash
Proceeds of which are used to refinance the Senior Subordinated Bridge
Loans or the Senior Subordinated Notes, the Term Loans and/or the Exchange
Notes, provided that the aggregate initial principal amount of such
Subordinated Debt may not exceed $200,000,000, plus the amount of any
pay-in-kind notes issued in lieu of cash interest on the Senior
Subordinated Bridge Loans, provided further that (A) the aggregate
principal amount of Indebtedness outstanding under this paragraph (j) may
not exceed, except as expressly provided in respect of any pay-in-kind
notes issued in lieu of cash interest on the Senior Subordinated Bridge
Loans, $200,000,000 and (B) no principal repaid in respect of any
Indebtedness outstanding under this paragraph (j) may be reborrowed under
the facility or agreement pursuant to which such Indebtedness was issued
or incurred;
(k) Indebtedness in respect of the Senior Subordinated Notes (in
addition to Indebtedness permitted under paragraph (j)(i) above) or any
other Subordinated Debt (in addition to Indebtedness permitted under
paragraph (j)(iii) above) in an aggregate initial principal amount not to
exceed $100,000,000;
(l) additional Indebtedness of the Company and the Guarantors not
exceeding in aggregate principal amount, together with the aggregate
outstanding Guarantee Obligations incurred and permitted by subsection
10.4(b), $40,000,000 at any one time outstanding; and
(m) any Indebtedness resulting from any transaction permitted under
subsection 10.12;
provided that no such Indebtedness shall constitute Indebtedness incurred in
connection with a "Qualified Securitization Transaction" (as defined in the
Senior Subordinated Note Indenture, the Senior Subordinated Credit Agreement
or any other Subordinated Debt Documentation).
10.3 Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Company or its
Subsidiaries, as the case may be, in conformity with GAAP (or, in the case
of Foreign Subsidiaries, generally accepted accounting principles in
effect from time to time in their respective jurisdictions of
incorporation);
(b) carriers', warehousemen's, landlord's, mechanics',
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business which are not overdue for a period of more than 60 days
or which are being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment
<PAGE> 77
70
insurance and other social security legislation and deposits securing
liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, zoning ordinances, restrictions and
other similar encumbrances existing or 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 materially interfere with the ordinary conduct of the
business of the Company or such Subsidiary;
(f) Liens in existence on the date hereof listed in Schedule
10.3(f), securing Indebtedness permitted by subsection 10.2(e), provided
that no such Lien is spread to cover any additional property after the
Closing Date and that the principal amount of Indebtedness secured thereby
is not increased;
(g) Liens securing Indebtedness of the Company and its Subsidiaries
permitted by subsection 10.2(c) incurred to finance the acquisition of
fixed or capital assets, provided that (i) such Liens shall be created
substantially simultaneously with the acquisition of such fixed or capital
assets, (ii) such Liens do not at any time encumber any property other
than the property financed by such Indebtedness and (iii) the principal
amount of Indebtedness secured thereby is not increased;
(h) Liens on assets of any Foreign Subsidiary securing Indebtedness
of such Foreign Subsidiary permitted by subsection 10.2(d);
(i) Liens on the property or assets of a corporation which becomes a
Subsidiary after the date hereof securing Indebtedness permitted by
subsection 10.2(f), provided that (i) such Liens existed at the time such
corporation became a Subsidiary and were not created in anticipation
thereof, (ii) any such Lien is not spread to cover any property or assets
of such corporation after the time such corporation becomes a Subsidiary,
and (iii) the principal amount of Indebtedness secured thereby is not
increased;
(j) Liens (not otherwise permitted hereunder) which secure
obligations not exceeding (as to the Company and all Subsidiaries)
$40,000,000 in aggregate amount at any time outstanding, provided that no
such Lien may cover Cash Equivalents, the Capital Stock of any Subsidiary
or any of the assets described in Schedule 10.6(f);
(k) Liens created pursuant to the Security Documents;
(l) any interest or title of a lessor under any Financing Lease,
provided that such Liens do not extend to any property or assets which are
not leased property subject to such Financing Lease;
(m) any Lien resulting from any transaction permitted under
subsection 10.12;
(n) Liens securing Indebtedness under Interest Rate Protection
Agreements and Foreign Currency Protection Agreements otherwise permitted
hereunder;
(o) Liens on assets of a Subsidiary in favor of the Company; and
(p) Liens on any bank account arising from a bank or financial
institution borrowing a check or draft inadvertently drawn against
insufficient funds in the ordinary course of business.
10.4 Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
<PAGE> 78
71
(a) Guarantee Obligations in existence on the date hereof and listed
in Schedule 10.4(a);
(b) Guarantee Obligations incurred after the date hereof in an
aggregate amount not to exceed, together with the aggregate outstanding
principal amount of Indebtedness incurred and permitted by subsection
10.2(l), $40,000,000 at any one time outstanding;
(c) guarantees made in the ordinary course of its business by the
Company of obligations of any of its Subsidiaries, which obligations are
otherwise permitted under this Agreement;
(d) Guarantee Obligations of Domestic Subsidiaries in respect of the
Senior Subordinated Notes, Senior Subordinated Bridge Loans or other
Subordinated Debt so long as (i) such Guarantee Obligations are
subordinated to such Domestic Subsidiary's Guarantor Obligations (as
defined in the Guarantee and Collateral Agreement) on terms and conditions
satisfactory to the Required Lenders (it being agreed that the
subordination provisions in the Senior Subordinated Note Indenture and the
Senior Subordinated Credit Agreement are satisfactory to the Required
Lenders) and (ii) such Domestic Subsidiary is a Guarantor (as defined in
the Guarantee and Collateral Agreement);
(e) guarantees by Foreign Subsidiaries of Indebtedness of other
Foreign Subsidiaries permitted under subsection 10.2(d); and
(f) the Guarantees.
10.5 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of the Company may be merged or consolidated with
or into the Company (provided that the Company shall be the continuing or
surviving entity) or with or into any one or more Subsidiaries of the
Company (provided that (i) a Subsidiary shall be the continuing or
surviving entity, (ii) the surviving entity must be a Guarantor if any
merged or consolidated Subsidiary is a Guarantor and (iii) the percentage
of the Capital Stock of the surviving entity owned directly or indirectly
by the Company is at least equal to the higher of (A) the percentage of
the Capital Stock of the merged or consolidated Subsidiary owned directly
or indirectly by the Company immediately prior to such merger or
consolidation and (B) the percentage of the Capital Stock of the surviving
entity owned directly or indirectly by the Company immediately prior to
such merger or consolidation);
(b) any Subsidiary may sell, lease, transfer or otherwise dispose of
all or substantially all of its assets (upon voluntary liquidation or
otherwise) to the Company or any other Subsidiary of the Company, provided
that (i) if the Subsidiary whose assets are so sold, leased, transferred
or otherwise disposed of is a Guarantor, any Subsidiary to which such
assets are so sold, leased, transferred or otherwise disposed of must also
be a Guarantor, except that any Domestic Subsidiary may transfer the
Capital Stock of any Foreign Subsidiary owned by it to a Foreign
Subsidiary which is formed to be a holding company with respect to the
Capital Stock of Foreign Subsidiaries, and (ii) the Company directly or
indirectly owns at least the same percentage of the Capital Stock of any
Subsidiary to which such assets are so sold, leased, transferred or
otherwise disposed of as the Company owns of the Capital Stock of the
Subsidiary whose assets are so sold, leased, transferred or otherwise
disposed of;
(c) pursuant to and in accordance with the Recapitalization
Documentation;
(d) any Subsidiary may be merged with any other Person or sell or
transfer all or substantially all of its property, business or assets in a
transaction permitted by subsection 10.6(f) or 10.6(g); and
(e) any Subsidiary may be merged with any other Person to effect a
Permitted Acquisition
<PAGE> 79
72
permitted by subsection 10.9(l) so long as the surviving entity is a
Subsidiary.
10.6 Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock to any Person other than the
Company or any wholly owned Subsidiary, except:
(a) the sale or other disposition of obsolete or worn out property
in the ordinary course of business;
(b) the sale or lease of inventory in the ordinary course of
business;
(c) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the
compromise or collection thereof;
(d) dispositions resulting from any Casualty Event;
(e) as permitted by subsection 10.5(b);
(f) (i) the asset sales and other dispositions described in Schedule
10.6(f) and (ii) asset sales in connection with transactions permitted
under subsection 10.12;
(g) sales of assets by the Company and its Subsidiaries not
otherwise permitted under this subsection, provided that the aggregate
consideration (including assumed Indebtedness and the fair market value of
non-cash consideration) of all such asset sales shall not exceed
$20,000,000 in any year or $60,000,000 in the aggregate after the Closing
Date;
(h) the lease of real property in the ordinary course of business
and consistent with past practice; and
(i) the transfer of manufacturing and other operating assets owned
by the Company on the date hereof to KCI Therapeutic Services, Inc.
10.7 Limitation on Dividends. Declare or pay any dividend (other
than dividends payable solely in common stock of the Company) on, or make any
payment on account of, or set apart assets for a sinking or other analogous fund
for, the purchase, redemption, defeasance, retirement or other acquisition of,
any shares of any class of Capital Stock of the Company or any warrants or
options to purchase any such Stock, whether now or hereafter outstanding, or
make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Company or any Subsidiary,
except:
(a) pursuant to and in accordance with the Recapitalization
Documentation; and
(b) the Company may (i) repurchase, redeem or otherwise acquire or
retire for value any Capital Stock of the Company held by employees of the
Company or any of its Subsidiaries pursuant to any employee equity
subscription agreement, stock option agreement or stock ownership
arrangement, provided that (A) the aggregate price paid for all such
repurchased, redeemed, acquired or retired Capital Stock shall not exceed
$10,000,000, and (B) no Event of Default shall have then occurred and be
continuing or would result therefrom and (ii) exchange Capital Stock of
the Company held by any employee of the Company or any of its Subsidiaries
for other Capital Stock of the Company.
10.8 Limitation on Capital Expenditures. Make or commit to make a
Capital Expenditure, excluding (i) any such Capital Expenditure in connection
with any asset acquired in connection with normal replacement and maintenance
programs properly charged to current operations and (ii) Capital Expenditures in
the ordinary course of business not exceeding, in the aggregate for the Company
and its Subsidiaries during any of the fiscal years of the Company set forth
below, the amount
<PAGE> 80
73
set forth opposite such fiscal year below:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1998 $35,000,000
1999 40,000,000
2000 42,500,000
2001 42,500,000
2002 45,000,000
2003 and each
Fiscal Year thereafter 50,000,000
</TABLE>
provided, that up to 100% of any such amount if not so expended in the fiscal
year for which it is permitted above, may be carried over for expenditure in the
three succeeding fiscal years.
10.9 Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in, any Person (an
"Investment"), except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) loans to officers of the Company, provided that the aggregate
outstanding principal amount thereof shall not exceed $5,000,000 at any
time;
(d) loans and advances to employees of the Company or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business in an aggregate amount for the Company and its
Subsidiaries not to exceed $1,000,000 at any one time outstanding;
(e) (i) Investments by the Company in any Guarantor and investments
by Subsidiaries in the Company and in any Guarantor and (ii) Investments
not otherwise permitted hereunder by the Company and the Guarantors in
Subsidiaries that are not Guarantors, provided that the aggregate amount
of all Investments (including Investments in such Subsidiaries in the
nature of sales and transfers of assets (including, pursuant to a
transaction permitted under subsection 10.5) to the extent made for less
than fair market value and Guarantee Obligations pursuant to subsection
10.4) made in any fiscal year pursuant to this clause (e)(ii) shall not
exceed $20,000,000 (with the period from the Closing Date through December
31, 1998 being deemed to be the first such fiscal year), provided,
further, that (x) up to 100% of any such amount if not so expended in the
fiscal year for which it is permitted, may be carried over for expenditure
in the three succeeding fiscal years, and (y) the conversion of any
Indebtedness owed to the Company or any Guarantor by any Subsidiary into
equity of such Subsidiary shall not constitute an additional Investment in
such Subsidiary by the Company or such Guarantor for purposes of the
limitation contained in the immediately preceding proviso;
(f) Interest Rate Protection Agreements contemplated by subsection
9.12 and Foreign Currency Protection Agreements permitted hereunder;
(g) loans by the Company to its employees in connection with
management incentive plans in an aggregate amount not to exceed $4,000,000
at any one time outstanding;
(h) Investments in the Senior Subordinated Debt Escrow Account and
the Tranche B/C Escrow Account;
(i) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers;
<PAGE> 81
74
(j) Investments made by the Company or any of its Subsidiaries as a
result of consideration received in connection with a sale of assets
permitted under subsection 10.6;
(k) Investments committed to by the Company and its Subsidiaries on
the date hereof, provided that the aggregate amount of such Investments
shall not exceed $1,500,000;
(l) Permitted Acquisitions;
(m) other Investments in an aggregate amount not to exceed
$10,000,000 at any one time outstanding; and
(n) the Investments described in Schedule 10.9(n).
10.10 Limitation on Optional Payments and Modifications of
Subordinated and Other Debt Instruments. (a) Make any optional payment or
prepayment on or redemption, purchase or defeasance of any Senior Subordinated
Notes (other than any refinancing thereof with the Net Cash Proceeds of any
Subordinated Debt permitted under subsection 10.2(j)(iii)), Senior Subordinated
Bridge Loans (other than any refinancing thereof with the Net Cash Proceeds of
the Senior Subordinated Notes or other Subordinated Debt permitted under
subsection 10.2(j)(iii) or the Net Cash Proceeds of any issuance of Capital
Stock or capital contribution as contemplated by subsection 6.3(c)(i)) or any
other Subordinated Debt, (b) amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms relating to any Senior
Subordinated Notes, Senior Subordinated Bridge Loans or any other 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 for payment of interest thereon or
otherwise would not be adverse to the Lenders), or (c) amend the subordination
provisions of the Senior Subordinated Notes, the Senior Subordinated Note
Indenture, the Senior Subordinated Credit Agreement or any other Subordinated
Debt Documentation.
10.11 Limitation on Transactions with Affiliates. Except with
respect to transactions contemplated by the Recapitalization Documents and to
the extent permitted under subsection 10.18, enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any Affiliate unless such transaction is
(a) otherwise permitted under this Agreement, (b) in the ordinary course of the
Company's or such Subsidiary's business and (c) upon fair and reasonable terms
no less favorable to the Company or such Subsidiary, as the case may be, than it
would obtain in a comparable arm's length transaction with a Person which is not
an Affiliate.
10.12 Limitation on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Company or any Subsidiary of
real or personal property which has been or is to be sold or transferred by the
Company or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of the Company or such Subsidiary, except for the sale and
leaseback of the Company's headquarters building and adjacent parcels of real
property.
10.13 Limitation on Changes in Fiscal Year. Permit the fiscal year
of the Company to end on a day other than December 31 in any calendar year.
10.14 Limitation on Negative Pledge Clauses. Enter into with any
Person any agreement, other than (a) this Agreement, (b) purchase money
mortgages or Financing Leases permitted by this Agreement (in which cases, any
prohibition or limitation shall only be effective against the assets financed
thereby), (c) the Senior Subordinated Note Indenture, the Senior Subordinated
Credit Agreement and the other Subordinated Debt Documentation (so long as any
the relevant provisions in such Subordinated Debt Documentation is substantially
the same as the comparable provisions contained in the Senior Subordinated Note
Indenture and the Senior Subordinated Note Indenture) and (d) agreements with
respect to the Indebtedness permitted under subsection 10.2(d) (which
restrictions may only limit the granting of Liens on the assets of a Foreign
Subsidiary), which prohibits or limits the ability of the Company or any of its
Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired.
<PAGE> 82
75
10.15 Limitation on Lines of Business. Enter into any business,
either directly or through any Subsidiary, except for those businesses which are
in the same, similar or reasonably related or complementary businesses as the
businesses in which the Company and its Subsidiaries are engaged on the date of
this Agreement or which are directly related thereto.
10.16 Limitation on Modifications of Recapitalization Documentation.
Amend, modify or change or consent to or agree to any amendment, modification or
change to any of the provisions of the Recapitalization Documentation which
would materially adversely affect the rights of the Lenders hereunder without
the consent of the Required Lenders.
10.17 Limitation on Subsidiary Distributions. Enter into or suffer
to exist or become effective any consensual encumbrance or restriction on the
ability of any Subsidiary to (a) pay dividends or make any other distributions
in respect of any Capital Stock of such Subsidiary held by, or pay any
Indebtedness owed to, the Company or any other Subsidiary of the Company, (b)
make loans or advances to the Company or any other Subsidiary of the Company or
(c) transfer any of its assets to the Company or any other Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of any restrictions existing under the Loan Documents and for customary
provisions in leases and other contracts restricting the assignment thereof.
10.18 Limitation on Management Fees. Pay management or similar fees
to the New Investor Group or any of their Affiliates in an aggregate amount in
excess of $2,000,000 in any twelve month period beginning on November 1 of any
year and ending on October 31 of the succeeding year.
10.19 Cancellation of Shares Acquired in Tender Offer. Fail to
cancel any Share (and related options) acquired by the Company pursuant to the
Tender Offer immediately upon the acquisition thereof.
10.20 Designated Senior Debt. Designate any Indebtedness of any Loan
Party (other than Indebtedness under this Agreement) as "Designated Senior Debt"
or "Designated Guarantor Senior Debt" under and as defined in the Senior
Subordinated Note Indenture (after the execution and delivery thereof), the
Senior Subordinated Credit Agreement (after the execution and delivery thereof)
or any other Subordinated Debt Documentation, in each case without the prior
written consent of the Administrative Agent and the Required Lenders.
SECTION 11. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Company or any Subsidiary Borrower shall fail to pay any
principal of any Loan when due in accordance with the terms thereof or
hereof; or the Company or any Subsidiary Borrower shall fail to pay any
interest on any Loan, or any other amount payable hereunder (including,
without limitation, any fees), within three Business Days after any such
interest or other amount becomes due in accordance with the terms thereof
or hereof; or
(b) Any representation or warranty made or deemed made by the
Company or any other Loan Party herein or in any other Loan Document or
which is contained in any certificate, document or financial or other
statement furnished by it at any time under or in connection with this
Agreement or any such other Loan Document shall prove to have been
incorrect in any material respect on or as of the date made or deemed
made; or
(c) Any Loan Party shall default in the observance or performance of
any agreement contained in Section 10 hereof or subsection 9.7(a); or
(d) The Company or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in paragraphs
(a) through (c) of this Section), and such default shall continue
unremedied
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for a period of 30 days after the earlier of (i) notice to the Company by
any Lender or any Agent of such default and (ii) any Responsible Officer
of any Loan Party becoming aware of such default; or
(e) The Company or any of its Subsidiaries shall (i) default in any
payment of principal of or interest of any Indebtedness (other than the
Loans) or in the payment of any Guarantee Obligation, beyond the period of
grace, if any, provided in the instrument or agreement under which such
Indebtedness or Guarantee Obligation was created; or (ii) default in the
observance or performance of any other agreement or condition relating to
any such Indebtedness or Guarantee Obligation or contained in any
instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or holders
of such Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (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, such Indebtedness to become due prior to its stated maturity or
such Guarantee Obligation to become payable; provided, however, that no
Default or Event of Default shall exist under this paragraph unless the
aggregate amount of Indebtedness and/or Guarantee Obligations in respect
of which any default or other event or condition referred to in this
paragraph shall have occurred shall be equal to at least $15,000,000 or
(f) (i) The Company or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it
or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or the Company or any of its Subsidiaries
shall make a general assignment for the benefit of its creditors; or (ii)
there shall be commenced against the Company or any of its Subsidiaries
any case, proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced
against the Company or any of its Subsidiaries any case, proceeding or
other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its
assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending
appeal within 60 days from the entry thereof; or (iv) the Company or any
of its Subsidiaries shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set forth
in clause (i), (ii), or (iii) above; or (v) the Company or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan
(other than a Multiemployer Plan) or any Lien in favor of the PBGC or a
Plan shall arise on the assets of the Company or any Commonly Controlled
Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall
be appointed, to administer or to terminate, any Single Employer Plan,
which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Required Lenders, likely to
result in the termination of such Plan for purposes of Title IV of ERISA,
(iv) any Single Employer Plan shall terminate for purposes of Title IV of
ERISA, (v) the Company or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Required Lenders is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other event or
condition shall occur or exist with respect to a Plan; and in each case in
clauses (i) through (vi) above, such event or condition, together with all
other such events or conditions, if any, could reasonably be expected to
have a Material Adverse Effect; or
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(h) One or more judgments or decrees shall be entered against the
Company or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance) of $15,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged, stayed
or bonded pending appeal within 60 days from the entry thereof; or
(i) (i) Any of the Security Documents shall cease, for any reason,
to be in full force and effect, or the Company or any other Loan Party
which is a party to any of the Security Documents shall so assert or (ii)
the Lien created by any of the Security Documents shall cease to be
enforceable and of the same effect and priority purported to be created
thereby; or
(j) Any Guarantee shall cease, for any reason, to be in full force
and effect or any Guarantor shall so assert; or
(k) Any subordination provision in the Senior Subordinated Note
Indenture, the Senior Subordinated Credit Agreement or any other
Subordinated Debt Documentation shall cease, for any reason, to be in full
force and effect or any Loan Party shall so assert; or
(l) (i) The Merger shall fail to be consummated in accordance with
the terms and conditions of the Recapitalization Documentation on or prior
to May 31, 1998, (ii) the Company shall not have borrowed or issued at
least $200,000,000 in Senior Subordinated Bridge Loans or Senior
Subordinated Notes on or prior to the date which is 21 days after the
Closing Date or (iii) the Shareholder Support Agreement shall cease to be
in full force and effect at any time prior to the consummation of the
Merger or any party thereto shall so assert; or
(m) (i) the New Investor Group shall cease to beneficially own at
least 35% or more of any outstanding class of Capital Stock having
ordinary voting power in the election of directors of the Company, (ii)
any Person or "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended) (other than the Rollover
Shareholders) shall have beneficial ownership of 20% or more of any
outstanding class of Capital Stock of the Company having ordinary voting
power for the election of directors of the Company, (iii) on or after the
Merger Date, the Board of Directors of the Company shall not consist of a
majority of Continuing Directors; "Continuing Directors" shall mean the
directors of the Company on the Merger Date and each other director, if
such other director's nomination for election to the Board of Directors of
the Company is recommended by a majority of the then Continuing Directors
or (iv) any "change of control" shall occur under the Senior Subordinated
Note Indenture (after the execution and delivery thereof), the Senior
Subordinated Credit Agreement (after the execution and delivery thereof
and for so long as the Senior Subordinated Credit Agreement remains in
effect) or any other Subordinated Debt Documentation (after the execution
and delivery thereof);
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section with respect to the
Company or any Subsidiary Borrower, automatically the Commitments shall
immediately terminate and the Loans hereunder (with accrued interest thereon)
and all other amounts owing under this Agreement (including, without limitation,
all amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) shall immediately become due and payable, and (B) if such event is
any other Event of Default, either or both of the following actions may be
taken: (i) with the consent of the Required Lenders, the Administrative Agent
may, or upon the request of the Required Lenders, the Administrative Agent
shall, by notice to the Company declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii) with
the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Company, declare the Loans hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Company shall at
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such time deposit in a cash collateral account opened by the Administrative
Agent an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. The Company hereby grants to the Administrative Agent, for
the benefit of the Issuing Bank and the L/C Participants, a security interest in
such cash collateral to secure all Obligations under this Agreement and the
other Loan Documents. Amounts held in such cash collateral account shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay other Obligations. Within a reasonable period after all such Letters of
Credit shall have expired or been fully drawn upon, all Reimbursement
Obligations shall have been satisfied and all other Obligations shall have been
paid in full, the balance, if any, in such cash collateral account shall be
returned to the Company. The Company shall execute and deliver to the
Administrative Agent, for the account of the Issuing Bank and the L/C
Participants, such further documents and instruments as the Administrative Agent
may request to evidence the creation and perfection of the within security
interest in such cash collateral account.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 12. THE AGENTS
12.1 Appointment. Each Lender hereby irrevocably designates and
appoints each Agent as the agent of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes each Agent, in
such capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to such Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, neither Agent shall have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against either Agent.
Without limiting the foregoing, the use of the term "agent" with respect to
either Agent is used as a matter of market custom and is intended to create or
reflect only an administrative relationship between independent contracting
parties. The Agents and the Lenders hereby acknowledge and agree that the
Administrative Agent shall be the only Agent which shall be a "Representative"
of the Lenders under the Senior Subordinated Note Indenture (after execution and
delivery thereof), the Senior Subordinated Credit Agreement (after execution and
delivery thereof and for so long as the Senior Subordinated Credit Agreement
remains in effect) and any other Subordinated Debt Documentation (after
execution and delivery thereof).
The Issuing Bank and the Fronting Lenders shall act on behalf of the
Lenders with respect to Letters of Credit and Fronted Offshore Loans issued or
made under this Agreement and the documents associated therewith. It is
understood and agreed that the Issuing Bank and the Fronting Lenders (a) shall
have all of the benefits and immunities (i) provided to the Agents in this
Section 12 with respect to acts taken or omissions suffered by the Issuing Bank
and Fronting Lenders in connection with Letters of Credit and Fronted Offshore
Loans issued or made under this Agreement and the documents associated therewith
as fully as if the term "Agents", as used in this Section 12, included the
Issuing Bank and the Fronting Lenders with respect to such acts or omissions and
(ii) as additionally provided in this Agreement and (b) shall have all of the
benefits of the provisions of subsection 12.7 or Section 13 as fully as if the
term "Agents", as used in subsection 12.7 or Section 13, included the Issuing
Bank and the Fronting Lenders.
12.2 Delegation of Duties. Each Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Neither Agent shall be
responsible for the negligence or misconduct of any agents or attorneys in-fact
selected by it with reasonable care.
12.3 Exculpatory Provisions. Neither Agent nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document
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(except for its or such Person's own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Company or any other Loan
Party or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agents under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Company or any other Loan Party to perform
its obligations hereunder or thereunder. No Agent-Related Person shall be under
any obligation to any Lender 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 other Loan Party.
12.4 Reliance by Agents. Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or teletype message,
statement, order 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, without
limitation, counsel to the Company or any other Loan Party), independent
accountants and other experts selected by such Agent. The Administrative Agent
may deem and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Administrative Agent. Each 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 relevant Lenders as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
Each Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement and the other Loan Documents in accordance
with a request of the relevant Lenders entitled to so act, and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
the Lenders and all future holders of the Loans.
12.5 Notice of Default. Neither Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless such Agent has received notice from a Lender 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
Administrative Agent receives such a notice, the Administrative Agent shall give
notice thereof to the Lenders. The Administrative Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Lenders entitled to so act; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
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 Lenders (except to the extent that
this Agreement expressly requires that such actions be taken or not be taken
only with the consent or upon the authorization of the Required Lenders).
12.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly
acknowledges that neither Agent nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by such Agent or any such other Person
hereinafter taken, including any review of the affairs of the Company or any
other Loan Party, shall be deemed to constitute any representation or warranty
by such Agent or any such other Person to any Lender. Each Lender represents to
the Agents that it has, independently and without reliance upon any
Agent-Related Person or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Company and the other Loan Parties and
made its own decision to make its extensions of credit hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon any Agent-Related Person or any other Lender, 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 the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Company and the other Loan Parties. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agents
hereunder, the Agents shall not have any duty or responsibility to provide any
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Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Company or any other Loan Party which may come into the possession of the
Agents or any of their respective officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
12.7 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Lenders agree to indemnify each Agent-Related Person
(to the extent not reimbursed by the Company or the Subsidiary Borrowers and
without limiting the obligation of the Company and the Subsidiary Borrowers to
do so), ratably according to their respective Voting Percentages in effect on
the date on which indemnification is sought, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against such Agent-Related Person in any
way relating to or arising out of, the Commitments, this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by such Agent-Related Person under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements to the extent resulting from
the relevant Agent-Related Person's gross negligence or willful misconduct. The
agreements in this subsection shall survive the payment of the Loans and all
other amounts payable hereunder.
12.8 Agent in Its Individual Capacity. Each Agent and its Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Company and the other Loan Parties as though such Agent were
not an Agent hereunder and under the other Loan Documents and without notice to
or consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, each Agent and its Affiliates may receive information regarding the
Company or the other Loan Parties or their respective Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Company or the other Loan Parties or their respective Affiliates) and
acknowledge that neither Agent nor their respective Affiliates shall be under an
obligation to provide such information to them. With respect to the Loans made
by it and with respect to any Letter of Credit issued or participated in by it,
each Agent shall have the same rights and powers under this Agreement and the
other Loan Documents as any Lender and may exercise the same as though it were
not an Agent, and the terms "Lender" and "Lenders" shall include each Agent in
its individual capacity.
12.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent (provided
that it shall have been approved by the Company (which approval shall not be
unreasonably withheld)), shall succeed to the rights, powers and duties of the
Administrative Agent hereunder. If no successor agent is appointed prior to the
effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Lenders and the
Company, a successor agent from among the Lenders. Effective upon such
appointment by the Required Lenders or by the Administrative Agent, the term
"Administrative Agent" shall mean such successor agent, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 12 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents. If no
successor agent has accepted appointment as Administrative Agent by the date
which is 10 days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall assume and perform all of the
duties of the Administrative Agent hereunder until such time, if any, as the
Required Lenders appoint a successor agent as provided for above.
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SECTION 13. GUARANTEE
13.1 Guarantee. (a) To induce the Agents and the Lenders to execute
and deliver this Agreement and to make the extensions of credit provided for
herein to the Subsidiary Borrowers, the Company hereby unconditionally and
irrevocably guarantees to the Agents and the Lenders and their respective
successors, permitted transferees and permitted assigns, the prompt and complete
payment and performance by the Subsidiary Borrowers when due (whether at the
stated maturity, by acceleration or otherwise) of the Subsidiary Borrower
Obligations. The Company further agrees to pay any and all reasonable expenses
(including, without limitation, all reasonable fees and disbursements of
counsel) which may be paid or incurred by any Agent or any Lender in enforcing,
or obtaining advice of counsel in respect of, any rights with respect to, or
collecting, any or all of the Subsidiary Borrower Obligations and/or enforcing
any rights with respect to, or collecting against, the Company under this
Section 13. This Guarantee shall remain in full force and effect until the
Subsidiary Borrower Obligations are paid in full, the Commitments are terminated
and no Letter of Credit remains outstanding, notwithstanding that from time to
time prior thereto the Subsidiary Borrowers may be free from any Subsidiary
Borrower Obligations. For purposes of this Section 13, each Fronting Lender
shall be deemed to be a "Lender".
(b) No payment or payments made by any Subsidiary Borrower or any
other Person or received or collected by any Agent or any Lender from any
Subsidiary Borrower or any other Person by virtue of any action or proceeding or
any set-off or appropriation or application, at any time or from time to time,
in reduction of or in payment of the Subsidiary Borrower Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of the
Company under this Section 13, which shall, notwithstanding any such payment or
payments, remain in full force and effect until the Subsidiary Borrower
Obligations are paid in full, the Commitments are terminated and no Letter of
Credit remains outstanding. The Company agrees that whenever, at any time, or
from time to time, it shall make any payment to any Agent or any Lender on
account of its liability under this Section 13, it will notify the
Administrative Agent and such Agent or Lender in writing that such payment is
made under this Section 13 for such purpose.
13.2 No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Section 13, the Company shall
not be entitled to be subrogated to any of the rights of any Agent or any Lender
against any Subsidiary Borrower or any other Guarantor or any collateral
security or guarantee or right of offset held by any Agent or any Lender for the
payment of the Subsidiary Borrower Obligations, nor shall the Company seek or be
entitled to seek any contribution or reimbursement from any Subsidiary Borrower
or any other Guarantor in respect of payments made by the Company hereunder,
until all amounts owing to the Agents and the Lenders by the Subsidiary
Borrowers on account of the Subsidiary Borrower Obligations are paid in full,
the Commitments are terminated and no Letter of Credit remains outstanding. If
any amount shall be paid to the Company on account of such subrogation rights at
any time when all of the Subsidiary Borrower Obligations shall not have been
paid in full, the Commitments shall not have been terminated or any Letter of
Credit is outstanding, such amount shall be held by the Company in trust for the
Agents and the Lenders, segregated from other funds of the Company, and shall,
forthwith upon receipt by the Company, be turned over to the Administrative
Agent, for the benefit of the Lenders, in the exact form received by the Company
(duly indorsed by the Company to the Administrative Agent, if required), to be
applied against the Subsidiary Borrower Obligations, whether matured or
unmatured, in such order as the Administrative Agent may determine. The
provisions of this subsection shall survive the termination of the guarantee
contained in this Section 13 and the payment in full of the Subsidiary Borrower
Obligations and the termination of the Commitments.
13.3 Amendments, etc. with respect to the Subsidiary Borrower
Obligations: Waiver of Rights. The Company shall remain obligated hereunder
notwithstanding that, without any reservation of rights against the Company, and
without notice to or further assent by the Company, any demand for payment of
any of the Subsidiary Borrower Obligations made by any Agent or any Lender may
be rescinded by such Agent or such Lender, and any of the Subsidiary Borrower
Obligations continued, and the Subsidiary Borrower Obligations, or the liability
of any other party upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by any Agent or any Lender, and
this Agreement, the other Loan Documents, and any other
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documents executed and delivered in connection herewith or therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Administrative Agent (or the relevant Lenders, as the case may be) may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by any Agent or any Lender for the payment of the
Subsidiary Borrower Obligations may be sold, exchanged, waived, surrendered or
released. No Agent or Lender nor any of their respective Affiliates shall have
any obligation to protect, secure, perfect or insure any Lien at any time held
by it as security for the Subsidiary Borrower Obligations or for the guarantee
contained in this Section 13 or any property subject thereto. When making any
demand hereunder against the Company, any Agent or any Lender may, but shall be
under no obligation to, make a similar demand on the relevant Subsidiary
Borrower or any other guarantor, and any failure by any Agent or any Lender to
make any such demand or to collect any payments from such Subsidiary Borrower or
any such other guarantor or any release of such Subsidiary Borrower or such
other guarantor shall not relieve the Company of its obligations or liabilities
under this Section 13, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of any Agent or any Lender against
the Company. For the purposes hereof "demand" shall include the commencement and
continuance of any legal proceedings.
13.4 Guarantee Absolute and Unconditional. The Company waives, to
the fullest extent permitted by applicable law, any and all notice of the
creation, renewal, extension or accrual of any of the Subsidiary Borrower
Obligations and notice of or proof of reliance by any Agent or any Lender upon
the guarantee contained in this Section 13 or acceptance of the guarantee
contained in to this Section 13; the Subsidiary Borrower Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon the guarantee
contained in this Section 13; and all dealings between the Subsidiary Borrowers,
on the one hand, and the Agents and the Lenders, on the other hand, shall
likewise be conclusively presumed to have been had or consummated in reliance
upon the guarantee contained in this Section 13. The Company waives, to the
fullest extent permitted by applicable law, diligence, presentment, protest,
demand for payment and notice of default or nonpayment to or upon the Subsidiary
Borrowers with respect to the Subsidiary Borrower Obligations. The Guarantee
contained in this Section 13 shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity,
regularity or enforceability of this Agreement, any Note, any other Loan
Document, any of the Subsidiary Borrower Obligations or any guarantee or right
of offset with respect thereto at any time or from time to time held by any
Agent or any Lender, (b) any defense, set-off or counterclaim (other than a
defense of payment or performance) which may at any time be available to or be
asserted by the Subsidiary Borrowers against any Agent or any Lender or (c) any
other circumstance whatsoever (with or without notice to or knowledge of the
Borrowers) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Subsidiary Borrowers for the Subsidiary Borrower
Obligations, or of the Company under the guarantee contained in this Section 13,
in bankruptcy or in any other instance. When pursuing its rights and remedies
hereunder against the Company, any Agent and any Lender may, but shall be under
no obligation to, pursue such rights and remedies as it may have against the
Subsidiary Borrowers or any other Person or against any guarantee for the
Subsidiary Borrower Obligations or any right of offset with respect thereto, and
any failure by any Agent or any Lender to pursue such other rights or remedies
or to collect any payments from the Subsidiary Borrowers or any such other
Person or to realize upon any such guarantee or to exercise any such right of
offset, or any release of the Subsidiary Borrowers or any such other Person or
of any such guarantee or right of offset, shall not relieve the Company of any
liability hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of any Agent or any
Lender against the Company. The guarantee contained in this Section 13 shall
remain in full force and effect and be binding in accordance with and to the
extent of its terms upon the Company and its successors, and shall inure to the
benefit of the Agents and the Lenders, and their respective successors,
permitted transferees and permitted assigns, until all the Subsidiary Borrower
Obligations and the obligations of the Company under this Section 13 shall have
been satisfied by payment in full, the Commitments shall be terminated and no
Letter of Credit shall be outstanding, notwithstanding that from time to time
during the term of this Agreement the Subsidiary Borrowers may be free from any
Subsidiary Borrower Obligations.
13.5 Reinstatement. The guarantee contained in this Section 13 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Subsidiary Borrower Obligations is
rescinded or must otherwise be restored or returned by any Agent or any Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
any Subsidiary
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Borrower or upon or as a result of the appointment of a receiver, intervener or
conservator of, or trustee or similar officer for, such Subsidiary Borrower or
any substantial part of its property, or otherwise, all as though such payments
had not been made.
SECTION 14. MISCELLANEOUS
14.1 Amendments and Waivers. Neither this Agreement nor any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the Company,
Subsidiary Borrowers and the other Loan Parties written amendments, supplements
or modifications hereto and to the other Loan Documents for the purpose of,
amending, supplementing, modifying or adding any provisions of or to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders, the Company or of the Subsidiary Borrowers hereunder or thereunder
or (b) waive, on such terms and conditions as the Required Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any of
the requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall (i) reduce the amount or
extend the scheduled date of maturity of any Loan or any Reimbursement
Obligation, or reduce the stated rate of any interest or fee payable hereunder
or extend the scheduled date of any payment thereof or increase the amount or
extend the expiration date of any Lender's Commitment, in each case without the
consent of each Lender directly affected thereby, or (ii) consent to the
assignment or transfer by the Company or any Subsidiary Borrower of any of its
rights and obligations under this Agreement and the other Loan Documents or
release all or substantially all of the Collateral or release any material
Guarantor, in each case without the written consent of all the Lenders, or (iii)
amend, modify or waive any provision of this subsection or reduce the percentage
specified in the definition of Required Lenders without the written consent of
all the Lenders, or (iv) amend, modify or waive any provision of Section 12
without the written consent of the then Administrative Agent or (v) amend,
modify or waive subsection 3.6, 6.3(e) or 6.9 without the consent of the
Required Tranche A Lenders, the Required Tranche B Lenders and the Required
Tranche C Lenders or amend, modify or waive any provision of subsection 6.3(i)
without the consent of the Required Tranche B Lenders and the Required Tranche C
Lenders or reduce the percentage specified in the definition of Required Tranche
A Lenders, Required Tranche B Lenders or Required Tranche C Lenders without the
consent of all the Tranche A Lenders and/or the Tranche B Lenders and/or all the
Tranche C Lenders, respectively, or (vi) amend, modify or waive subsection 3.3,
3.4 or 3.5 without the consent of Lenders the Voting Percentages of which
aggregate at least 66-2/3% or (vii) amend, modify or waive Section 5 or
subsection 6.3(f) without the consent of the Required Tender Loan Lenders or
reduce the percentage specified in the definition of Required Tender Loan
Lenders without the consent of all the Tender Loan Lenders or (viii) amend,
modify or waive Section 4 or subsection 6.3(e), 6.3(f) or 6.9 without the
consent of the Required Acquisition Loan Lenders or reduce the percentage
specified in the definition of Required Acquisition Loan Lenders without the
consent of all the Acquisition Loan Lenders or (ix) amend, modify or waive
Section 2 or subsection 6.3(e) or 6.9 without the consent of the Required
Revolving Credit Lenders or amend, modify or waive the definition of Eligible
Offshore Currency or reduce the percentage specified in the definition of
Required Revolving Credit Lenders without the consent of all the Revolving
Credit Lenders or (x) amend, modify or waive subsection 2.5 through 2.12 or
subsection 12.1 without the consent of the Issuing Bank or (xi) amend, modify or
waive subsections 2.13 through 2.16, 6.2(b), or 12.1 without the consent of each
Fronting Lender adversely affected thereby or (xii) amend, modify or waive any
provision of subsection 2.17, 2.18 or 2.19 without the consent of the Swing Line
Lender. Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the Lenders and shall be binding upon the Company and
the Subsidiary Borrowers, the Lenders, the Agents and all future holders of the
Loans. In the case of any waiver, the Company, the Subsidiary Borrowers, the
Lenders and the Agents shall be restored to their former positions and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereon.
14.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand or
by
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overnight courier, when delivered, (b) in the case of delivery by mail, three
Business Days after being deposited in the mails, postage prepaid, or (c) in the
case of delivery by facsimile transmission, when sent and receipt has been
confirmed, addressed as follows in the case of the Company and the
Administrative Agent, and as set forth in Schedule 14.2 in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:
The Company: 8023 Vantage Drive
San Antonio, Texas 78230-4726
Attention: Chief Executive Officer
Telephone: (210) 524-9000
Telecopy: (210) 255-6998
with a copy to:
8023 Vantage Drive
San Antonio, Texas 78230-4726
Attention: General Counsel
Telephone: (210) 255-6331
Telcopy: (210) 255-6993
The Administrative
Agent: Bank of America National Trust and Savings Association
1850 Gateway Boulevard, 5th Floor
Concord, California 94520
Attention: Agency Administrative Officer #5596
Telephone: (510) 675-8365
Telecopy: (510) 675-8500
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.2, 2.4, 2.6, 2.14, 2.18, 3.2, 4.2, 4.5,
5.2, 6.2 or 6.4 shall not be effective until received.
14.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
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.
14.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Loan Documents (or in any amendment,
modification or supplement hereto or thereto) and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the making of the Loans
hereunder.
14.5 Payment of Expenses and Taxes. Subject to subsection 14.17, the
Company and the Subsidiary Borrowers jointly and severally agree (a) to pay or
reimburse the Agents and Agent-Related Persons for all their out-of-pocket costs
and expenses incurred in connection with the development, preparation,
syndication and execution and delivery of, and any amendment, supplement, waiver
or modification to, this Agreement and the other Loan Documents and any other
documents prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of counsel to the
Agents (including the reasonable allocated fees and expenses of in-house
counsel), (b) to pay or reimburse each Lender and the Agents for all their
respective costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Loan Documents and
any such other documents, including, without limitation, the fees and
disbursements of counsel to each Lender and of counsel to the Administrative
Agent (including the allocated fees and expenses of in-house counsel), (c) to
pay, indemnify, and hold each Lender, the Issuing Bank, each Fronting Lender,
the Agents and each Agent-Related Person harmless from, any and all recording
and filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise and other taxes, if any,
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which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, (d) to pay or reimburse each Lender,
each Fronting Lender and the Issuing Bank for any costs and expenses incurred by
such Lender in funding any payment in an Offshore Currency pursuant to
subsection 2.9(a), 2.16(a) or 2.16(b), and to pay or reimburse each Lender, each
Fronting Lender and the Issuing Bank for any costs and expenses incurred in
connection with any conversion of any amount to Dollars paid pursuant to
subsection 2.9(a), 2.16(a) or 2.16(b) and (e) TO PAY, INDEMNIFY, AND HOLD EACH
LENDER, THE ISSUING BANK, EACH FRONTING LENDER, THE AGENTS AND THE AGENT-RELATED
PERSONS AND THEIR RESPECTIVE DIRECTORS, TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS
HARMLESS FROM AND AGAINST ANY AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS
OF ANY KIND OR NATURE WHATSOEVER WITH RESPECT TO THE EXECUTION, DELIVERY,
ENFORCEMENT, PERFORMANCE AND ADMINISTRATION OF THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, THE RECAPITALIZATION DOCUMENTATION, THE RECAPITALIZATION OR THE USE
OR PROPOSED USE OF THE PROCEEDS OF THE LOANS IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY AND ANY SUCH OTHER DOCUMENTS, REGARDLESS OF
WHETHER ANY AGENT OR LENDER IS A PARTY TO THE LITIGATION OR OTHER PROCEEDING
GIVING RISE THERETO AND REGARDLESS OF WHETHER ANY SUCH LITIGATION OR OTHER
PROCEEDING IS BROUGHT BY THE COMPANY OR A SUBSIDIARY BORROWER OR ANY OTHER
PERSON, INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING RELATING TO THE
VIOLATION OF, NONCOMPLIANCE WITH OR LIABILITY UNDER, ANY ENVIRONMENTAL LAW
APPLICABLE TO THE OPERATIONS OF THE COMPANY, ANY OF ITS SUBSIDIARIES OR ANY OF
THE PROPERTIES (ALL THE FOREGOING IN THIS CLAUSE (D), COLLECTIVELY, THE
"INDEMNIFIED LIABILITIES"), PROVIDED THAT THE COMPANY AND THE SUBSIDIARY
BORROWERS SHALL HAVE NO OBLIGATION HEREUNDER TO THE AGENTS, ANY LENDER, THE
ISSUING BANK OR ANY FRONTING LENDER OR ANY OF THEIR RESPECTIVE DIRECTORS,
TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS WITH RESPECT TO INDEMNIFIED LIABILITIES
ARISING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PERSON. WITHOUT
LIMITING THE FOREGOING, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
COMPANY AND EACH SUBSIDIARY BORROWER AGREES NOT TO ASSERT, AND HEREBY WAIVES,
AND SHALL CAUSE EACH OF ITS SUBSIDIARIES NOT TO ASSERT AND TO WAIVE, ALL RIGHTS
OF CONTRIBUTION OR ANY OTHER RIGHTS OF RECOVERY WITH RESPECT TO ALL CLAIMS,
DEMANDS, PENALTIES, FINES, LIABILITIES, SETTLEMENTS, DAMAGES, COSTS AND EXPENSES
OF WHATEVER KIND OR NATURE, UNDER OR RELATED TO ENVIRONMENTAL LAWS, THAT ANY OF
THEM MIGHT HAVE BY STATUTE OR OTHERWISE AGAINST ANY AGENT OR LENDER. The
agreements in this subsection shall survive repayment of the Loans and all other
amounts payable hereunder.
14.6 Successors and Assigns; Participations and Assignments. (a)
This Agreement shall be binding upon and inure to the benefit of the Company,
each Subsidiary Borrower, the Lenders, the Agents and their respective
successors and assigns, except that neither the Company nor any Subsidiary
Borrower may assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
business or investment activities and in accordance with applicable law, at any
time sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any Commitment of such Lender or any
other interest of such Lender hereunder and under the other Loan Documents. In
the event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Loan for all purposes under this Agreement and the other Loan
Documents, and the Company, the Subsidiary
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Borrowers and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. No Lender shall
be entitled to create in favor of any Participant, in the participation
agreement pursuant to which such Participant's participating interest shall be
created or otherwise, any right to vote on, consent to or approve any matter
relating to this Agreement or any other Loan Document except for those specified
in clauses (i) and (ii) of the proviso to subsection 14.1. The Company and each
Subsidiary Borrower agrees that if amounts outstanding under this Agreement are
due or unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall, to the
maximum extent permitted by applicable law, be deemed to have the right of
setoff 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 Lender under this Agreement, provided that, in
purchasing such participating interest, such Participant shall be deemed to have
agreed to share with the Lenders the proceeds thereof as provided in subsection
14.7(a) as fully as if it were a Lender hereunder. The Company and each
Subsidiary Borrower also agrees that each Participant shall be entitled to the
benefits of subsections 6.11, 6.12 and 6.13 with respect to its participation in
the Commitments and the Loans outstanding from time to time as if it was a
Lender, provided that, in the case of subsection 6.12, such Participant shall
have complied with the requirements of said subsection and provided, further,
that no Participant shall be entitled to receive any greater amount pursuant to
any such subsection than the transferor Lender would have been entitled to
receive in respect of the amount of the participation transferred by such
transferor Lender to such Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking
business or investment activities and in accordance with applicable law, at any
time and from time to time assign to any Lender or any branch or affiliate or a
Related Fund thereof or, with the consent of the Administrative Agent (and, with
respect to assignments of Revolving Loans or Revolving Credit Commitments, the
Issuing Bank, the Swing Line Lender and the Fronting Lenders) and (so long as no
Event of Default is continuing) the Company, (which consent in each case shall
not be unreasonably withheld), to an additional bank, financial institution or
entity which is regularly engaged in making, purchasing or investing in loans
(an "Assignee") all or any part of its rights and obligations under this
Agreement and the other Loan Documents pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit J, executed by such Assignee, such
assigning Lender (and, in the case of an Assignee that is not then a Lender or
an affiliate thereof, by the Company, the Issuing Bank, the Swing Line Lender
and the Fronting Banks (in each case, if required) and the Administrative Agent)
and delivered to the Administrative Agent for its acceptance and recording in
the Register, provided that, (i) in the case of any such assignment to an
additional bank or financial institution of less than all of the rights and
obligations of the assigning Lender, the sum of the aggregate principal amount
of the Loans, the aggregate amount of the L/C Obligations and the aggregate
amount of the Available Revolving Credit Commitments and Available Acquisition
Loan Commitments being assigned and the sum of the aggregate principal amount of
the Loans, the aggregate amount of the L/C Obligations and the aggregate amount
of the Available Revolving Credit Commitments and Available Acquisition Loan
Commitments remaining with the assigning Lender are each not less than
$5,000,000 (or such lesser amount as may be agreed to by the Company and the
Administrative Agent) and (ii) assignments shall not be required to be made on a
ratable basis between the Commitments and/or Loans held by any Lender. Upon such
execution, delivery, acceptance and recording, from and after the effective date
determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with a Commitment as set forth therein, and (y) the assigning Lender thereunder
shall, to the extent provided in such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such assigning Lender shall cease to be a
party hereto).
(d) The Administrative Agent, on behalf of the Company, shall
maintain at the address of the Administrative Agent referred to in subsection
14.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "Register") for the recordation of the names and addresses of the Lenders
and the Commitments of, and principal amounts of the Loans owing to, and any
Notes evidencing the Loans owned by, each Lender from time to time. Notes and
the Loans evidenced thereby may be assigned or otherwise transferred in whole or
in part only by registration of such assignment or transfer on the Register (and
each Note shall expressly so provide). Any assignment or transfer of all or part
of such
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Loan(s) and the Note(s) evidencing the same shall be registered on the Register
only upon surrender for registration of assignment or transfer of the Note(s)
evidencing such Loan(s), accompanied by a duly executed Assignment and
Acceptance, and thereupon one or more new Note(s) in the same aggregate
principal amount shall be issued, if requested, to the designated Assignee(s)
and the old Note(s) shall be returned by the Agent to the Company or the
relevant Subsidiary Borrower, as the case may be, marked "cancelled". The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Company and each Subsidiary Borrower, the Administrative Agent and the
Lenders shall treat each Person whose name is recorded in the Register as the
owner of a Loan or other obligation hereunder (whether or not evidenced by a
Note) as the owner thereof for all purposes of this Agreement and the other Loan
Documents, notwithstanding any notice to the contrary. Any assignment of any
Loan or other obligation hereunder (whether or not evidenced by a Note) shall be
effective only upon appropriate entries with respect thereto being made in the
Register.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Company, the Issuing Bank, the
Swing Line Lender and the Fronting Lenders (in each case, if required), the
Issuing Bank and the Administrative Agent) together with payment to the
Administrative Agent of a registration and processing fee of $3,500, the
Administrative Agent shall (i) promptly accept such Assignment and Acceptance
and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give notice of such acceptance
and recordation to the Lenders and the Company and the Subsidiary Borrowers.
(f) The Company and the Subsidiary Borrowers authorize each Lender
to disclose to any Participant or Assignee (each, a "Transferee") and any
prospective Transferee, subject to such Person's agreeing to comply with the
provisions of subsection 14.15, any and all financial and other information in
such Lender's possession concerning the Company or any Subsidiary Borrower and
any of its Affiliates which has been delivered to such Lender by or on behalf of
the Company or such Subsidiary Borrower pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of the Company or such Subsidiary
Borrower in connection with such Lender's credit evaluation of the Company or
any Subsidiary Borrower and any of its respective Affiliates prior to becoming a
party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans and Notes relate only to absolute assignments (whether or not arising as
the result of foreclosure of a security interest) and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
14.7 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender")
shall at any time receive any payment of all or part of its Loans, its
Reimbursement Obligations or other amounts owing to it hereunder in respect of
any participating interest in any Loan, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in Section 11(f), or
otherwise), in a greater proportion than any such payment to or collateral
received by any other relevant Lender, if any, in respect of such other relevant
Lender's relevant Loans, Reimbursement Obligations or other amounts owing to it
hereunder in respect of any participating interest in any Loan, or interest
thereon, such benefitted Lender shall purchase for cash from the other relevant
Lenders a participating interest in such portion of each such other relevant
Lender's relevant Loans, Reimbursement Obligations or other amounts owing to it
hereunder in respect of any participating interest in any Loan, or shall provide
such other relevant Lenders with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such benefitted Lender to share
the excess payment or benefits of such collateral or proceeds ratably with each
of the relevant Lenders, provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided
by law, subject to subsection 14.17, each Lender shall have the right, without
prior notice to the Company or any Subsidiary Borrower, any such notice being
expressly waived by the Company and each Subsidiary Borrower to the extent
permitted by applicable law, upon any amount (including, without limitation, any
amount owing to
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such Lender in respect of an undivided interest purchased by such Lender in any
draft paid by the Issuing Bank under any Letter of Credit pursuant to subsection
3.4(a) or any participating interest in any Swing Line Loans or Fronted Offshore
Loans or any participating interest purchased pursuant to subsection 14.7(a))
becoming due and payable by the Company or any Subsidiary Borrower hereunder
(whether at the stated maturity, by acceleration or otherwise), to set-off and
appropriate and apply against such amount any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any affiliate, branch or agency thereof to or for the
credit or the account of the Company or any Subsidiary Borrower. Each Lender
agrees promptly to notify the Company and the Administrative Agent after any
such set-off and application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
14.8 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute 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
Administrative Agent.
14.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Company, the Subsidiary Borrowers, the
Administrative Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by the
Administrative Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.
14.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
14.12 Submission To Jurisdiction; Waivers. The Company and each
Subsidiary Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgement
in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Company and to each Subsidiary Borrower at the addresses set forth
pursuant to subsection 14.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
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89
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred
to in this subsection any special, exemplary, punitive or consequential
damages.
14.13 Acknowledgements. The Company and each Borrower Subsidiary
hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Company or any Subsidiary
Borrower arising out of or in connection with this Agreement or any of the
other Loan Documents, and the relationship between the Administrative
Agent and Lenders, on one hand, and the Loan Parties, on the other hand,
in connection herewith or therewith is solely that of debtor and creditor;
and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Loan Parties and the Lenders.
14.14 WAIVERS OF JURY TRIAL. THE COMPANY, EACH SUBSIDIARY BORROWER,
THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
14.15 Confidentiality. Each Lender agrees to keep confidential all
non-public information provided to it by the Company and the Subsidiary
Borrowers pursuant to this Agreement; provided that nothing herein shall prevent
any Lender from disclosing any such information (i) to the Administrative Agent
or any other Lender, (ii) to any Transferee or prospective Transferee which
agrees to comply with the provisions of this subsection, (iii) to its employees,
directors, agents, attorneys, accountants and other professional advisors, (iv)
upon the request or demand of any Governmental Authority having jurisdiction
over such Lender, (v) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (vi) in connection with any litigation or similar proceeding
to which each Lender is a party, (vii) which has been publicly disclosed other
than in breach of this Agreement, (viii) to the National Association of
Insurance Commissioners or any similar organization or any nationally recognized
rating agency that requires access to information about such Lender's investment
portfolio or (ix) in connection with the exercise of any remedy hereunder.
14.16 Conversion of Currencies. (a) If, for the purpose of obtaining
judgment in any court, it is necessary to convert a sum owing hereunder in one
currency into another currency, each party hereto (including any Subsidiary
Borrower) agrees, to the fullest extent that it may effectively do so, that the
rate of exchange used shall be that at which, in accordance with normal banking
procedures in the relevant jurisdiction, the first currency could be purchased
with such other currency on the Banking Day immediately preceding the day on
which final judgment is given.
(b) The obligations of the Company and each Subsidiary Borrower in
respect of any sum due to any party hereto or any holder of the obligations
owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment
in a currency (the "Judgment Currency") other than the currency in which such
sum is stated to be due hereunder (the "Agreement Currency"), be discharged only
to the extent that, on the Business Day following receipt by the Applicable
Creditor of any sum adjudged to be so due in the Judgment Currency, the
Applicable Creditor may in accordance with normal banking procedures in the
relevant jurisdiction purchase the Agreement Currency with the Judgment
Currency; subject to subsection 14.17, if the amount of the Agreement Currency
so purchased is less than the sum originally due to the Applicable Creditor in
the Agreement Currency, the Company and each Subsidiary Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss. The obligations of the Company and the
Subsidiary Borrowers contained in this subsection 14.16 shall survive the
termination of this Agreement and the payment of all other amounts owing
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90
hereunder.
14.17 Limitation on Obligations of Subsidiary Borrowers.
Notwithstanding any provision contained herein or in any of other the Loan
Documents to the contrary, in no event shall any Subsidiary Borrower be liable
or otherwise responsible, nor shall any assets of such Subsidiary Borrower be
pledged as Collateral or deemed to be Collateral for any Obligations other than
Obligations for principal, interest, fees and commissions with respect to Loans
made directly to such Subsidiary Borrower and for costs and expenses related
solely to such Loans, and in no event shall any of the provisions contained
herein be construed or interpreted to cause any Subsidiary Borrower to be
considered a pledgor or guarantor of any Obligation of the Company, any
Guarantor or any other Person pursuant to Section 956(d) of the Internal Revenue
Code of 1986, as amended, or pursuant to any regulations thereunder, including,
but not limited to, Regulation 1.956-2(c).
14.18 Usury Savings Clause. It is the intention of the parties
hereto to comply with applicable usury laws (now or hereafter enacted);
accordingly, notwithstanding any provision to the contrary in this Agreement,
any Notes, any of the other Loan Documents or any other document related hereto
or thereto, in no event shall this Agreement or any such other document require
the payment or permit the collection of interest in excess of the maximum amount
permitted by such laws. If from any circumstances whatsoever, fulfillment of any
provision of this Agreement, any Notes, any of the other Loan Documents or of
any other document pertaining hereto or thereto, shall involve transcending the
limit of validity prescribed by applicable law for the collection or charging of
interest, then, ipso facto, the obligation to be fulfilled shall be reduced to
the limit of such validity, and if from any such circumstances the
Administrative Agent and the Lenders shall ever receive anything of value as
interest or deemed interest by applicable law under this Agreement, any Notes,
any of the other Loan Documents or any other document pertaining hereto or
otherwise an amount that would exceed the highest lawful rate, such amount that
would be excessive interest shall be applied to the reduction of the principal
amount owing under the Loans or on account of any other indebtedness of the
Company or any Subsidiary Borrower, and not to the payment of interest, or if
such excessive interest exceeds the unpaid balance of principal of such
indebtedness, such excess shall be refunded to the Company or the relevant
Subsidiary Borrower. In determining whether or not the interest paid or payable
with respect to any indebtedness of the Company or any Subsidiary Borrower to
the Administrative Agent and the Lenders, under any specified contingency,
exceeds the highest lawful rate, the Company, the Administrative Agent and the
Lenders shall, to the maximum extent permitted by applicable law, (a)
characterize any non-principal payment as an expense, fee or premium rather than
as interest, (b) exclude voluntary prepayments and the effects thereof, (c)
amortize, prorate, allocate and spread the total amount of interest throughout
the full term of such indebtedness so that interest thereon does not exceed the
maximum amount permitted by applicable law, and/or (d) allocate interest between
portions of such indebtedness, to the end that no such portion shall bear
interest at a rate greater than that permitted by applicable law.
<PAGE> 98
91
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
KINETIC CONCEPTS, INC.
By: /s/ Dennis E. Noll
----------------------------------------
Title: Senior Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative Agent
By: /s/ Kevin P. Morrison
----------------------------------------
Title: Vice President
BANKERS TRUST COMPANY,
as Syndication Agent
By: /s/ Mary Jo Jolly
----------------------------------------
Title: Assistant Vice President
<PAGE> 1
Exhibit 10.28
KINETIC CONCEPTS, INC.
$200,000,000
% Senior Subordinated Notes Due 2007
PURCHASE AGREEMENT
October 29, 1997
BT ALEX. BROWN INCORPORATED
130 Liberty Street
New York, New York 10006
BANCAMERICA ROBERTSON STEPHENS
230 South LaSalle Street
Chicago, Illinois 60697
Ladies and Gentlemen:
Kinetic Concepts, Inc., a Texas corporation (the "Company" or
"Marine Midland Bank"), and each of the Company's Subsidiaries listed on the
signature pages hereof (together with any Subsidiary that in the future executes
a supplemental indenture pursuant to which such Subsidiary agrees to guarantee
the Notes (as defined) the "Guarantors" and, together with the Company, the
"Issuers") hereby confirm their agreement with you (the "Initial Purchasers") as
set forth below.
1. The Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchasers
$200,000,000 aggregate principal amount of its % Senior Subordinated Notes due
2007 (the "Notes"). The Notes will be guaranteed (collectively, the
"Guarantees") on a senior basis by each of the Guarantors. The Notes and the
Guarantees are collectively referred to herein as the "Securities". The Notes
are to be issued under an indenture (the "Indenture") to be dated as of October
, 1997 by and among the Company, the Guarantors and Marine Midland Bank, as
Trustee (the "Trustee").
The Securities are being offered in connection with a leveraged
recapitalization transaction involving the Company (the "Recapitalization"),
pursuant to the Transaction Agreement dated as of October 2, 1997 (the
"Transaction Agreement"), among Fremont Purchaser II, Corp., RCBA Purchaser I,
L.P. and the Company.
<PAGE> 2
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The Securities will be offered and sold to the Initial Purchasers without being
registered under the Securities Act of 1933, as amended (the "Act"), in reliance
on exemptions therefrom.
In connection with the sale of the Securities, the Issuers have
prepared a preliminary offering memorandum dated October 15, 1997 (the
"Preliminary Memorandum") and a final offering memorandum dated October , 1997
(the "Final Memorandum"; the Preliminary Memorandum and the Final Memorandum
each herein being referred to as a "Memorandum") setting forth or including a
description of the terms of the Securities, the terms of the offering of the
Securities, a description of the Company and its subsidiaries and any material
developments relating to the Company and its subsidiaries occurring after the
date of the most recent historical financial statements included therein.
The Company understands that the Initial Purchasers propose to make
an offering of the Securities only on the terms and in the manner set forth in
the Final Memorandum and Section 8 hereof as soon as the Initial Purchasers deem
advisable after this Agreement has been executed and delivered to persons in the
United States whom the Initial Purchasers reasonably believe to be qualified
institutional buyers ("Qualified Institutional Buyers" or "QIBs") as defined in
Rule 144A under the Act, as such rule may be amended from time to time ("Rule
144A"), in transactions under Rule 144A and outside the United States to certain
persons in reliance on Regulation S under the Act.
The Initial Purchasers and their direct and indirect transferees of
the Securities will be entitled to the benefits of the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Issuers have agreed,
among other things, to file a registration statement (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
registering the Securities or the Exchange Notes (as defined in the Registration
Rights Agreement) and related guarantees under the Act.
2. Representations and Warranties. The Issuers, jointly and
severally, represent and warrant to and agree with the Initial Purchasers that:
(a) Neither the Preliminary Memorandum as of the date thereof nor
the Final Memorandum nor any amendment or sup-
<PAGE> 3
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plement thereto as of the date thereof and at all times subsequent thereto up
to the Closing Date (as defined in Section 3 below) contained or contains any
untrue statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this Section 2(a) do not apply to statements or
omissions made in reliance upon and in conformity with information relating to
the Initial Purchasers furnished to the Company in writing by the Initial
Purchasers expressly for use in the Preliminary Memorandum, the Final Memorandum
or any amendment or supplement thereto.
(b) As of the Closing Date, the Company will have the authorized,
issued and outstanding capitalization set forth in the Final Memorandum; as of
the date hereof, all of the subsidiaries of the Company are listed in Schedule 1
attached hereto (the "Subsidiaries"); all of the outstanding shares of capital
stock of the Company and the Subsidiaries have been, and as of the Closing Date
will be, duly authorized and validly issued, are fully paid and nonassessable
and were not issued in violation of any preemptive or similar rights; all of the
outstanding shares of capital stock of the Company and the Subsidiaries will be
free and clear of all liens, encumbrances, equities and claims or restrictions
on transferability (other than those imposed by the Act and the securities or
"Blue Sky" laws of certain jurisdictions) or voting; except as set forth in the
Final Memorandum, there are no (i) options, warrants or other rights to
purchase, (ii) agreements or other obligations to issue or (iii) other rights to
convert any obligation into, or exchange any securities for, shares of capital
stock of or ownership interests in the Company and the Subsidiaries outstanding.
Except for the Subsidiaries or as disclosed in the Final Memorandum, neither the
Company nor the Subsidiaries owns, directly or indirectly, a material number of
shares of capital stock or any other equity or long term debt securities or has
any equity interest in any firm, partnership, joint venture or other entity.
(c) Each of the Company and the Subsidiaries is duly incorporated,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation and has all requisite corporate power and
authority to own its properties and conduct its business as now conducted and as
described in the Final Memorandum; each of the Company and the Subsidiaries is
duly qualified to do business as a foreign corporation in good standing in all
other jurisdictions where the ownership or leasing of its properties or the
conduct of its business re-
<PAGE> 4
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quires such qualification, except where the failure to be so qualified would
not, individually or in the aggregate, have a material adverse effect on the
general affairs, management, business, condition (financial or otherwise),
prospects or results of operations of the Company and the Subsidiaries, taken as
a whole (any such event, a "Material Adverse Effect").
(d) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Notes, the
Exchange Notes and the Private Exchange Notes (as defined in the Registration
Rights Agreement). The Notes, when issued, will be in the form contemplated by
the Indenture. The Notes, the Exchange Notes and the Private Exchange Notes have
each been duly and validly authorized by the Company and, when executed by the
Company and authenticated by the Trustee in accordance with the provisions of
the Indenture and, in the case of the Notes, when delivered to and paid for by
the Initial Purchasers in accordance with the terms of this Agreement, will
constitute valid and legally binding obligations of the Company, entitled to the
benefits of the Indenture, and enforceable against the Company in accordance
with their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought.
(e) Each Guarantor has all requisite corporate power and authority
to execute, deliver and perform each of its obligations under its Guarantee, its
guarantee of the Exchange Notes (each, an "Exchange Notes Guarantee") and its
guarantee of the Private Exchange Notes (each, "Private Exchange Notes
Guarantee"). The Guarantees, when issued, will be in the form contemplated by
the Indenture. The Guarantees, the Exchange Notes Guarantees and the Private
Exchange Notes Guarantees have each been duly and validly authorized by the
Guarantors and, in the case of the Guarantees, when delivered to and paid for by
the Initial Purchasers in accordance with the terms of this Agreement, will
constitute valid and legally binding obligations of the Guarantors, entitled to
the benefits of the Indenture, and enforceable against the Guarantors in
accordance with their terms, except that enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought.
<PAGE> 5
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(f) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Indenture.
The Indenture meets the requirements for qualification under the Trust Indenture
Act of 1939, as amended (the "TIA"). The Indenture has been duly and validly
authorized by the Issuers and, when executed and delivered by the Issuers
(assuming the due authorization, execution and delivery by the Trustee), will
constitute a valid and legally binding agreement of each of the Issuers,
enforceable against each of the Issuers in accordance with its terms, except
that the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought.
(g) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Registration
Rights Agreement. The Registration Rights Agreement has been duly and validly
authorized by each of the Issuers and, when executed and delivered by the
Issuers, will constitute a valid and legally binding agreement of each of the
Issuers, enforceable against each of the Issuers in accordance with its terms,
except that (A) the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding therefor may
be brought and (B) any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy considerations.
(h) Each of the Issuers has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. This Agreement and the
consummation by the Issuers of the transactions contemplated hereby have been
duly and validly authorized by the Issuers. This Agreement has been duly
executed and delivered by the Issuers.
(i) No consent, approval, authorization or order of any court or
governmental agency or body, or third party is required for (i) the issuance and
sale by the Company of the Notes to the Initial Purchasers or the consummation
by the Company of the other transactions contemplated hereby, (ii) the issuance
and sale by the Guarantors of the Guarantees or the consummation by the
Guarantors of the other transactions con-
<PAGE> 6
-6-
templated hereby and (iii) the consummation by the Company of the transactions
contemplated by the Transaction Agreement and (iv) the execution by the Company
of the Credit Agreement (as defined) and the consummation by the Issuers of each
of the transactions contemplated by the Credit Agreement, except such as have
been or, prior to the Closing Date, will be obtained and such as may be required
under state securities or "Blue Sky" laws in connection with the purchase and
resale of the Securities by the Initial Purchasers. None of the Company and the
Subsidiaries is (i) in violation of its certificate of incorporation or bylaws
(or similar organizational document), (ii) in breach or violation of any
statute, law, judgment, decree, order, rule or regulation applicable to any of
them or any of their respective properties or assets, except for any such breach
or violation which would not, individually or in the aggregate, have a Material
Adverse Effect, or (iii) in breach of or default under (nor has any event
occurred which, with notice or passage of time or both, would constitute a
default under) or in violation of any of the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement or
instrument to which any of them is a party or to which any of them or their
respective properties or assets is subject (collectively, "Contracts"), except
for any such breach, default, violation or event which would not, individually
or in the aggregate, have a Material Adverse Effect.
(j) The execution, delivery and performance by the Issuers of this
Agreement, the Indenture and the Registration Rights Agreement and the
consummation by the Issuers of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and sale of the Securities to the
Initial Purchasers) and the execution, delivery and performance by the Company
of the Transaction Agreement and the execution, delivery and performance by the
Company of the Credit Agreement and the consummation by the Issuers of each of
the transactions contemplated by the Credit Agreement will not conflict with or
constitute or result in a breach of or a default under (or an event which with
notice or passage of time or both would constitute a default under) or violation
of any of (A) the terms or provisions of any Contract, except for any such
conflict, breach, violation, default or event which would not, individually or
in the aggregate, have a Material Adverse Effect, (B) the certificate of
incorporation or bylaws (or similar organizational document) of the Company or
any of the Subsidiaries or (C) (assuming compliance with all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the rep-
<PAGE> 7
-7-
resentations and warranties of the Initial Purchasers in Section 8 hereof)
any statute, judgment, decree, order, rule or regulation applicable to the
Company or any of the Subsidiaries or any of their respective properties or
assets, except for any such conflict, breach or violation which would not,
individually or in the aggregate, have a Material Adverse Effect.
(k) Each of KPMG Peat Marwick LLP, who are reporting on the audited
consolidated financial statements of the Company included in the Final
Memorandum, and Ernst & Young LLP are independent public accountants within the
meaning of the Act. The consolidated financial statements of the Company and
related notes thereto included in the Final Memorandum present fairly in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries, the results of their operations and the changes in
their consolidated cash flow at the dates and for the periods specified and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, except as otherwise stated therein. The summary
and selected financial and statistical data in the Final Memorandum present
fairly in all material respects the information shown therein and have been
prepared and compiled on a basis consistent with the audited financial
statements included therein.
(l) The pro forma financial statements (including the notes thereto)
and the other pro forma financial information included in the Final Memorandum
(i) comply as to form in all material respects with the applicable requirements
of Regulation S-X promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) have been prepared in all material respects
in accordance with the Commission's rules and guidelines with respect to pro
forma financial statements and (iii) have been correctly computed on the bases
described therein; the assumptions used in the preparation of the pro forma
financial data and other pro forma financial information included in the Final
Memorandum are reasonable and the adjustments used therein are appropriate to
give effect to the transactions or circumstances referred to therein.
(m)There is not pending or, to the knowledge of the Issuers,
threatened any action, suit, proceeding, inquiry or investigation to which the
Company or any of the Subsidiaries is a party, or to which the property or
assets of the Company or any of the Subsidiaries are subject, before or brought
by any court, arbitrator or governmental agency or body which, if determined
adversely to the Company or any of the Subsidiaries, would, individually or in
the aggregate, have a Material Ad-
<PAGE> 8
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verse Effect or which seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Securities to be sold hereunder
or the consummation of the other transactions described in the Final Memorandum.
(n) Each of the Company and the Subsidiaries possesses all licenses,
permits, certificates, consents, orders, approvals and other authorizations
from, and has made all declarations and filings with, all federal, state, local
and other governmental authorities, all self-regulatory organizations and all
courts and other tribunals, presently required or necessary to own or lease, as
the case may be, and to operate its respective properties and to carry on its
respective businesses as now or proposed to be conducted as set forth in the
Final Memorandum ("Permits"), except where the failure to obtain such Permits
would not, individually or in the aggregate, have a Material Adverse Effect;
each of the Company and the Subsidiaries has fulfilled and performed all of its
obligations with respect to such Permits and no event has occurred which allows,
or after notice or lapse of time would allow, revocation or termination thereof
or results in any other material impairment of the rights of the holder of any
such Permit; and none of the Company or any of the Subsidiaries has received any
written or, to the knowledge of the Issuers, oral notice of any proceeding
relating to revocation or modification of any such Permit, except as described
in the Final Memorandum and except where such revocation or modification would
not, individually or in the aggregate, have a Material Adverse Effect.
(o) Neither the Company nor any of the Subsidiaries nor any of their
respective directors, officers, agents, representatives or employees (in their
capacity as directors, officers, agents, representatives or employees) has: (i)
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (ii) directly or indirectly,
paid or delivered any fee, commission or other sum of money or item of property,
however characterized, to any finder, agent, government official or other party
or other party acting on behalf of or under the auspices of a governmental
official or governmental entity, in the United States or any other country,
which is in any manner related to the business or operations of the Company or
any of the Subsidiaries, that was illegal under any federal, state or local laws
of the United States or any other country having jurisdiction; or (iii) made any
payment to any customer or supplier of the Company or any of the Subsidiaries or
any officer, director, partner, employee or agent of any such customer or
supplier for the unlawful sharing of fees or to any such customer or supplier or
<PAGE> 9
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any such officer, director, partner, employee or agent for the unlawful rebating
of charges, or engaged in any other unlawful reciprocal practice, or made any
other unlawful payment or given any other unlawful consideration to any such
customer or supplier or any such officer, director, partner, employee or agent,
in respect of the business of the Company and the Subsidiaries, except where any
such use, payment, delivery, engaging or making, singly or in the aggregate,
would not have a Material Adverse Effect.
(p) Since the date of the most recent financial statements appearing
in the Final Memorandum, except as described therein, (i) none of the Company or
any of the Subsidiaries has incurred any liabilities or obligations, direct or
contingent, or entered into or agreed to enter into any transactions or
contracts (written or oral) not in the ordinary course of business, which
liabilities, obligations, transactions or contracts would, individually or in
the aggregate, be material to the general affairs, management, business,
condition (financial or otherwise), prospects or results of operations of the
Company and the Subsidiaries, taken as a whole, (ii) except as contemplated and
permitted by the Recapitalization Agreement, none of the Company or any of the
Subsidiaries has purchased any of its outstanding capital stock, nor declared,
paid or otherwise made any dividend or distribution of any kind on its capital
stock (other than with respect to any of such Subsidiaries, the purchase of, or
dividend or distribution on, capital stock owned by the Company or a Subsidiary)
and (iii) there shall not have been any change in the capital stock or long-term
indebtedness of the Company or any of the Subsidiaries.
(q) Each of the Company and the Subsidiaries has filed all necessary
federal, state and foreign income and franchise tax returns, except where the
failure to so file such returns would not, individually or in the aggregate,
have a Material Adverse Effect, and has paid all taxes shown as due thereon; and
other than tax deficiencies which the Company or any of the Subsidiaries is
contesting in good faith and for which it has provided reserves in accordance
with generally accepted accounting principles, there is no tax deficiency that
has been asserted against the Company or any of the Subsidiaries that would
have, individually or in the aggregate, a Material Adverse Effect.
(r) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Issuers believe to be
reliable and accurate.
<PAGE> 10
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(s) None of the Company or any of the Subsidiaries or any agent
acting on their behalf has taken or will take any action that might cause this
Agreement or the sale of the Securities to violate Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System, in each case as in effect,
or as the same may hereafter be in effect, on the Closing Date.
(t) Each of the Company and the Subsidiaries has good and marketable
title to all real property and good title to all personal property described in
the Final Memorandum as being owned by it and good and marketable title to a
leasehold estate in the real and personal property described in the Final
Memorandum as being leased by it free and clear of all liens, charges,
encumbrances or restrictions, except as described in the Final Memorandum or to
the extent the failure to have such title or the existence of such liens,
charges, encumbrances or restrictions would not, individually or in the
aggregate, have a Material Adverse Effect. All leases, contracts and agreements
to which the Company or any of the Subsidiaries is a party or by which any of
them is bound are valid and enforceable against the Company or such Subsidiary,
as the case may be, and are valid and enforceable against the other party or
parties thereto and are in full force and effect with only such exceptions as
would not, individually or in the aggregate, have a Material Adverse Effect. The
Company and the Subsidiaries own or possess adequate licenses or other rights to
use all patents, trademarks, service marks, trade names, copyrights and know-how
necessary to conduct the businesses now or proposed to be operated by them as
described in the Final Memorandum, and none of the Company or any of the
Subsidiaries has received any notice of infringement of or conflict with (or
knows of any such infringement of or conflict with) asserted rights of others
with respect to any patents, trademarks, service marks, trade names, copyrights
or know-how which, if such assertion of infringement or conflict were sustained,
would have a Material Adverse Effect.
(u)There are no legal or governmental proceedings involving or
affecting the Company or any of the Subsidiaries or any of their respective
properties or assets that would be required to be described in a prospectus
pursuant to the Act that are not described in the Final Memorandum, nor are
there any material contracts or other documents that would be required to be
described in a prospectus filed in accordance with Form S-1 pursuant to the Act
that are not described in the Final Memorandum.
<PAGE> 11
-11-
(v) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect (A) each of the Company
and the Subsidiaries is in compliance with and not subject to liability under
applicable Environmental Laws (as defined below), (B) each of the Company and
the Subsidiaries has made all filings and provided all notices required under
any applicable Environmental Law, and has, and is in compliance with, all
Permits required under any applicable Environmental Laws and each of them is in
full force and effect, (C) there is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter or request for information pending or, to the knowledge
of the Issuers, threatened against the Company or any of the Subsidiaries under
any Environmental Law, (D) no lien, charge, encumbrance or restriction has been
recorded under any Environmental Law with respect to any assets, facility or
property owned, operated, leased or controlled by the Company or any of the
Subsidiaries, (E) none of the Company or any of the Subsidiaries has received
notice that it has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or any comparable state law, (F) no property or facility of
the Company or any of the Subsidiaries is (i) listed or proposed for listing on
the National Priorities List under CERCLA or is (ii) listed in the Comprehensive
Environmental Response, Compensation, Liability Information System List
promulgated pursuant to CERCLA, or on any comparable list maintained by any
state or local governmental authority.
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal, state and local laws or regulations,
codes, orders, decrees, judgments or injunctions issued, promulgated, approved
or entered thereunder, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
hazardous materials into the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transport or handling of hazardous materials and (iii) underground and
above ground storage tanks and related piping, and emissions, discharges,
releases or threatened releases therefrom.
(w) There is no strike, labor dispute, slowdown or work stoppage
with the employees of the Company or any of the
<PAGE> 12
-12-
Subsidiaries which is pending or, to the knowledge of the Issuers, threatened.
(x) Each of the Company and the Subsidiaries carries insurance in
such amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties.
(y) None of the Company or any of the Subsidiaries has incurred any
liability for any prohibited transaction or funding deficiency or any complete
or partial withdrawal liability with respect to any pension, profit sharing or
other plan which is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company or any of the Subsidiaries
makes or ever has made a contribution and in which any employee of the Company
or any of the Subsidiaries is or has ever been a participant. With respect to
such plans, the Company and the Subsidiaries are in compliance in all respects
with all applicable provisions of ERISA.
(z) Each of the Company and the Subsidiaries (i) makes and keeps
accurate books and records and (ii) maintains internal accounting controls which
provide reasonable assurance that (A) transactions are executed in accordance
with management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (C) access to its assets is permitted only in accordance with
management's authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(aa) None of the Company or any of the Subsidiaries is an
"investment company" or "promoter" or "principal underwriter" for an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
(bb) The Notes, the Guarantees, the Indenture, the Registration
Rights Agreement, the Credit Agreement and the Transaction Agreement will
conform in all material respects to the descriptions thereof in the Final
Memorandum.
(cc) No holder of securities of the Company or any of the
Subsidiaries will be entitled to have such securities registered under the
registration statements required to be filed by the Issuers pursuant to the
Registration Rights Agreement, other than as expressly permitted thereby.
<PAGE> 13
-13-
(dd) Immediately after the consummation of the transactions
contemplated by each of the Transaction Agreement, the Credit Agreement, this
Agreement and the Indenture, the fair value and present fair saleable value of
the assets of each of the Issuers will exceed the sum of its stated liabilities
and identified contingent liabilities; none of the Issuers is, nor will any of
the Issuers be, after giving effect to the execution, delivery and performance
of the Transaction Agreement, the Credit Agreement, this Agreement and the
Indenture, and the consummation of the transactions contemplated hereby and
thereby, (a) left with unreasonably small capital with which to carry on its
business as it is proposed to be conducted, (b) unable to pay its debts
(contingent or otherwise) as they mature or (c) otherwise insolvent.
(ee) None of the Issuers or any of their respective Affiliates (as
defined in Rule 501(b) of Regulation D under the Act) has directly, or through
any agent, (i) sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any "security" (as defined in the Act) which is or
could be integrated with the sale of the Securities in a manner that would
require the registration under the Act of the Securities or (ii) engaged in any
form of general solicitation or general advertising (as those terms are used in
Regulation D under the Act) in connection with the offering of the Securities or
in any manner involving a public offering within the meaning of Section 4(2) of
the Act. Assuming the accuracy of the representations and warranties of the
Initial Purchasers in Section 8 hereof, it is not necessary in connection with
the offer, sale and delivery of the Securities to the Initial Purchasers in the
manner contemplated by this Agreement to register any of the Securities under
the Act or to qualify the Indenture under the TIA.
(ff) No securities of any of the Issuers are of the same class
(within the meaning of Rule 144A under the Act) as any of the Securities and
listed on a national securities exchange registered under Section 6 of the
Exchange Act, or quoted in a U.S. automated inter-dealer quotation system.
(gg) None of the Issuers has taken, nor will any of them take,
directly or indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of the price of
the Securities.
(hh) None of the Issuers, any of their respective Affiliates or any
person acting on any of their behalf (other than the Initial Purchasers) has
engaged in any directed sell-
<PAGE> 14
-14-
ing efforts (as that term is defined in Regulation S under the Act ("Regulation
S")) with respect to the Securities; the Issuers and their respective Affiliates
and any person acting on any of their behalf (other than the Initial Purchasers)
have complied with the offering restrictions requirement of Regulation S.
Any certificate signed by any officer of any Issuer and delivered to
the Initial Purchasers or to counsel for the Initial Purchasers shall be deemed
a joint and several representation and warranty by the Issuers to the Initial
Purchasers as to the matters covered thereby.
3. Purchase, Sale and Delivery of the Securities. On the basis of
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Issuers agree to issue
and sell to the Initial Purchasers, and each of the Initial Purchasers agrees,
acting severally and not jointly, to purchase the Securities, at % of their
principal amount, in the respective principal amounts set forth opposite their
names on Schedule I hereto.
One or more certificates in definitive form for the Notes and
Guarantees that the Initial Purchasers have agreed to purchase hereunder, and in
such denomination or denominations and registered in such name or names as the
Initial Purchasers request upon notice to the Company at least 36 hours prior to
the Closing Date, shall be delivered by or on behalf of the Issuers to the
Initial Purchasers, against payment by or on behalf of the Initial Purchasers of
the purchase price therefor by wire transfer (same day funds), net of the
overnight cost of such funds, to such account or accounts as the Company shall
specify prior to the Closing Date, or by such means as the parties hereto shall
agree prior to the Closing Date. Such delivery of and payment for the Securities
shall be made at the offices of Cahill Gordon & Reindel, 80 Pine Street, New
York, New York at 10:00 A.M., New York time, on November , 1997, or at such
other place, time or date as the Initial Purchasers, on the one hand, and the
Company, on the other hand, may agree upon, such time and date of delivery
against payment being herein referred to as the "Closing Date." The Company will
make such certificate or certificates for the Securities available for checking
and packaging by the Initial Purchasers at the offices of BT Alex. Brown
Incorporated in New York, New York, or at such other place as BT Alex. Brown
Incorporated may designate, at least 24 hours prior to the Closing Date.
<PAGE> 15
-15-
4. Offering by the Initial Purchasers. The Initial Purchasers
propose to make an offering of the Securities at the price and upon the terms
set forth in the Final Memorandum, as soon as practicable after this Agreement
is entered into and as in the judgment of the Initial Purchasers is advisable.
5. Covenants of the Issuers. The Issuers covenant and agree with the
Initial Purchasers that:
(a) The Issuers will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchasers shall not
previously have been advised and furnished a copy for a reasonable period of
time prior to the proposed amendment or supplement and as to which the Initial
Purchasers shall not have given its consent. The Issuers will promptly, upon the
reasonable request of the Initial Purchasers or counsel for the Initial
Purchasers, make any amendments or supplements to the Preliminary Memorandum or
the Final Memorandum that may be necessary or advisable in connection with the
resale of the Securities by the Initial Purchasers.
(b) The Issuers will cooperate with the Initial Purchasers in
arranging for the qualification of the Securities for offering and sale under
the securities or "Blue Sky" laws of which jurisdictions as the Initial
Purchasers may designate and will continue such qualifications in effect for as
long as may be necessary to complete the resale of the Securities; provided,
however, that in connection therewith, none of the Issuers shall be required to
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction or subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the distribution by
the Initial Purchasers of the Securities or the Private Exchange Notes and
Private Exchange Notes Guarantees, any event occurs or information becomes known
as a result of which the Final Memorandum as then amended or supplemented would
include any untrue statement of a material fact, or omit to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if for any other reason it is
necessary at any time to amend or supplement the Final Memorandum to comply with
applicable law, the Issuers will promptly notify the Initial Purchasers thereof
and will prepare, at the expense of the Issuers, an amendment or supplement to
the Final
<PAGE> 16
-16-
Memorandum that corrects such statement or omission or effects such compliance.
(d) The Issuers will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or supplement
thereto as the Initial Purchasers may reasonably request.
(e) The Company will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Final Memorandum.
(f) For so long as any of the Securities remain outstanding, the
Company will furnish to the Initial Purchasers copies of all reports and other
communications (financial or otherwise) furnished by the Company to the Trustee
or to the holders of the Notes and, as soon as available, copies of any reports
or financial statements furnished to or filed by the Company with the Commission
or any national securities exchange on which any class of securities of the
Company may be listed.
(g) Prior to the Closing Date, the Company will furnish to the
Initial Purchasers, as soon as they have been prepared, a copy of any available
unaudited interim financial statements of the Company for any period subsequent
to the period covered by the most recent consolidated financial statements of
the Company appearing in the Final Memorandum.
(h) None of the Issuers or any of their Affiliates will sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale of
the Securities in a manner which would require the registration under the Act of
the Securities.
(g)The Issuers will not engage in any form of general solicitation
or general advertising (as those terms are used in Regulation D under the Act)
in connection with the offering of the Securities or in any manner involving a
public offering within the meaning of Section 4(2) of the Act.
(j) For so long as any of the Securities remain outstanding, the
Company will make available at its expense, upon request, to any holder of such
Securities and any prospective purchasers thereof the information specified in
Rule 144A(d)(4) under the Act, unless the Company is then subject to Section 13
or 15(d) of the Exchange Act.
<PAGE> 17
-17-
(k) The Company will use its best efforts to (i) permit the
Securities to be designated PORTAL securities in accordance with the rules and
regulations adopted by the NASD relating to trading in the Private Offerings,
Resales and Trading through Automated Linkages market (the "PORTAL Market") and
(ii) permit the Securities to be eligible for clearance and settlement through
The Depository Trust Company.
(l) In connection with Securities offered and sold in an off-shore
transaction (as defined in Regulation S) the Company will not register any
transfer of such Notes not made in accordance with the provisions of Regulation
S and will not, except in accordance with the provisions of Regulation S, if
applicable, issue any such Notes in the form of definitive securities.
6. Expenses. The Issuers jointly and severally agree to pay all
costs and expenses incident to the performance of their respective obligations
under this Agreement, whether or not the transactions contemplated herein are
consummated or this Agreement is terminated pursuant to Section 11 hereof,
including all costs and expenses incident to (i) the printing, word processing
or other production of documents with respect to the transactions contemplated
hereby, including any costs of printing the Preliminary Memorandum and the Final
Memorandum and any amendment or supplement thereto, and any "Blue Sky"
memoranda, (ii) all arrangements relating to the delivery to the Initial
Purchasers of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Issuers, (iv) preparation (including printing), issuance and
delivery to the Initial Purchasers of the Securities, (v) the qualification of
the Securities under state securities and "Blue Sky" laws, including filing fees
and fees and disbursements of counsel for the Initial Purchasers relating
thereto, (vi) expenses in connection with any meetings with prospective
investors in the Securities, (vii) fees and expenses of the Trustee including
fees and expenses of its counsel, (viii) all expenses and listing fees incurred
in connection with the application for quotation of the Securities on the PORTAL
Market and (ix) any fees charged by investment rating agencies for the rating of
the Securities. If the sale of the Securities provided for herein is not
consummated because any condition to the obligations of the Initial Purchasers
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated or because of any failure, refusal or inability on the part of the
Issuers to perform all obligations and satisfy all conditions on their part to
be performed or satisfied hereunder (other than solely
<PAGE> 18
-18-
by reason of a default by the Initial Purchasers of its obligations hereunder
after all conditions hereunder have been satisfied in accordance herewith), the
Issuers jointly and severally agree to promptly reimburse the Initial Purchasers
upon demand for all out-of-pocket expenses (including fees, disbursements and
charges of Cahill Gordon & Reindel, counsel for the Initial Purchasers) that
shall have been incurred by the Initial Purchasers in connection with the
proposed purchase and sale of the Securities.
7. Conditions of the Initial Purchasers' Obligations. The obligation
of the Initial Purchasers to purchase and pay for the Notes shall, in its sole
discretion, be subject to the satisfaction or waiver of the following conditions
on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of [Shearman & Sterling or Cox & Smith Incorporated], counsel for
the Issuers, in form and substance satisfactory to counsel for the Initial
Purchasers, to the effect that:
(i) Each of the Company and the Subsidiaries is duly incorporated,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation and has all requisite corporate power and
authority to own its properties and to conduct its business as described
in the Final Memorandum. Each of the Company and the Subsidiaries is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions where the ownership or leasing of its properties or
the conduct of its business requires such qualification, except where the
failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect.
(ii) The Company has the authorized, issued and outstanding
capitalization set forth in the Final Memorandum; all of the outstanding
shares of capital stock of the Company and the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable and were
not issued in violation of any preemptive or similar rights; all of the
outstanding shares of capital stock of the Subsidiaries are owned,
directly or indirectly, by the Company, free and clear of all perfected
security interests and, to the knowledge of such counsel, free and clear
of all other liens, encumbrances, equities and claims or
<PAGE> 19
-19-
restrictions on transferability (other than those imposed by the Act and
the securities or "Blue Sky" laws of certain jurisdictions) or voting.
(iii) Except as set forth in the Final Memorandum (A) no options,
warrants or other rights to purchase from the Company or any of the
Subsidiaries shares of capital stock or ownership interests in the Company
or any of the Subsidiaries are outstanding, (B) no agreements or other
obligations to issue, or other rights to convert, any obligation into, or
exchange any securities for, shares of capital stock or ownership
interests in the Company or any of the Subsidiaries are outstanding and
(C) no holder of securities of the Company or any of the Subsidiaries is
entitled to have such securities registered under a registration statement
filed pursuant to the Registration Rights Agreement.
(iv) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Indenture,
the Notes, the Exchange Notes and the Private Exchange Notes; each
Guarantor has all requisite corporate power and authority to execute,
deliver and perform each of its obligations under the Indenture, its
Guarantees, its Exchange Notes Guarantees and its Private Exchange Notes
Guarantees; the Indenture meets the requirements for qualification under
the TIA; the Indenture has been duly and validly authorized by each of the
Issuers and, when duly executed and delivered by each of the Issuers
(assuming the due authorization, execution and delivery thereof by the
Trustee), will constitute the valid and legally binding agreement of each
of the Issuers, enforceable against each of the Issuers in
accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought.
(v) The Notes are in the form contemplated by the Indenture. The Notes
have each been duly and validly authorized by the Company and, when duly
executed and delivered by the Company and paid for by the Initial
Purchasers in accordance with the terms of this Agreement (assuming the
due authorization, execution and delivery of the Indenture by the Trustee
and due authentication and
<PAGE> 20
-20-
delivery of the Notes by the Trustee in accordance with the Indenture),
will constitute the valid and legally binding obligations of the Company,
entitled to the benefits of the Indenture, and enforceable against the
Company in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought.
(vi) The Guarantees are in the form contemplated by the Indenture. The
Guarantees have each been duly and validly authorized by the Guarantors
and, when duly executed and delivered by the Guarantors in accordance with
terms of this Agreement (assuming the due authorization, execution and
delivery of the Indenture by the Trustee), will constitute the valid and
legally binding obligations of the Guarantors, enforceable against the
Guarantors in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought.
(vii) The Exchange Notes and the Private Exchange Notes have been duly and
validly authorized by the Company, and when the Exchange Notes and the
Private Exchange Notes have been duly executed and delivered by the
Company in accordance with the terms of the Registration Rights Agreement
and the Indenture (assuming the due authorization, execution and delivery
of the Indenture by the Trustee and due authentication and delivery of the
Exchange Notes and the Private Exchange Notes by the Trustee in accordance
with the Indenture), will constitute the valid and legally binding
obligations of the Company, entitled to the benefits of the Indenture, and
enforceable against the Company in accordance with their terms, except
that the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles
of equity and the discretion of the court before which any proceeding
therefor may be brought.
<PAGE> 21
-21-
(viii) The Exchange Notes Guarantees and the Private Exchange Notes
Guarantees have been duly and validly authorized by the Guarantors, and
when the Exchange Notes Guarantees and the Private Exchange Notes
Guarantees have been duly executed and delivered by the Guarantors in
accordance with the terms of the Registration Rights Agreement and the
Indenture (assuming due authorization, execution and delivery of the
Indenture by the Trustee), will constitute the valid and legally binding
obligations of the Guarantors, and enforceable against the Guarantors in
accordance with their terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought.
(ix) Each of the Issuers has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Registration
Rights Agreement; the Registration Rights Agreement has been duly and
validly authorized by each of the Issuers and, when duly executed and
delivered by each of the Issuers (assuming due authorization, execution
and delivery thereof by the Initial Purchasers), will constitute the valid
and legally binding agreement of each of the Issuers, enforceable against
each of the Issuers in accordance with its terms, except that (A) the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles
of equity and the discretion of the court before which any proceeding
therefor may be brought and (B) any rights to indemnity or contribution
thereunder may be limited by federal and state securities laws and public
policy considerations.
(x) Each of the Issuers has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement and
to consummate the transactions contemplated hereby; this Agreement and the
consummation by each of the Issuers of the transactions contemplated
hereby have been duly and validly authorized by each of the Issuers. This
Agreement has been duly executed and delivered by each of the Issuers.
<PAGE> 22
-22-
(xi) The Indenture, the Notes, the Guarantees, the Registration Rights
Agreement, the Credit Agreement and the Transaction Agreement conform in
all material respects to the descriptions thereof contained in the Final
Memorandum.
(xii) The descriptions contained and summarized in the Final Memorandum
of contracts and other documents are accurate; and the statements set
forth under the headings "Risk Factors," "The Transactions," "Business,"
"Description of Notes" and "Certain Relationships and Related
Transactions" in the Final Memorandum, insofar as such statements
constitute a summary of legal matters, documents, proceedings or
conclusions of law referred to therein, provide an accurate summary of
such legal matters, documents, proceedings and conclusions.
(xiii) No legal or governmental proceedings are pending or, to the
knowledge of such counsel, threatened to which the Company or any of the
Subsidiaries is a party or to which any of their respective properties or
assets is subject which, if determined adversely to the Company or the
Subsidiaries, would result, individually or in the aggregate, in a
Material Adverse Effect, or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the
Securities to be sold hereunder or the consummation of the other
transactions described in the Final Memorandum under the caption "Use of
Proceeds."
(xiv) The execution, delivery and performance by the Issuers of this
Agreement, the Indenture and the Registration Rights Agreement and the
consummation of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and sale of the Securities to
the Initial Purchasers), the execution, delivery and performance by the
Company of the Transaction Agreement, and the execution, delivery and
performance by the Company of the Credit Agreement and the consummation by
the Issuers of each of the transactions contemplated by the Credit
Agreement will not conflict with or constitute or result in a breach or a
default under (or an event which with notice or passage of time or both
would constitute a default under) or violation of any of (i) the terms or
provisions of any Contract known to such counsel (including in any event
any of the foregoing which have been filed by the Company with the
Commission), except for any such conflict, breach, violation, default or
event which would not, indi-
<PAGE> 23
-23-
vidually or in the aggregate, have a Material Adverse Effect, (ii) the
certificate of incorporation or bylaws (or similar organizational
document) of the Company or any of the Subsidiaries, or (iii) (assuming
compliance with all applicable state securities or "Blue Sky" laws and
assuming the accuracy of the representations and warranties, of the
Initial Purchasers in Section 8 hereof) any statute, law, judgment,
decree, order, rule or regulation known to such counsel to be applicable
to the Company or any of the Subsidiaries or any of their respective
properties or assets, except for any such conflict, breach or violation
which would not, individually or in the aggregate, have a Material Adverse
Effect.
(xv) None of the Company or any of the Subsidiaries is (i) in violation of
its certificate of incorporation or bylaws (or similar organizational
document), (ii) to the knowledge of such counsel, in breach or violation
of any statute, law, judgment, decree, order, rule or regulation
applicable to any of them or any of their respective properties or assets,
except for any such breach or violation which would not, individually or
in the aggregate, have a Material Adverse Effect, or (iii) in breach or
default under (nor has any event occurred which, with notice or passage of
time or both, would constitute a default under) or in violation of any of
the terms or provisions of any Contract known to such counsel (including
in any event any of the foregoing which have been filed by the Company
with the Commission), except for any such breach, default, violation or
event which would not, individually or in the aggregate, have a Material
Adverse Effect.
(xvi) The Company and the Subsidiaries have obtained all Permits necessary
to conduct the businesses now or proposed to be conducted by them as
described in the Final Memorandum, the lack of which would, individually
or in the aggregate, have a Material Adverse Effect; each of the Company
and the Subsidiaries has fulfilled and performed all of its obligations
with respect to such Permits and no event has occurred which allows, or
after notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of the
holder of any such Permit.
(xvii) To the best of such counsel's knowledge, the Company and the
Subsidiaries own or possess adequate licenses or other rights to use all
patents, trademarks, service marks, trade names, copyrights and know-how
neces-
<PAGE> 24
-24-
sary to conduct the businesses now or proposed to be operated by them as
described in the Final Memorandum, and none of the Company or any of the
Subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, trademarks, service
marks, trade names, copyrights or know-how which, if such assertion of
infringement or conflict were sustained, would have a Material Adverse
Effect.
(xviii) No consent, approval, authorization or order of any governmental
authority is required for (i) the issuance and sale by the Company of the
Notes to the Initial Purchasers or the consummation by the Company of the
other transactions contemplated hereby and (ii) the execution and delivery
by the Guarantors of the Guarantees or the consummation by the Guarantors
of the other transactions contemplated hereby and (iii) the consummation
by the Company of the transactions contemplated by the Transaction
Agreement and except such as may be required under Blue Sky laws, as to
which such counsel need express no opinion, and those which have
previously been obtained.
(xix) To the knowledge of such counsel, there are no legal or governmental
proceedings involving or affecting the Company or any of the Subsidiaries
or any of their respective properties or assets which would be required to
be described in a prospectus pursuant to the Act that are not described in
the Final Memorandum, nor are there any material contracts or other
documents which would be required to be described in a prospectus pursuant
to the Act that are not described in the Final Memorandum.
(xx) None of the Company or any of the Subsidiaries is, or immediately
after the sale of the Securities to be sold hereunder and the application
of the proceeds from such sale (as described in the Final Memorandum under
the caption "Use of Proceeds") will be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
(xxi) No registration under the Act of the Securities is required in
connection with the sale of the Securities to the Initial Purchasers as
contemplated by this Agreement and the Final Memorandum or in connection
with the initial resale of the Securities by the Initial Purchasers in
accordance with Section 8 of this Agreement, and prior to the commencement
of the Exchange Offer (as defined in
<PAGE> 25
-25-
the Registration Rights Agreement) or the effectiveness of the Shelf
Registration Statement (as defined in the Registration Rights Agreement),
the Indenture is not required to be qualified under the TIA, in each case
assuming (i) (A) that the purchasers who buy such Securities in the
initial resale thereof are qualified institutional buyers as defined in
Rule 144A promulgated under the Act ("QIBs") or (B) that the offer or sale
of the Securities is made in an offshore transaction as defined in
Regulation S promulgated under the Act (ii) the accuracy of the Initial
Purchasers' representations in Section 8 hereof and those of the Issuers
contained in this Agreement regarding the absence of a general
solicitation in connection with the sale of such Securities to the Initial
Purchasers and the initial resale thereof and (iii) the due performance by
the Initial Purchasers of the agreements set forth in Section 8 hereof.
(xxii) Neither the consummation of the transactions contemplated by this
Agreement nor the sale, issuance, execution or delivery of the Securities
will violate Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.
At the time the foregoing opinion is delivered, [Shearman & Sterling
or Cox & Smith Incorporated] shall additionally state that it has participated
in conferences with officers and other representatives of the Issuers,
representatives of the independent public accountants for the Issuers,
representatives of the Initial Purchasers and counsel for the Initial
Purchasers, at which conferences the contents of the Final Memorandum and
related matters were discussed, and, although it has not independently verified
and is not passing upon and assumes no responsibility for the accuracy,
completeness or fairness of the statements contained in the Final Memorandum
(except to the extent specified in subsections 7(a)(xi) and 7(a)(xii)), no facts
have come to its attention which lead it to believe that the Final Memorandum,
on the date thereof or at the Closing Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading (it being understood
that such firm need not express any opinion with respect to the financial
statements and related notes thereto and the other financial, statistical and
accounting data included in the Final Memorandum). The opinion of [Shearman &
Sterling or Cox & Smith Incorporated] described in this Section shall be
rendered to the Ini-
<PAGE> 26
-26-
tial Purchasers at the request of the Company and shall so state therein.
In rendering the foregoing opinions, [Shearman & Sterling or Cox &
Smith Incorporated] may (i) state that their opinion is limited to matters
governed by the federal laws of the United States of America, the laws of the
States of New York and Texas and the corporate laws of the State of Delaware,
and (ii) rely, to the extent such counsel deems proper, upon the representations
set forth herein and on certificates of public officials and officers of the
Company, with respect to the accuracy of factual matters contained therein which
were not independently established.
References to the Final Memorandum in this subsection (a) shall
include any amendment or supplement thereto prepared in accordance with the
provisions of this Agreement at the Closing Date.
(b) On the Closing Date, the Initial Purchasers shall have received
the opinion, in form and substance satisfactory to the Initial Purchasers, dated
as of the Closing Date and addressed to the Initial Purchasers, of Cahill Gordon
& Reindel, counsel for the Initial Purchasers, with respect to certain legal
matters relating to this Agreement and such other related matters as the Initial
Purchasers may reasonably require. In rendering such opinion, Cahill Gordon &
Reindel shall have received and may rely upon such certificates and other
documents and information as it may reasonably request to pass upon such
matters.
(c) The Initial Purchasers shall have received from each of KPMG
Peat Marwick LLP and Ernst & Young LLP a comfort letter or letters dated the
date hereof and the Closing Date, in form and substance satisfactory to counsel
for the Initial Purchasers.
(d) The representations and warranties of the Issuers contained in
this Agreement shall be true and correct on and as of the date hereof and on and
as of the Closing Date as if made on and as of the Closing Date; the statements
of the Issuers' officers made pursuant to any certificate delivered in
accordance with the provisions hereof shall be true and correct in all material
respects on and as of the date made and on and as of the Closing Date; the
Issuers shall have performed all covenants and agreements and satisfied all
conditions on their part to be performed or satisfied hereunder at or prior to
the Closing Date; and, except as described in the Final Memorandum
<PAGE> 27
-27-
(exclusive of any amendment or supplement thereto after the date hereof),
subsequent to the date of the most recent financial statements in such Final
Memorandum, there shall have been no event or development, and no information
shall have become known, that, individually or in the aggregate, has or would be
reasonably likely to have a Material Adverse Effect.
(e) The sale of the Securities hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(f) Subsequent to the date of the most recent financial statements
in the Final Memorandum (exclusive of any amendment or supplement thereto after
the date hereof), none of the Company or any of the Subsidiaries shall have
sustained any loss or interference with respect to its business or properties
from fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any strike, labor dispute, slow down or work stoppage or
from any legal or governmental proceeding, order or decree, which loss or
interference, individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect.
(g) The Initial Purchasers shall have received a certificate of each
of the Issuers, dated the Closing Date, signed on behalf of each of the Issuers
by its Chairman of the Board, President or any Senior Vice President and the
Chief Financial Officer, to the effect that:
(i) The representations and warranties of the Issuers contained in this
Agreement are true and correct on and as of the date hereof and on and as
of the Closing Date, and the Issuers have performed all covenants and
agreements and satisfied all conditions on their part to be performed or
satisfied hereunder at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or since the date of the
most recent financial statements in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date hereof), no event or
development has occurred, and no information has become known, that,
individually or in the aggregate, has or would be reasonably likely to
have a Material Adverse Effect; and
(iii) The sale of the Securities hereunder has not been enjoined
(temporarily or permanently).
<PAGE> 28
-28-
(h) On the Closing Date, the Initial Purchasers shall have received
the Registration Rights Agreement executed by each of the Issuers and such
agreement shall be in full force and effect at all times from and after the
Closing Date.
(i) The Indenture shall have been duly executed and delivered by the
Company and the Trustee, and the Notes and the Guarantees shall have been duly
executed by the Company and the Guarantors, respectively, and the Notes shall
have been duly authenticated by the Trustee;
(j) The Initial Purchasers shall have received a true and correct
copy of the Transaction Agreement and any amendments thereto, and there shall
have been no material amendments, alterations, modifications or waivers of any
provisions of the Transaction Agreement since the date of this Agreement; all
conditions to effect the Offer and the Stock Purchase (as such terms are defined
in the Transaction Agreement) shall have been satisfied without waiver.
(k) The Initial Purchasers shall have received a true and correct
copy of the Credit Agreement, dated as of the Closing Date (the "Credit
Agreement"), among the Company, Bank of America National Trust and Savings
Association, as Administrative Agent, Bank of America International Limited, as
European Payment Agent, Bankers Trust Company, as Syndication Agent, and the
other institutions party thereto.
On or before the Closing Date, the Initial Purchasers and counsel
for the Initial Purchasers shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Subsidiaries as
they shall have heretofore reasonably requested.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchasers and counsel for the Initial Purchasers. The Company shall
furnish to the Initial Purchasers such conformed copies of such documents,
opinions, certificates, letters, schedules and instruments in such quantities as
the Initial Purchasers shall reasonably request.
8. Offering of Securities; Restrictions on Transfer. (a) Each of the
Initial Purchasers represents and warrants (as to itself only) that it is a QIB.
Each of the Initial Purchas-
<PAGE> 29
-29-
ers agrees with the Issuers (as to itself only) that (i) it has not and will not
solicit offers for, or offer or sell, the Securities by any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Act; and (ii) it has and will solicit offers for the
Securities only from, and will offer the Securities only to (A) in the case of
offers inside the United States, persons whom such Initial Purchaser reasonably
believes to be QIBs or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to such Initial Purchaser that each such
account is a QIB, to whom notice has been given that such sale or delivery is
being made in reliance on Rule 144A, and, in each case, in transactions under
Rule 144A and (B) in the case of offers outside the United States, to persons
other than U.S. persons ("foreign purchasers," which term shall include dealers
or other professional fiduciaries in the United States acting on a discretionary
basis for foreign beneficial owners (other than an estate or trust)); provided,
however, that, in the case of this clause (B), in purchasing such Securities
such persons are deemed to have represented and agreed as provided under the
caption "Transfer Restrictions" contained in the Final Memorandum (or, if the
Final Memorandum is not in existence, in the most recent Memorandum).
(b) Each of the Initial Purchasers represents and warrants (as to itself
only) with respect to offers and sales outside the United States that (i) it has
and will comply with all applicable laws and regulations in each jurisdiction in
which it acquires, offers, sells or delivers Securities or has in its possession
or distributes any Memorandum or any such other material, in all cases at its
own expense; (ii) the Securities have not been and will not be offered or sold
within the United States or to, or for the account or benefit of, U.S. persons
except in accordance with Regulation S under the Act or pursuant to an exemption
from the registration requirements of the Act; (iii) it has offered the
Securities and will offer and sell the Securities (A) as part of its
distribution at any time and (B) otherwise until 40 days after the later of the
commencement of the offering and the Closing Date, only in accordance with Rule
903 of Regulation S and, accordingly, neither it nor any persons acting on its
behalf have engaged or will engage in any directed selling efforts (within the
meaning of Regulation S) with respect to the Securities, and any such persons
have complied and will comply with the offering restrictions requirement of
Regulation S; and (iv) it agrees that, at
<PAGE> 30
-30-
or prior to confirmation of sales of the Securities, it will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Securities from it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the United
States Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of the distribution of the Securities
at any time or (ii) otherwise until 40 days after the later of the
commencement of the offering and the closing date of the offering, except
in either case in accordance with Regulation S (or Rule 144A if available)
under the Securities Act. Terms used above have the meaning given to them
in Regulation S."
Terms used in this Section 8(b) and not defined in this Agreement have the
meanings given to them in Regulation S.
9. Indemnification and Contribution. (a) The Issuers jointly and
severally agree to indemnify and hold harmless the Initial Purchasers and the
affiliates, directors, officers, agents, representatives and employees of any
Initial Purchaser or their affiliates, and each other person, if any, who
controls the Initial Purchasers within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which any Initial Purchaser or such other person may become
subject under the Act, the Exchange Act or otherwise, insofar as any such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon:
(i) any untrue statement or alleged untrue statement of any material fact
contained in any Memorandum or any amendment or supplement thereto or any
application or other document, or any amendment or supplement thereto,
executed by an Issuer or based upon written information furnished by or on
behalf of an Issuer filed in any jurisdiction in order to qualify the
Securities under the securities or "Blue Sky" laws thereof or filed with
any securities association or securities exchange (each an "Application");
or
(ii) the omission or alleged omission to state, in any Memorandum or any
amendment or supplement thereto or any Application, a material fact
required to be stated
<PAGE> 31
-31-
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading,
and will reimburse, as incurred, the Initial Purchasers and each such other
person for any legal or other expenses incurred by the Initial Purchasers or
such other person in connection with investigating, defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, the Issuers will not be liable
in any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in any Memorandum or any amendment or
supplement thereto or any Application in reliance upon and in conformity with
written information concerning the Initial Purchasers furnished to an Issuer by
the Initial Purchasers specifically for use therein. This indemnity agreement
will be in addition to any liability that the Issuers may otherwise have to the
indemnified parties. The Issuers shall not be liable under this Section 9 for
any settlement of any claim or action effected without their prior written
consent, which shall not be unreasonably withheld.
(b) The Initial Purchasers agree, severally and not jointly, to
indemnify and hold harmless the Issuers, their respective directors, their
respective officers and each person, if any, who controls an Issuer within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against any
losses, claims, damages or liabilities to which an Issuer or any such director,
officer or controlling person may become subject under the Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any Memorandum or any
amendment or supplement thereto or any Application, or (ii) the omission or the
alleged omission to state therein a material fact required to be stated in any
Memorandum or any amendment or supplement thereto or any Application, or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information concerning such Initial Purchaser, furnished
to an Issuer by such Initial Purchaser specifically for use therein; and subject
to the limitation set forth immediately preceding this clause, will reimburse,
as incurred, any reasonable legal or other expenses incurred by an
<PAGE> 32
-32-
Issuer or any such director, officer or controlling person in connection with
investigating or defending against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action in respect
thereof. This indemnity agreement will be in addition to any liability that the
Initial Purchasers may otherwise have to the indemnified parties. The Initial
Purchasers shall not be liable under this Section 9 for any settlement of any
claim or action effected without its consent, which shall not be unreasonably
withheld. The Issuers shall not, without the prior written consent of the
Initial Purchasers, effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Initial Purchaser is or could have
been a party, or indemnity could have been sought hereunder by the Initial
Purchasers, unless such settlement (A) includes an unconditional written release
of the Initial Purchasers, in form and substance reasonably satisfactory to the
Initial Purchasers, from all liability on claims that are the subject matter of
such proceeding and (B) does not include any statement as to an admission of
fault, culpability or failure to act by or on behalf of the Initial Purchasers.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such indemnified
party is entitled to indemnification under this Section 9, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9, notify the indemnifying party of the commencement
thereof in writing; but the omission to so notify the indemnifying party (i)
will not relieve it from any liability under paragraph (a) or (b) above unless
and to the extent such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraphs (a) and (b)
above. In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one
<PAGE> 33
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or more legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, or
(iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after receipt by the indemnifying party of notice of the
institution of such action, then, in each such case, the indemnifying party
shall not have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by BT Alex. Brown
Incorporated in the case of paragraph (a) of this Section 9 or the Company in
the case of paragraph (b) of this Section 9, representing the indemnified
parties under such paragraph (a) or paragraph (b), as the case may be, who are
parties to such action or actions) or (ii) the indemnifying party has authorized
in writing the employment of counsel for the indemnified party at the expense of
the indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the prior written consent of the indemnifying party (which consent shall
not be unreasonably withheld), unless such indemnified party waived in writing
its rights under this Section 9, in which case the indemnified party may effect
such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided for
in the preceding paragraphs of this Section 9 is unavailable to, or insufficient
to hold harmless, an indemnified party in respect of any losses, claims, damages
or li-
<PAGE> 34
-34-
abilities (or actions in respect thereof), each indemnifying party, in order to
provide for just and equitable contribution, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Securities or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, not only such relative benefits
but also the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof). The relative
benefits received by the Issuers on the one hand and any Initial Purchaser on
the other shall be deemed to be in the same proportion as the total proceeds
from the offering (before deducting expenses) received by the Issuers bear to
the total discounts and commissions received by such Initial Purchaser. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuers on the one hand, or such Initial Purchaser on the other,
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission or alleged statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Issuers and the Initial Purchasers agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the first sentence of this
paragraph (d). Notwithstanding any other provision of this paragraph (d), no
Initial Purchaser shall be obligated to make contributions hereunder that in the
aggregate exceed the total discounts, commissions and other compensation
received by such Initial Purchaser under this Agreement, less the aggregate
amount of any damages that such Initial Purchaser has otherwise been required to
pay by reason of the untrue or alleged untrue statements or the omissions or
alleged omissions to state a material fact, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the Act or
Sec-
<PAGE> 35
-35-
tion 20 of the Exchange Act shall have the same rights to contribution as the
Initial Purchasers, and each director of an Issuer, each officer of an Issuer
and each person, if any, who controls an Issuer within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Issuers.
10. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Issuers, their
respective officers and the Initial Purchasers set forth in this Agreement or
made by or on behalf of them pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Issuers, any of their respective officers or directors, the Initial
Purchasers or any controlling person referred to in Section 9 hereof and (ii)
delivery of and payment for the Securities. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6, 9 and 15
hereof shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchasers by notice to the Company given prior to the
Closing Date in the event that any of the Issuers shall have failed, refused or
been unable to perform all obligations and satisfy all conditions on its part to
be performed or satisfied hereunder at or prior thereto or, if at or prior to
the Closing Date:
(i) the Company or any of the Subsidiaries shall have sustained any loss
or interference with respect to its businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any strike, labor dispute, slow down or work stoppage
or any legal or governmental proceeding, which loss or interference, in
the sole judgment of the Initial Purchasers, has had or has a Material
Adverse Effect, or there shall have been, in the sole judgment of the
Initial Purchasers, any event or development that, individually or in the
aggregate, has or could be reasonably likely to have a Material Adverse
Effect (including without limitation a change in control of the Company or
any of the Subsidiaries), except in each case as described in the Final
Memorandum (exclusive of any amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock Exchange,
American Stock Exchange or the NASDAQ Na-
<PAGE> 36
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tional Market shall have been suspended or minimum or maximum prices shall
have been established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New York or United
States authorities;
(iv) there shall have been (A) an outbreak or escalation of hostilities
between the United States and any foreign power, or (B) an outbreak or
escalation of any other insurrection or armed conflict involving the
United States or any other national or international calamity or
emergency, or (C) any material change in the financial markets of the
United States which, in the case of (A), (B) or (C) above and in the sole
judgment of the Initial Purchasers, makes it impracticable or inadvisable
to proceed with the offering or the delivery of the Securities as
contemplated by the Final Memorandum; or
(v) any securities of the Company shall have been downgraded or placed on
any "watch list" for possible downgrading by any nationally recognized
statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall be without
liability of any party to any other party except as provided in Section 10
hereof.
12. Information Supplied by the Initial Purchasers. The statements
set forth in third, fifth, sixth and seventh paragraphs under the heading
"Private Placement" in the Final Memorandum (to the extent such statements
relate to the Initial Purchasers) constitute the only information furnished by
the Initial Purchasers to the Issuers for the purposes of Sections 2(a) and 9
hereof.
13. Notices. All communications hereunder shall be in writing and,
if sent to the Initial Purchasers, shall be mailed or delivered to BT Alex.
Brown Incorporated, 130 Liberty Street, New York, New York 10006, Attention:
Corporate Finance Department, with a copy to Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005, Attention: William M. Hartnett; if sent to the
Issuers, shall be mailed or delivered to the Company at 8023 Vantage Drive, P.O.
Box 659508, San Antonio, Texas 78285-9508, Attention: Chief Financial Officer,
with a copy to Shearman & Sterling, 555 California Street, San Francisco,
California 94104, Attention: Steven E. Sherman.
<PAGE> 37
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All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one business
day after being timely delivered to a next-day air courier.
14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers, the Issuers and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the indemnities
of the Issuers contained in Section 9 of this Agreement shall also be for the
benefit of the affiliates, directors, officers, agents, representatives and
employees of the Initial Purchasers or their affiliates and any person or
persons who control any of the Initial Purchasers within the meaning of Section
15 of the Act or Section 20 of the Exchange Act and (ii) the indemnities of the
Initial Purchasers contained in Section 9 of this Agreement shall also be for
the benefit of the affiliates, directors, officers, agents, representatives and
employees of the Initial Purchasers or their affiliates and the directors of the
Issuers, their respective officers and any person or persons who control an
Issuer within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act. No purchaser of Securities from the Initial Purchasers will be deemed a
successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE> 38
-38-
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute a binding agreement between the Company, the
Guarantors set forth below and the Initial Purchasers.
Very truly yours,
KINETIC CONCEPTS, INC.
By: /s/ DENNIS E. NOLL
----------------------------
Name:
Title:
KCI HOLDING COMPANY, INC.
By: /s/ DENNIS E. NOLL
----------------------------
Name:
Title:
KCI PROPERTIES LTD.
By: /s/ DENNIS E. NOLL
----------------------------
Name:
Title:
KCI REAL PROPERTY LTD.
By: /s/ DENNIS E. NOLL
----------------------------
Name:
Title:
KCI THERAPEUTIC SERVICES, INC.
By: /s/ DENNIS E. NOLL
----------------------------
Name:
Title:
<PAGE> 39
-39-
KCI NEW TECHNOLOGIES, INC.
By: /s/ DENNIS E. NOLL
----------------------------
Name:
Title:
KCI INTERNATIONAL, INC.
By: /s/ DENNIS E. NOLL
----------------------------
Name:
Title:
KCI AIR, INC.
By: /s/ DENNIS E. NOLL
----------------------------
Name:
Title:
KCI-RIK ACQUISITION CORP.
By: /s/ DENNIS E. NOLL
----------------------------
Name:
Title:
PLEXUS ENTERPRISES, INC.
By: /s/ DENNIS E. NOLL
----------------------------
Name:
Title:
MEDICAL RETRO DESIGN
By: /s/ DENNIS E. NOLL
----------------------------
Name:
Title:
<PAGE> 40
-40-
The foregoing Agreement is hereby confirmed and accepted
as of the date first above written.
BT ALEX. BROWN INCORPORATED
By: /s/ KATE W. COOK
-------------------------------
Name: Kate W. Cook
Title: Managing Director
BANCAMERICA ROBERTSON STEPHENS
By: /s/ MARK S. DAWLEY
-------------------------------
Name:Mark S. Dawley
Title: Senior Managing Director
<PAGE> 41
SCHEDULE
SUBSIDIARIES
Jurisdiction of
Name Stockholder(s) Incorporation
---- -------------- -------------
KCI Holding Company, Kinetic Concepts, Inc. Delaware
Inc.
KCI Properties Ltd. Kinetic Concepts, Inc. Texas
KCI Real Properties Kinetic Concepts, Inc. Texas
Ltd.
KCI Therapeutic Kinetic Concepts, Inc. Delaware
Services, Inc. and KCI Properties
Ltd.
KCI New Technologies, Kinetic Concepts, Inc. Delaware
Inc.
KCI International, Kinetic Concepts, Inc. Delaware
Inc.
KCI Air, Inc. Kinetic Concepts, Inc. Delaware
[Add other Subsidiaries]
<PAGE> 42
SCHEDULE II
Principal amount of
Initial Purchaser Securities to be Purchased
- ----------------- --------------------------
BT Alex. Brown Incorporated $ 100,000,000
BancAmerica Robertson Stephens $ 100,000,000
-------------
Total $ 200,000,000
<PAGE> 1
EXHIBIT 12.1
KINETIC CONCEPTS, INC.
STATEMENT OF THE CALCULATION OF RATIO OF EARNINGS OF FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings before income taxes, minority interest, extraordinary item
and cumulative effects of changes in accounting principles $ 47,917 $ 14,627 $ 119,550 $ 48,346 $ 64,441
Minority interest in subsidiary loss -- (560) (40) -- --
Fixed charges
Interest expense 8,482 8,819 5,846 509 177
Interest portion of rental expense(1) 1,660 1,665 1,635 1,800 2,025
--------- --------- --------- --------- ---------
Earnings Before Fixed Charges $ 58,059 $ 24,551 $ 126,991 $ 50,655 $ 66,643
========= ========= ========= ========= =========
Fixed Charges
Interest 8,482 8,819 5,846 509 177
Interest portion of rental expenses 1,660 1,665 1,635 1,800 2,025
Preferred stock dividend requirements 49 26 -- -- --
--------- --------- --------- --------- ---------
Fixed Charges and Preferred Stock Dividends $ 10,191 $ 10,510 $ 7,481 $ 2,309 $ 2,202
========= ========= ========= ========= =========
Ratio of Earnings to Fixed Charges 5.7x 2.3x 17.0x 21.9x 30.3x
========= ========= ========= ========= =========
</TABLE>
(1) Estimated to approximate 15% of rental expense.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1996 1997
--------- ---------
<S> <C> <C>
Earnings before income taxes, minority interest, extraordinary item
and cumulative effects of changes in accounting principles $ 43,027 $ 49,900
Minority interest in subsidiary loss -- (37)
Fixed charges
Interest expense 118 126
Interest portion of rental expense(1) 1,519 1,814
--------- ---------
Earnings Before Fixed Charges $ 44,664 $ 51,803
========= =========
Fixed Charges
Interest 118 126
Interest portion of rental expenses 1,519 1,814
Preferred stock dividend requirements -- --
--------- ---------
Fixed Charges and Preferred Stock Dividends $ 1,637 $ 1,940
========= =========
Ratio of Earnings to Fixed Charges 27.3x 26.7
========= =========
</TABLE>
(1) Estimated to approximate 15% of rental expense.
<PAGE> 1
EXHIBIT 21.1
KCI Subsidiaries
KINETIC CONCEPTS, INC., a Texas corporation
(Tax ID #74-1891727)
Subsidiaries:
1. KCI Therapeutic Services, Inc., a Delaware corporation
(Tax ID #74-2152396)
(a) KCI-RIK Acquisition Corp., a Delaware corporation
2. KCI New Technologies, Inc., a Delaware corporation
(Tax ID #74-2615226)
3. KCI Properties Limited, a Texas limited liability company
(Tax ID #74-2621178)
4. KCI Real Property Limited, a Texas limited liability company,
d/b/a Premier Properties (Tax ID #74-2644430)
5. KCI Air, Inc., a Delaware corporation
(Tax ID #74-2765302)
6. Medical Retro Design, Inc., a Delaware corporation
(Tax ID #74-2652711)
7. KCI Holding Company, Inc., a Delaware corporation
(Tax ID #74-2804102)
(a) KCI Insurance Company, Ltd., a Cayman Islands corporation
(b) KCI Equi-Tron Inc., a Canadian corporation
(i) Equi-Tron Mfg. Inc., a Canadian corporation
8. Plexus Enterprises, Inc., a Delaware corporation
(Tax ID #74-2814710)
(a) NDM(UK) Limited, a United Kingdom corporation
9. The Kinetic Concepts Foundation, a Texas non-profit corporation
(Tax ID#74-2822321)
10. KCI International, Inc., a Delaware corporation
(Tax ID #51-0307888)
(a) KCI Medical Canada, Inc., a Canadian corporation
<PAGE> 2
(b) KCI Medical Limited, a United Kingdom corporation (formerly Mediscus
International Limited), name change effective October 31, 1995
(i) KCI Medical United Kingdom Limited, a United Kingdom
corporation
(ii) Mediscus Products Limited, a United Kingdom corporation
a. KCII Medical Ltd., a United Kingdom corporation
(iii) Home-Care Medical Products Limited (formerly KCII
Medical Limited), a United Kingdom corporation
(c) KCI Medical Holdings GmbH (formerly KCI Handels GmbH), a German
corporation
(i) KCI Mediscus Produkte GmbH, a German corporation
(ii) KCI Therapie Gerate mbH (formerly Verwalt), a German
corporation
(d) Equipement Medical KCI, S.A.R.L., a French corporation
(e) KCI Mediscus AG, a Swiss corporation
(f) KCI Mediscus Klinikausstattung Gesellschaft mbH with
domicile in Vienna
(g) KCI Europe Holding B.V., a Netherlands corporation
(i) KCI Medical B.V., a Netherlands corporation
(ii) KCI Medica Espana, S.A., a Spanish corporation (partially
incorporated)
(h) KCI International-Virgin Islands, Inc., a Virgin Islands
corporation
(i) Ethos Medical Group Ltd., an Ireland corporation
2
<PAGE> 3
(k) KCI Medical Australia PTY, Ltd., an Australian corporation
(l) KCI Medical S.r.l., an Italian corporation
(m) KCI Medical A/S, Denmark
(n) KCI Medical AB, Sweden
3
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Kinetic Concepts, Inc.:
We consent to the use of our report dated February 5, 1997 on the consolidated
financial statements of Kinetic Concepts, Inc. and subsidiaries as of December
31, 1995 and 1996, and for each of the years in the three-year period ended
December 31, 1996 included herein and to the reference to our firm under the
heading "Independent Accountants" in the Registration Statement.
Our report refers to a change in the method of applying overhead to inventory
in 1994.
KPMG Peat Marwick LLP
San Antonio, Texas
December 17, 1997
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
-----------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
-----------
MARINE MIDLAND BANK
(Exact name of trustee as specified in its charter)
New York 16-1057879
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. Identification No.)
national bank)
140 Broadway, New York, N.Y. 10005-1180
(212) 658-1000 (Zip Code)
(Address of principal executive offices)
Charles E. Bauer
Vice President
Marine Midland Bank
140 Broadway
New York, New York 10005-1180
Tel: (212) 658-1792
(Name, address and telephone number of agent for service)
<PAGE> 2
Kinetic Concepts, Inc.
KCI Properties Limited
KCI Real Property Limited
KCI Holding Company, Inc.
KCI-RIK Acquisition Corp.
KCI International, Inc.
KCI Air, Inc.
Plexus Enterprises, Inc.
Medical Retro Design, Inc.
KCI Therapeutic Services, Inc.
KCI New Technologies, Inc.
(Exact name of obligors as specified in its charter)
<TABLE>
<S> <C> <C>
Texas 7352 74-1891727
Texas 7352
Texas 7352
Delaware 7352
Delaware 7352
Delaware 7352
Delaware 7352
Delaware 7352
Delaware 7352
Delaware 7352
</TABLE>
8023 Vantage Drive
San Antonio, Texas 78230
(210) 524 - 9000 (Zip Code)
(Address of principal executive offices)
9 5/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
(Title of Indenture Securities)
<PAGE> 3
General
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory
authority to which it is subject.
State of New York Banking Department.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
None
<PAGE> 4
Item 16. List of Exhibits.
Exhibit
T1A(i) * - Copy of the Organization Certificate of
Marine Midland Bank.
T1A(ii) * - Certificate of the State of New York
Banking Department dated December 31,
1993 as to the authority of Marine
Midland Bank to commence business.
T1A(iii) - Not applicable.
T1A(iv) * - Copy of the existing By-Laws of Marine
Midland Bank as adopted on January 20,
1994.
T1A(v) - Not applicable.
T1A(vi) * - Consent of Marine Midland Bank
required by Section 321(b) of the Trust
Indenture Act of 1939.
T1A(vii) - Copy of the latest report of condition of
the trustee (September 30, 1997),
published pursuant to law or the
requirement of its supervisory or
examining authority.
T1A(viii) - Not applicable.
T1A(ix) - Not applicable.
* Exhibits previously filed with the Securities and Exchange
Commission with Registration No. 33-53693 and incorporated
herein by reference thereto.
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
Marine Midland Bank, a banking corporation and trust company organized under the
laws of the State of New York, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York on the 11th day of December, 1997.
MARINE MIDLAND BANK
By: /s/ Frank J. Godino
---------------------------
Frank J. Godino
Vice President
<PAGE> 6
EXHIBIT T1A (vii)
<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Expires March 31, 1999
</TABLE>
- --------------------------------------------------------------------------------
This financial information has not been reviewed, or confirmed
for accuracy or relevance, by the Federal Reserve System.
Please refer to page i, Table of Contents, for the required disclosure /1/
of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
REPORT AT THE CLOSE OF BUSINESS SEPTEMBER 30,
1997
(950630)
(RCRI 9999)
This report is required by law; 12 U.S.C. Section 324 (State member
banks); 12 U.S.C. Section 1817 (State nonmember banks); and 12
U.S.C. Section 161 (National banks).
This report form is to be filed by banks with branches and
consolidated subsidiaries in U.S. territories and possessions,
Edge or Agreement subsidiaries, foreign branches, consoli-
dated foreign subsidiaries, or International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed
by an authorized officer and the Report of Condition must be
attested to by not less than two directors (trustees) for State
nonmember banks and three directors for State member and
National Banks.
I, Gerald A. Ronning, Executive VP & Controller
--------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and believe.
/s/ Gerald A. Ronning
-----------------------------------------
Signature of Officer Authorized to Sign Report
10/27/97
- ----------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in some
cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/ Malcolm Burnett
- ----------------------------------------------
Director (Trustee)
/s/ James H. Cleave
- ----------------------------------------------
Director (Trustee)
/s/ Bernard J. Kennedy
- ----------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANK: Return the original and one copy to the
appropriate Federal Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- --------------------------------------------------------------------------------
FDIC Certificate Number 0 0 5 8 9
--------------------
(RCRI 9030)
<PAGE> 7
pd
NOTICE
This form is intended to assist institutions with state publication
requirements. It has not been approved by any state banking authorities. Refer
to your appropriate state banking authorities for your state publication
requirements.
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the
Marine Midland Bank of Buffalo
Name of Bank City
in the state of New York, at the close of business
September 30, 1997
ASSETS
<TABLE>
<CAPTION>
Thousands
of dollars
----------
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances
currency and coin ...................................... $ 1,110,485
Interest-bearing balances ............................... 2,048,920
Held-to-maturity securities ............................. 0
Available-for-sale securities ........................... 3,391,694
Federal funds sold and securities purchased
under agreements to resell ............................. 1,342,831
Loans and lease financing receivables:
Loans and leases net of unearned
income ................................................. 21,487,570
LESS: Allowance for loan and lease
losses ................................................. 425,157
LESS: Allocated transfer risk reserve ................... 0
Loans and lease, net of unearned
income, allowance, and reserve ......................... 21,062,413
Trading assets .......................................... 968,456
Premises and fixed assets (including
capitalized leases) .................................... 221,523
Other real estate owned .................................... 5,545
Investments in unconsolidated
subsidiaries and associated companies ..................... 0
Customers' liability to this bank on
acceptances outstanding ................................... 23,847
Intangible assets .......................................... 482,701
Other assets ............................................... 537,780
Total assets ............................................... 31,196,195
LIABILITIES
Deposits:
In domestic offices ..................................... 19,952,350
Noninterest-bearing ..................................... 3,982,634
</TABLE>
<PAGE> 8
<TABLE>
<S> <C>
Interest-bearing ........................................ 15,969,716
In foreign offices, Edge, and Agreement
subsidiaries, and IBFs .................................. 3,344,008
Noninterest-bearing ..................................... 0
Interest-bearing ........................................ 3,344,008
Federal funds purchased and securities sold
under agreements to repurchase .......................... 2,540,798
Demand notes issued to the U.S. Treasury ................... 279,418
Trading Liabilities ........................................ 208,931
Other borrowed money:
With a remaining maturity of one year
or less ................................................ 1,359,650
With a remaining maturity of more than
one year through three years ........................... 73,635
With a remaining maturity of more than
three years ............................................ 102,337
Bank's liability on acceptances
executed and outstanding ................................... 23,847
Subordinated notes and debentures .......................... 497,711
Other liabilities .......................................... 596,321
Total liabilities .......................................... 28,979,006
Limited-life preferred stock and
related surplus ............................................ 0
EQUITY CAPITAL
Perpetual preferred stock and related
surplus ................................................. 0
Common Stock ............................................... 205,000
Surplus .................................................... 1,983,923
Undivided profits and capital reserves ..................... 10,090
Net unrealized holding gains (losses)
on available-for-sale securities ........................ 18,176
Cumulative foreign currency translation
adjustments ............................................. 0
Total equity capital ....................................... 2,217,189
Total liabilities, limited-life
preferred stock, and equity capital ........................ 31,196,195
</TABLE>
