<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MAXXIM MEDICAL GROUP, INC.*
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 3842 59-3597135
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
---------------------
10300 49TH STREET NORTH, CLEARWATER, FLORIDA 33762, (727) 561-2100
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------------
KENNETH W. DAVIDSON, PRESIDENT
MAXXIM MEDICAL GROUP, INC.
10300 49TH STREET NORTH
CLEARWATER, FLORIDA 33762
(727) 561-2100
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for Service)
WITH COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
PAUL R. LYNCH, ESQ. MITCHELL S. PRESSER, ESQ.
SHUMAKER, LOOP & KENDRICK, LLP WACHTELL, LIPTON, ROSEN & KATZ
101 EAST KENNEDY BOULEVARD 51 WEST 52ND STREET
SUITE 2800 NEW YORK, NY 10019-6150
TAMPA, FLORIDA 33602 (212) 403-1000
(813) 229-7600
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon
consummation of the Exchange Offer referred to herein.
---------------------
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. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO MAXXIM MAXIMUM AMOUNT OF
OF SECURITIES TO BE BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER NOTE OFFERING PRICE(1) FEE(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Senior Subordinated Discount Notes due 2009 $144,552,000(3) 73.9% $106,913,550 $28,225.18(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Guarantees of the Senior Subordinated Discount
Notes due 2009(4) (4) (4) (4) (4)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the Securities Act of 1933.
(2) Calculated pursuant to Rule 457(f)(2).
(3) The Senior Subordinated Discount Notes due 2009 were sold on November 12,
1999 at a discount from their principal amount at maturity. The registration
fee was calculated based on the gross proceeds received from the sale of the
Senior Subordinated Discount Notes due 2009. The "Amount to Be Registered"
represents the aggregate principal amount at maturity of such notes.
(4) Pursuant to Rule 457(n) under the Securities Act, no registration fee is
required with respect to the guarantees.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
*TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER PRIMARY STANDARD
JURISDICTION OF INDUSTRIAL I.R.S. EMPLOYEE
INCORPORATION OR CLASSIFICATION IDENTIFICATION
NAME ORGANIZATION NUMBER NUMBER
- ---- ---------------- ---------------- ---------------
<S> <C> <C> <C>
Maxxim Medical, Inc.(1)............ Texas 3842 76-0291634
Maxxim Medical, Inc.(1)............ Delaware 3842 74-1941367
Maxxim Investment Management,
Inc.(2).......................... Nevada 3842 88-1625987
Fabritek La Romana, Inc.(1)........ Mississippi 3842 64-0574215
</TABLE>
- -------------------------
(1) The address, including zip code, and telephone number, including area code,
of the principal executive offices of these additional registrants is 10300
49th Street North, Clearwater, Florida 33762, (727) 561-2100.
(2) The address, including zip code, and telephone number, including area code,
of the principal executive offices of Maxxim Investment Management, Inc. is
1325 Airmotive Way, Suite 130, Reno, Nevada 89902, (775) 823-3080.
<PAGE> 3
SUBJECT TO COMPLETION
DECEMBER 15, 1999
PROSPECTUS
MAXXIM MEDICAL GROUP, INC.
OFFER TO EXCHANGE
ALL SENIOR SUBORDINATED DISCOUNT NOTES DUE 2009 ($144,552,000 AGGREGATE
PRINCIPAL AMOUNT AT MATURITY)
FOR
SENIOR SUBORDINATED DISCOUNT NOTES DUE 2009 ($144,552,000 AGGREGATE PRINCIPAL
AMOUNT AT MATURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
The exchange offer will expire at 5:00 p.m., New York City time, on
, 2000, unless extended.
-------------------------
We do not intend to list the exchange notes on any national securities
exchange, and no public market for the exchange notes is anticipated.
-------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF
FACTORS THAT YOU SHOULD CONSIDER BEFORE TENDERING YOUR OLD NOTES.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
THE DATE OF THIS PROSPECTUS IS , 2000.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION RELATING TO THESE SECURITIES IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information.............. ii
Forward-Looking Statements.......... iii
Industry and Pro Forma
Information....................... v
Summary............................. 1
Risk Factors........................ 22
The Exchange Offer.................. 40
The Transactions.................... 49
Use of Proceeds..................... 52
Capitalization...................... 53
Unaudited Pro Forma Financial
Information of the Company........ 54
Selected Historical Consolidated
Financial Information of
Holdings.......................... 64
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...... 66
Business............................ 78
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management.......................... 96
Security Ownership of Certain
Beneficial Owners and
Management........................ 101
Certain Relationships and Related
Party Transactions................ 104
Description of New Credit Facilities
and Other Indebtedness............ 111
Description of the Exchange Notes... 115
Exchange and Registration Rights
Agreement......................... 168
Book-Entry, Delivery and Form....... 171
Certain United States Federal Income
Tax Considerations................ 175
Plan of Distribution................ 176
Available Information............... 177
Experts............................. 178
Validity of the Exchange Notes...... 178
</TABLE>
i
<PAGE> 5
ADDITIONAL INFORMATION
This prospectus incorporates important business and financial information
about us from documents that are not included in or delivered with this
document. You can obtain documents incorporated by reference in this prospectus
(other than exhibits to those documents) by requesting them in writing or by
telephone from us at the following address:
Maxxim Medical Group, Inc.
10300 49th Street North
Clearwater, Florida 33762
Attention: Mary Lugris
Telephone: (727) 561-2100
You will not be charged for any documents that you request. If you would
like to request documents, please do so by , 2000 in order to receive
them before the exchange offer expires on , 2000.
-------------------------
Until , 2000, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
ii
<PAGE> 6
FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" including, in
particular, the statements about our plans, strategies and prospects under
"Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." These statements are based on our current
plans and expectations relating to, among other things, growth in the future and
future success under various strategies, and, as such, these forward-looking
statements involve uncertainty and risk. The forward-looking statements are not
guarantees of future performance, and actual results may differ materially from
those contemplated by such forward-looking statements. Important factors, some
of which may be beyond our control, that could cause actual results to differ
materially from management's expectations ("cautionary statements") are
disclosed in this prospectus, including under "Risk Factors." We caution you not
to place undue reliance on these forward-looking statements. All forward-looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements included in this
prospectus. These forward-looking statements are based on assumptions about the
Company and Holdings, including, among other things, that:
- our increased leverage and debt service obligations described in this
prospectus will not have an adverse effect on our operations and
finances;
- there will not be adverse developments in, or changes to, the laws and
regulations governing our business (particularly regulations promulgated
by the U.S. Food and Drug Administration);
- there will not be adverse developments in the international markets in
which we operate, and we will be successful in anticipating and managing
the risks associated with our international operations;
- products in development will be introduced successfully and on schedule;
- we will make acquisitions which contribute to profitability, and the
integration of such acquisitions will not disrupt our operations;
- we will be able to respond effectively to cost containment efforts and
other significant trends affecting healthcare providers and healthcare
buying groups;
- demand for our products will follow recent growth trends;
- we will become year 2000 compliant without material expenditures, and our
key suppliers and customers also will become year 2000 compliant so that
our business is not disrupted;
- our senior management's obligation to manage Circon Corporation (a former
subsidiary that is commonly owned and managed) as well as the Company
will not prove unduly burdensome or adversely divert management attention
away from the Company;
- our competitors will not introduce new products that will substantially
reduce our sales position in our most significant product groups;
- any product liability claims or other litigation to which we are now
subject or to which we may become subject in the future will not result
in materially adverse judgments against us; and
iii
<PAGE> 7
- we will be successful in retaining employees who are integral to the
operation of our business.
In the event any of the above assumptions does not prove to be correct,
actual results could differ materially from the expectations expressed in the
forward-looking statements. Except to the extent required under the federal
securities laws, we do not intend to update or otherwise revise forward-looking
statements to reflect circumstances arising after the date of the preparation of
the forward-looking statements.
iv
<PAGE> 8
INDUSTRY AND PRO FORMA INFORMATION
Unless otherwise indicated, and except as provided in the following
sentence, information in this prospectus concerning the U.S. single-use
specialty medical products industry and the custom procedure tray and medical
glove portions of such industry and the European custom procedure tray industry,
including, but not limited to, information as to historical sales, historical
growth rates, projected growth rates and our position in the custom procedure
tray portion of the U.S. single-use specialty medical products industry, is
based on a report dated September 7, 1999, that was prepared in connection with
the sale of the old notes by Frost & Sullivan, a market research firm.
Information regarding our percentage of total sales of non-latex medical
examination gloves to hospitals, surgery centers and other acute care facilities
in the United States is based on reports prepared by IMS Health Incorporated
("IMS"), a supplier of market research data to the pharmaceutical and healthcare
industries. We have not independently verified any of the information in the
Frost & Sullivan or IMS reports. Information presented in this prospectus based
on the Frost & Sullivan and IMS reports is based on estimates, but is, we
believe, generally indicative of such industries' size and our positions within
such industries or their components. Our general expectations concerning the
U.S. single-use specialty medical products industry and its components and the
European custom procedure tray industry involve risks and uncertainties and are
subject to change based on various factors, including those discussed under
"Risk Factors."
Pro forma statement of operations information presented in this prospectus
gives effect to the Transactions (as defined) and, for certain periods, the
consummation of the Winfield Acquisition (as defined) as if they had occurred on
November 3, 1997. Pro forma balance sheet information presented in this
prospectus gives effect to the Transactions as if they had occurred on August 1,
1999.
v
<PAGE> 9
SUMMARY
The following summary highlights selected information contained elsewhere
in this prospectus. This summary may not contain all of the information that you
should consider before exchanging your old notes for exchange notes, and you are
encouraged to read this prospectus in its entirety. This prospectus includes
specific terms of the exchange notes we are offering, as well as information
about our business and detailed financial data.
Unless otherwise indicated or the context otherwise requires, references in
this prospectus to (1) the "Issuer" refer to Maxxim Medical Group, Inc., a
Delaware corporation, (2) "Holdings" refer to Maxxim Medical, Inc., a Texas
corporation that is the direct parent of the Issuer, (3) the "Company," "we,"
"our" and "us" refer to the Issuer and its subsidiaries as a combined entity
after giving effect to the Transactions, (4) "Circon" refer to Circon
Corporation, an indirect wholly owned subsidiary of Holdings prior to the
Transactions, and currently a separate corporation indirectly owned by the same
shareholders that currently own Holdings, and (5) "Fox Paine" refer,
collectively, to Fox Paine Capital Fund, L.P., Fox Paine & Company, LLC, Fox
Paine Medic Acquisition Corporation and certain related entities. Holdings is a
holding company, the principal asset of which is the capital stock of the
Issuer. The Issuer is also a holding company, the principal assets of which are
the capital stock of its subsidiaries. Discussions of the Company and its
historical operations, unless otherwise indicated, exclude the effects of the
acquisition of Circon in January 1999, including Circon's results of operations.
References to a particular fiscal year refer to our fiscal year, which ends
on the Sunday following the last Thursday in October of the fiscal year
specified. Our 1997 fiscal year ended on November 2, 1997, our 1998 fiscal year
ended on November 1, 1998, and our 1999 fiscal year ended on October 31, 1999.
THE COMPANY
OVERVIEW
We are a leading developer, manufacturer, distributor and marketer of a
broad range of single-use specialty medical products primarily used in the
operating rooms of hospitals and surgery centers. Through our North American and
European sales force of 156 full-time representatives, we sell approximately
23,000 products to approximately 7,000 customers. Our products (and the
percentage they represented of our pro forma total net sales for the twelve
months ended August 1, 1999) include:
- custom procedure trays (56.6%);
- gloves for medical examinations and surgical procedures (21.0%);
- imaging and critical care products for cardiology and radiology (6.7%);
- bio-safety containment products (5.8%);
- drapes and gowns (4.6%); and
- other single-use specialty medical products (5.3%).
We are the second leading supplier of custom procedure trays in the United
States, with approximately 29% of sales of such products in 1998, and we are the
leading supplier
1
<PAGE> 10
of non-latex medical examination gloves to hospitals, surgery centers and other
acute care facilities in the United States, with approximately 35% of sales of
such products to such customers for the three months ended March 31, 1999. For
the twelve months ended August 1, 1999, approximately 89.9% of our pro forma
total net sales were in North America (substantially all of which were in the
United States) and 10.1% of our pro forma total net sales were outside North
America (primarily in Europe). For the twelve months ended August 1, 1999, we
generated pro forma net sales of $524.4 million and pro forma EBITDA (as
defined) of $75.6 million.
Our custom procedure trays are kits containing single-use products (such as
surgical drapes and gowns, needles, syringes, pressure syringes, bulb syringes,
scalpels, tubing, skin markers, bowls, cotton towels, towel clamps and other
non-powered instruments) used in surgical and other medical procedures. We
currently assemble approximately 4,000 different custom procedure trays. We
design these custom procedure trays in accordance with the specific preferences
of individual end users (primarily hospitals and surgery centers) that select
components from a list of approximately 9,000 components manufactured by us or
other third party manufacturers. Hospitals and surgery centers have increased
their use of custom procedure trays in recent years in order to increase
efficiency, reduce inventory levels, protect against product contamination and
allow for easier identification of costs associated with specific medical
procedures.
The gloves we manufacture include non-latex medical examination gloves,
which are manufactured entirely from synthetic materials, as well as non-latex
and latex gloves for use in surgical procedures. A June 1997 report published by
the National Institute for Occupational Safety and Health heightened the
awareness and concern of healthcare professionals about allergic reactions from
exposure to latex and has, we believe, contributed to non-latex gloves becoming
the fastest growing portion of medical glove sales. To capitalize on this
expanding business, we have increased our glove capacity from 2.2 billion to 3.5
billion non-latex gloves per year by investing approximately $36.0 million since
the beginning of fiscal year 1998 in additional plant capacity, including two
new state-of-the-art production lines. We believe our increased capacity and
high product quality position us to grow in the expanding non-latex medical
glove business.
Hospitals and surgery centers are the primary end-use customers of our
products. Our North American sales force, consisting of approximately 140
full-time representatives, maintains close, direct relationships with the
healthcare professionals and administrators who make the purchasing decisions
for these customers. In addition, a majority of our U.S. hospital and surgery
center customers are members of Buying Groups (as defined). See "-- Industry"
for a description of Buying Groups. Our nationwide customer service and
distribution capabilities, broad product offerings and sophisticated supply
management systems, combined with the efforts of our 10 national account
managers, have enabled us to develop close relationships with a number of Buying
Groups, including the six largest Buying Groups, as ranked by number of member
hospitals -- Premier Research Worldwide Ltd., AmeriNet, Inc., Novation, LLC,
Mid-Atlantic Group Network of Shared Services Inc., MHA/MedEcon and Health
Services Corporation of America. Buying Groups typically enter into contracts
with various suppliers that provide that the suppliers will make available
specified products at agreed-upon prices to members of the Buying Groups. Buying
Groups strongly encourage their members to purchase these products, although
compliance by different Buying Group members may vary. Our sales efforts at the
hospital and surgery center level, which are strengthened by the use of our
proprietary DataStat(TM) and ValuQuote(TM) systems (see "-- Business
Strengths"), increase demand for our
2
<PAGE> 11
products among our end-use customers, including those that make purchases under
Buying Group contracts.
Led by our Chairman, President and Chief Executive Officer, Kenneth W.
Davidson, and a team of senior managers who average approximately 18 years of
experience in the medical products industry, we have grown through strategic
acquisitions as well as through the development of new products. Our strategy
has been to acquire companies and develop products that expand or complement
existing product groups, increase vertical integration or enlarge our customer
base. Since Mr. Davidson's arrival in 1986, we have completed 20 acquisitions
(excluding Circon), which, when combined with internal growth, have generated
compound annual growth rates through August 1, 1999 of 44.9% in net sales and
48.8% in EBITDA (in each case, excluding Circon).
INDUSTRY
We compete primarily in the $5.3 billion (based on 1998 sales) U.S.
single-use specialty medical products industry, which has been growing at a
compound annual rate of approximately 6.6% since 1993 and is expected to grow at
a compound annual rate of approximately 6.3% through 2003. The products included
in the U.S. single-use specialty medical products industry are latex and
non-latex medical gloves, custom procedure trays, drapes, gowns, shoe covers,
face masks, non-powered instruments, headgear, needles, syringes, tubing and
prepackaged needle kits and trays, all of which we sell. The primary customers
for single-use specialty medical products are hospitals, surgery centers,
alternate site care providers and physician practices.
We believe several trends have had and will continue to have an impact on
the single-use specialty medical products industry. First, we expect the
projected aging of the population to increase demand for such products because
older people tend to undergo more surgical procedures. Second, we expect efforts
to reduce the transmission of infectious diseases and to address the
occupational safety of healthcare professionals to favorably impact demand for
single-use specialty medical products. Finally, in recent years, widespread
efforts have been made in both the public and private sectors to control
healthcare costs in the United States and abroad. Among other implications, this
has led to a growing trend in the United States for hospitals and surgery
centers to consolidate and/or to join so-called independent delivery networks
and group purchasing organizations (collectively, "Buying Groups"), which are
groups of independent hospitals and surgery centers that coordinate their
purchasing and supply requirements on a regional or national basis in order to
obtain price concessions and contain costs. We believe this trend favors
suppliers, like us, that are able to serve national contracts with a broad
product line, sophisticated supply management processes, high brand name
recognition with member hospitals and other end-use customers and nationwide
customer service and distribution capabilities.
CUSTOM PROCEDURE TRAYS. The custom procedure tray portion of the U.S.
single-use specialty medical products industry, estimated at $1.1 billion (based
on 1998 sales), has been growing at a compound annual rate of approximately 7.2%
since 1993 and is expected to grow at a compound annual rate of approximately
6.3% through 2003. Custom procedure trays were used in approximately 65% of all
surgical procedures in the United States in 1998. We believe several factors
will contribute to continued growth in demand for custom procedure trays in the
United States, including (1) continued growth in the number of overall surgical
procedures, (2) growth in the number of more complex surgical
3
<PAGE> 12
procedures for which custom procedure trays are used and (3) growing demand for
products that improve productivity and contain costs.
MEDICAL EXAMINATION AND SURGICAL GLOVES. The medical glove portion of the
U.S. single-use specialty medical products industry, estimated at $1.2 billion
(based on 1998 sales), has been growing at a compound annual rate of
approximately 8.9% since 1993 and is expected to grow at a compound annual rate
of approximately 10.0% through 2003. The medical glove portion can be divided
into latex gloves and non-latex gloves, each of which can be designed either for
medical examinations or surgical procedures. U.S. sales of medical examination
gloves, estimated at $940 million in 1998, are projected to grow at a compound
annual rate of approximately 9.9% through 2003, with the non-latex category
estimated to grow at a compound annual rate of approximately 17.5% through 2003.
U.S. sales of surgical procedure gloves, estimated at $223 million in 1998, are
projected to grow at a compound annual rate of approximately 10.1% through 2003,
with the non-latex category estimated to grow at a compound annual rate of
approximately 30.9% through 2003. A greater emphasis on protecting healthcare
professionals from the transmission of infectious diseases is expected to help
drive growth in sales of both latex and non-latex gloves. A June 1997 report
published by the National Institute for Occupational Safety and Health
heightened the awareness and concern of healthcare professionals about allergic
reactions from exposure to latex and has, we believe, contributed to non-latex
gloves becoming the fastest growing portion of medical glove sales.
EUROPEAN INDUSTRY TRENDS. Although we believe the number of surgical
procedures performed in Europe is only slightly less than the number of surgical
procedures performed in the United States, the use of single-use specialty
medical products, including custom procedure trays, currently is not as
prevalent in Europe as it is in the United States. Custom procedure trays were
used in approximately 8% of all surgical procedures in Europe in 1998 versus
approximately 65% in the United States during such time. We believe that
European healthcare providers will increase their use of single-use specialty
medical products, including custom procedure trays, as demand increases in
Europe for products that improve productivity, help contain healthcare costs and
reduce the transmission of infectious diseases.
BUSINESS STRENGTHS
We believe that the following business strengths provide us with a
foundation to further enhance growth, profitability and our position as an
industry leader:
LEADING SALES POSITIONS. We are the second leading supplier of custom
procedure trays in the United States, with approximately 29% of sales of
such products in 1998, and we are the leading supplier of non-latex medical
examination gloves to hospitals, surgery centers and other acute care
facilities in the United States, with approximately 35% of sales of such
products to such customers for the three months ended March 31, 1999. We
believe our strong reputation for high-quality products, superior customer
service and cost competitiveness makes doing business with us attractive to
our end-use customers as well as to Buying Groups, and has helped us to
establish our leading sales positions. Our leading sales positions in these
products give our products a significant presence in the operating rooms of
hospitals and surgery centers, which we believe allows us to expand the
variety and increase the volume of products sold to our customers.
4
<PAGE> 13
STRONG CUSTOMER RELATIONSHIPS. We have developed and maintain strong
relationships with Buying Groups, their member hospitals and surgery
centers which purchase and use our products under Buying Group contracts
and independent hospitals and surgery centers. At the Buying Group level,
our nationwide customer service and distribution capabilities, broad
product offerings and sophisticated supply management systems, combined
with the efforts of our 10 national account managers, have enabled us to
develop close relationships with a number of Buying Groups, including the
six largest Buying Groups, as ranked by number of member hospitals --
Premier Research Worldwide Ltd., AmeriNet, Inc., Novation, LLC,
Mid-Atlantic Group Network of Shared Services Inc., MHA/MedEcon and Health
Services Corporation of America. At the hospital and surgery center level,
our North American sales force, consisting of approximately 140 full-time
representatives, maintains close, direct relationships with the healthcare
professionals and administrators who make the purchasing decisions for
these customers, providing value-added solutions and superior customer
service. By working closely with these customers and learning about their
individualized needs, we are able to design, assemble and deliver highly
customized procedure trays quickly on a cost-effective basis, which further
strengthens our relationships and reputation with these customers.
VALUE-ADDED CUSTOMER SUPPORT SYSTEMS. We have created and implemented
process innovations that provide significant value to our customers,
including our DataStat(TM) and ValuQuote(TM) software systems and our
EnCompass(SM) Integrated Product Packaging system. Our DataStat(TM)
software system enables us to help our customers measure efficiency and
cost by reviewing various surgical procedures, tracking which components
are used in each procedure and recording surgery time and operating room
delays. Our ValuQuote(TM) software system allows our account managers to
search our component database for cost-effective components that meet the
product and sequencing needs of each customer. We use these two software
systems to design custom procedure trays that address the specific
preferences and requirements of each individual customer. Our EnCompass(SM)
Integrated Product Packaging system is an innovative system that packages
most of the single-use components used in a surgical procedure, together
with the custom procedure tray, into a single modular container. These
containers are specially designed and labeled to meet the inventory and
operating room set-up, turnaround and disposal needs of hospitals and
surgery centers. We believe that these proprietary systems have had and
will continue to have an important impact on our customers' decisions to
select the Company to be their single-use specialty medical products
supplier.
MANUFACTURING EXPERTISE. We believe we have developed significant
expertise in the manufacture of non-latex medical examination gloves and in
the assembly and supply management processes that are important to the sale
of custom procedure trays. Technology plays a major role in the
development, manufacture and sale of medical gloves because medical glove
performance is measured by the degree of tactility and barrier protection
that the glove affords. Our most technologically advanced non-latex gloves
are manufactured using a combination of trade secrets and patented
formulations and manufacturing processes that we believe provide us with
technological and performance advantages over our competitors. Similarly,
the assembly and preparation of custom procedure trays from a selection of
approximately 9,000 components requires sophisticated assembly and supply
management processes, as well as extensive systems for processing customer
data. We believe we have developed the physical and technological
infrastructure -- including systems for
5
<PAGE> 14
ordering and tracking components, coordinating information received from
customers and reducing turn-around and delivery times -- that is necessary
to compete effectively in the custom procedure tray business.
PROVEN MANAGEMENT TEAM WITH SUBSTANTIAL EQUITY OWNERSHIP. Our senior
management team is comprised of eight individuals who average approximately
18 years of experience in the medical products industry. Mr. Davidson, our
Chairman, President and Chief Executive Officer, has 29 years of medical
products industry experience. Since joining the Company in 1986, he has
overseen 20 acquisitions (excluding Circon), that have helped the Company
increase its net sales from $4.6 million in fiscal year 1986 to $524.4
million for the twelve months ended August 1, 1999 (excluding Circon). The
eight members of senior management own approximately 8.2% of the
outstanding common equity of Holdings (before giving effect to the exercise
of any stock options or warrants) and, assuming the exercise of their stock
options, will own approximately 22.8% of the outstanding common equity of
Holdings on a fully-diluted basis.
BUSINESS STRATEGY
Our key business objectives are to enhance growth, profitability and our
position as an industry leader through the following key strategic initiatives:
EMPHASIZE RELATIONSHIPS WITH BUYING GROUPS. We believe that the trend
among Buying Groups to concentrate their supply contracting with fewer,
larger suppliers favors suppliers, like us, that offer the ability to serve
national contracts with a broad product line, sophisticated supply
management processes, high brand name recognition with Buying Group members
and nationwide customer service and distribution capabilities. We intend to
leverage our strengths in these areas and our existing relationships in
order to (1) increase the number of Buying Groups with which we do
business, (2) increase the number of our products approved by each Buying
Group for purchase by its members and (3) increase sales of approved
products to the members of each Buying Group.
SEEK GREATER VERTICAL INTEGRATION. Our profitability is greatly
affected by our ability to vertically integrate the products we manufacture
into our custom procedure trays. Most of the items included in our custom
procedure trays, based on the cost of materials, are purchased from third
parties. We intend to increase the percentage of our products integrated
into our custom procedure trays through an aggressive marketing effort
designed to encourage hospitals and surgery centers to select
Company-manufactured products when selecting the components of the custom
procedure trays we sell.
CONTINUE GROWTH THROUGH STRATEGIC ACQUISITIONS AND PRODUCT
DEVELOPMENT. An important focus of our overall strategy is to:
- acquire companies and product groups that expand or complement our
existing product groups, increase vertical integration or enlarge our
customer base; and
- continue our internal product development and enhancement efforts in
order to maintain a leadership position in the medical glove business
and to increase the number of Company-manufactured products that
either can be sold directly or can be included in our custom procedure
trays.
6
<PAGE> 15
We have successfully used acquisitions to build the Company into a leading
single-use specialty medical products company and we intend to continue to
grow through additional select acquisitions. Since 1986, we have
successfully completed 20 acquisitions (excluding Circon) which, when
combined with internal growth, have generated compound annual growth rates
through August 1, 1999 of 44.9% in net sales and 48.8% in EBITDA (in each
case, excluding Circon). We believe the Company is an attractive platform
from which to grow for the following reasons:
- our strong relationships with Buying Groups and approximately 7,000
end-use customers;
- our North American and European sales force of 156 full-time
representatives;
- our senior management team's experience and track record of
integrating acquisitions; and
- our custom procedure tray business, which creates margin-improvement
opportunities from the vertical integration of newly acquired or
developed products that can be included in our trays.
EXPAND EUROPEAN PRESENCE. We plan to increase our penetration of the
expanding European single-use specialty medical products business by using
our current European operations as a platform for growth and by leveraging
the expertise we have developed from our U.S. experience in the
manufacture, assembly, marketing and distribution of these products. We
believe that European healthcare providers will increase their use of
single-use specialty medical products, including custom procedure trays, as
demand increases in Europe for products that improve productivity, help
contain healthcare costs and reduce the transmission of infectious
diseases. We first introduced products in Europe in January of 1995 through
the acquisition of our Medica subsidiary. For the twelve months ended
August 1, 1999, our pro forma net sales into Europe were $45.2 million, or
8.6% of our pro forma total net sales.
We are located at 10300 49th Street North, Clearwater, Florida 33762. Our
telephone number is (727) 561-2100.
THE TRANSACTIONS
On June 13, 1999, Holdings and Fox Paine Medic Acquisition Corporation, a
Texas corporation newly formed by Fox Paine Capital Fund, L.P., entered into a
merger agreement providing for the recapitalization of Holdings. The
transactions contemplated by the merger agreement, including the
recapitalization, were consummated on November 12, 1999. The recapitalization
involved, among other transactions, (1) the sale (the "Circon Sale") to Circon
Holdings Corporation, a newly formed Texas corporation which is owned by the
shareholders of Holdings, of all of the capital stock of Circon in exchange for
$208.0 million in cash and the repayment of $20 million of intercompany
indebtedness owed by Circon to Holdings, as a result of which Circon is pursuing
separate business strategies, is separately capitalized and is operated
separately from Holdings and us and (2) the contribution of all of Holdings'
assets and liabilities (other than those relating to Holdings' credit facility
in existence prior to the consummation of the Transactions, which was repaid and
terminated as part of the Transactions) to us (the "Asset Dropdown"). See "The
Transactions."
7
<PAGE> 16
The Transactions required total funding of approximately $799.6 million
(see "-- Sources and Uses" and "The Transactions"). In addition to the $110.0
million from the issuance of the old, unregistered senior subordinated discount
notes due 2009 and associated warrants to purchase Holdings common stock, the
remainder of the financing came from the following sources:
- $261.6 million in borrowings by us under our new senior secured credit
facilities;
- $50.0 million from the issuance by Holdings of senior unsecured discount
notes (the "Holdings Notes") and warrants to purchase shares of Holdings
common stock to GS Mezzanine Partners, L.P., an investment fund managed
by affiliates of Goldman, Sachs & Co., and certain of its affiliated
investment funds (collectively, the "Holdco Note Purchaser");
- $131.8 million in cash from the purchase by the Investors (as defined) of
shares of Fox Paine Medic Acquisition Corporation common stock, which
were converted in the merger of Fox Paine Medic Acquisition Corporation
with and into Holdings into shares of Holdings common stock (the
"Investor Equity Contribution");
- $13.8 million of shares of Holdings common stock retained by the
Continuing Shareholders (as defined) following the merger (the "Rollover
Equity");
- $4.4 million in cash from the sale of shares of Holdings common stock to
the Management Investors (as defined); and
- $228.0 million in cash from the Circon Sale and the repayment of
intercompany indebtedness by Circon to Holdings.
In connection with the recapitalization, we (1) repaid all amounts
outstanding under Holdings' previous credit facility and (2) consummated the
tender offer for Holdings' $100.0 million principal amount of outstanding
10 1/2% Senior Subordinated Notes due 2006.
We refer to Fox Paine, together with the Holdco Note Purchaser and the
entities managed by Fox Paine which are shareholders of Holdings, as the
"Investors." See "Security Ownership of Certain Beneficial Owners and
Management."
References in this prospectus to the "Transactions" refer, collectively, to
(1) the merger, (2) the Circon Sale and repayment of intercompany indebtedness
by Circon to Holdings, (3) the payment of the Cash Consideration (as defined) in
the merger, (4) the issuance of the old notes, (5) the initial borrowings under
the new credit facilities, (6) the issuance of the Holdings Notes, (7) the
completion of the tender offer for the 10 1/2% Senior Subordinated Notes due
2006, (8) the repayment of indebtedness under Holdings' previous credit
facility, (9) the Investor Equity Contribution, (10) the Management Equity
Investment (as defined), (11) the Asset Dropdown and (12) the payment of fees
and expenses in connection with the foregoing.
8
<PAGE> 17
SOURCES AND USES
The following table sets forth the approximate sources and uses of funds in
connection with the Transactions:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C>
SOURCES:
New credit facilities(1).................................. $261.6
Old notes and warrants.................................... 110.0
Holdings Notes and warrants(2)............................ 50.0
Investor Equity Contribution.............................. 131.8
Management Equity Investment(3)........................... 18.2
Cash from Circon Sale and repayment of Circon
Indebtedness........................................... 228.0
------
Total sources.......................................... $799.6
======
USES:
Cash consideration(4)..................................... $368.6
Repayment of previous credit facility(5).................. 252.8
Purchase of 10 1/2% Senior Subordinated Notes due 2006.... 100.0
Rollover Equity........................................... 13.8
Transaction fees and expenses(6).......................... 52.2
Working capital........................................... 12.2
------
Total uses............................................. $799.6
======
</TABLE>
- -------------------------
(1) Represents borrowings under the new credit facilities made at the closing of
the Transactions, consisting of $80.0 million under the Term Loan A facility
(as defined), $90.0 million under the Term Loan B facility (as defined),
$90.0 million under the Term Loan C facility (as defined) and $1.6 million
under the revolving credit facility. Upon consummation of the Transactions,
we had $48.4 million of additional borrowing capacity under the revolving
credit facility. See "The Transactions -- Financing for the Transactions"
and "Description of New Credit Facilities and Other Indebtedness -- New
Credit Facilities."
(2) See "Description of New Credit Facilities and Other Indebtedness -- Holdings
Notes."
(3) Represents $13.8 million of Rollover Equity and $4.4 million of option
proceeds invested by the Management Investors in shares of Holdings common
stock. See "The Transactions -- Financing for the Transactions" and "Certain
Relationships and Related Party Transactions -- Treatment of Continuing
Shares and Options."
(4) Consists of $357.5 million of Merger Consideration (as defined) (net of the
repayment of certain outstanding loans to employees who are not Management
Investors) and $11.1 million of Option Consideration (as defined). See
"Certain Relationships and Related Party Transactions -- Treatment of
Continuing Shares and Options."
(5) Represents the amount outstanding under our previous credit facility at
November 12, 1999.
(6) Transaction fees and expenses include, among other things, the premium,
consent fees and other fees and expenses paid in connection with the tender
offer for Holdings' outstanding 10 1/2% Senior Subordinated Notes due 2006,
the discount takedown fee payable to the purchasers of the old notes and
other expenses related to the offering of the old notes and fees and
expenses associated with the recapitalization, the new credit facilities,
the Holdings Notes and the other Transactions.
9
<PAGE> 18
SUMMARY OF TERMS OF THE EXCHANGE OFFER
On November 12, 1999, we completed the private offering of the old,
unregistered senior subordinated discount notes. We entered into an exchange and
registration rights agreement with the purchasers of those notes in which we
agreed to deliver to you this prospectus as part of the exchange offer and
agreed to complete the exchange offer within 180 days after the date of original
issuance of the old notes. You are entitled to exchange in the exchange offer
your old notes for exchange notes which are identical in all material respects
to the old notes except:
- the exchange notes have been registered under the Securities Act;
- the exchange notes are not entitled to some registration rights which are
applicable to the old notes under the exchange and registration rights
agreement; and
- contingent liquidated damages provisions, except for those relating to
our failure to keep effective a shelf registration statement under
certain circumstances, are no longer applicable.
The Exchange Offer........... We are offering to exchange up to $144,552,000
aggregate principal amount at maturity of old
notes for up to $144,552,000 aggregate principal
amount at maturity of exchange notes. You may
exchange old notes only in integral multiples of
$1,000.
Resale....................... Based on an interpretation by the staff of the
SEC set forth in no-action letters issued to
third parties, we believe that the exchange
notes issued pursuant to the exchange offer in
exchange for old notes may be offered for
resale, resold and otherwise transferred by you
(unless you are an "affiliate" of us 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 you are acquiring the
exchange notes in the ordinary course of your
business and that you have not engaged in, do
not intend to engage in, and have no arrangement
or understanding with any person to participate
in, a distribution of the exchange notes. Each
participating broker-dealer that receives
exchange notes for its own account under the
exchange offer in exchange for old notes that
were acquired as a result of market-making or
other trading activity must acknowledge that it
will deliver a prospectus in connection with any
resale of the exchange notes. See "Plan of
Distribution."
Any holder of old notes who:
- is our affiliate;
- does not acquire exchange notes in the
ordinary course of its business; or
10
<PAGE> 19
- tenders in the exchange offer with the
intention to participate, or for the purpose
of participating, in a distribution of
exchange notes
cannot rely on the position of the staff of the
SEC stated in Exxon Capital Holdings
Corporation, Morgan Stanley & Co. Incorporated
or similar no-action letters and, in the absence
of an exemption, must comply with the
registration and prospectus delivery
requirements of the Securities Act in connection
with the resale of the exchange notes.
Expiration of the
Exchange Offer;
Withdrawal of Tender....... The exchange offer will expire at 5:00 p.m., New
York City time, on , 2000 or a later date
and time to which we extend it. We do not
currently intend to extend the expiration of the
exchange offer. You may withdraw your tender of
old notes pursuant to the exchange offer at any
time before expiration of the exchange offer.
Any old notes not accepted for exchange for any
reason will be returned without expense to you
promptly after the expiration or termination of
the exchange offer.
Conditions to the
Exchange Offer............. The exchange offer is subject to customary
conditions, which we may waive. Please read the
section under the caption "The Exchange
Offer -- Conditions" of this prospectus for more
information regarding the conditions to the
exchange offer.
Procedures for Tendering
Outstanding Notes.......... If you wish to participate in the exchange
offer, you must:
- complete, sign and date the accompanying
letter of transmittal, or a facsimile of the
letter of transmittal, according to the
instructions contained in this prospectus and
the letter of transmittal; and
- mail or otherwise deliver the letter of
transmittal, or a facsimile of the letter of
transmittal, together with your old notes and
any other required documents, to the exchange
agent at the address set forth on the cover
page of the letter of transmittal.
By signing the letter of transmittal, you will
represent to us that, among other things:
- you acquired your old notes in the ordinary
course of your business;
11
<PAGE> 20
- you have no arrangement or understanding with
any person or entity to participate in a
distribution of the exchange notes;
- if you are a broker-dealer that will receive
exchange notes for your own account in
exchange for old notes that were acquired as a
result of market-making activities, that you
will deliver a prospectus, as required by law,
in connection with any resale of those
exchange notes; and
- you are not an "affiliate," as defined in Rule
405 of the Securities Act, of us or, if you
are an affiliate, that you will comply with
any applicable registration and prospectus
delivery requirements of the Securities Act.
Special Procedures for
Beneficial Owners.......... If you are a beneficial owner of old notes that
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee,
and you want to tender old notes in the exchange
offer, you should contact the registered holder
promptly and instruct the registered holder to
tender on your behalf. If you wish to tender on
your own behalf, you must, before completing and
executing the letter of transmittal and
delivering your old notes, either make
appropriate arrangements to register ownership
of the old notes in your name or obtain a
properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time and may not
be able to be completed before expiration of the
exchange offer.
Guaranteed Delivery
Procedures................. If you wish to tender your old notes and your
old notes are not immediately available or you
cannot deliver your old notes, the letter of
transmittal or any other documents required by
the letter of transmittal before expiration of
the exchange offer, you must tender your old
notes according to the guaranteed delivery
procedures set forth under the caption "The
Exchange Offer -- Guaranteed Delivery
Procedures."
Effect on Holders of
Outstanding Notes.......... By making the exchange offer and by accepting
for exchange all validly tendered old notes
under the exchange offer, we will have fulfilled
a covenant contained in the registration rights
agreement. Accordingly, there will be no
liquidation damages payable to holders of the
old notes under the circumstances described in
the registration rights agreement. If you are
12
<PAGE> 21
a holder of old notes and you do not tender your
old notes in the exchange offer, you will
continue to hold your old notes and will be
entitled to all the rights and subject to all
the limitations applicable to the old notes in
the indenture, except for any rights under the
registration rights agreement that terminate
upon the completion of the exchange offer. Any
trading market for old notes could be adversely
affected if some but not all of the old notes
are tendered and accepted in the exchange offer.
Consequences of Failure
to Exchange................ All untendered old notes will remain subject to
the restrictions on transfer provided for in the
old notes and in the indenture. In general, the
old 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. Other than
in connection with the exchange offer, we do not
currently anticipate that we will register the
old notes under the Securities Act.
Federal Income Tax
Considerations............. The exchange of old notes for exchange notes in
the exchange offer will not be a taxable event
for U.S. federal income tax purposes. See
"Certain United States Federal Income Tax
Considerations" for a more detailed description
of the tax consequences of the exchange.
Use of Proceeds.............. We will not receive any cash proceeds from the
issuance of exchange notes pursuant to the
exchange offer.
Exchange Agent............... The Bank of New York is the exchange agent for
the exchange offer. The address and telephone
number of the exchange agent are set forth under
the caption "The Exchange Offer - Exchange
Agent" of this prospectus.
SUMMARY OF TERMS OF THE EXCHANGE NOTES
Issuer....................... Maxxim Medical Group, Inc.
Securities Offered........... $144,552,000 aggregate principal amount at
maturity of Senior Subordinated Discount Notes
due 2009 ($110,004,072 aggregate initial
accreted value).
Maturity..................... November 15, 2009.
Interest Payment Dates....... May 15 and November 15 of each year, commencing
on May 15, 2000.
Yield and Interest........... (i) 11% cash interest on the initial accreted
value ($761.00) of each note with a
principal amount at
13
<PAGE> 22
maturity of $1,000, equal to $41.86, paid
semi-annually May 15 and November 15 of each
year, commencing on May 15, 2000; and
(ii) 1.375% semi-annual accreted interest on the
accreted value, accreting on May 15 and
November 15 of each year, commencing on May
15, 2000.
Original Issue Discount...... The old notes were issued with original issue
discount for U.S. Federal income tax purposes.
The exchange notes will bear the same amount of
original issue discount as the old notes, and
the holders of the exchange notes will be
required to include such original issue discount
in gross income for U.S. federal income tax
purposes on a constant yield to maturity basis,
in advance of the receipt of the cash payments
to which such income is attributable.
Optional Redemption.......... On or after November 15, 2004, the Issuer may
redeem some or all of the exchange notes at the
redemption prices (expressed as a percentage of
accreted value) listed under the caption
"Description of the Exchange Notes -- Optional
Redemption," together with accrued and unpaid
interest and liquidated damages, if any, to the
date of redemption. Prior to such date, the
exchange notes may not be redeemed, except as
described in the following sentence. At any time
prior to November 15, 2002, the Issuer may
redeem exchange notes and old notes representing
up to 35% of the original aggregate principal
amount at maturity of the old notes, together
with accrued and unpaid interest and liquidated
damages, if any, to the date of redemption, with
the net cash proceeds of certain equity
offerings at a redemption price equal to
113 3/4% of the accreted value thereof, plus
accrued and unpaid interest, if any, thereon, so
long as:
- at least 65% of the original aggregate
principal amount at maturity of the old notes
remains outstanding after each such
redemption; and
- any such redemption is made within 90 days of
the consummation of such equity offering.
See "Description of the Exchange
Notes -- Optional Redemption."
Change of Control............ If Holdings or the Issuer experiences a change
of control, you will have the right to require
the Issuer to purchase all or a portion of your
exchange notes at a purchase price in cash equal
to 101% of the accreted value of the exchange
notes, plus accrued and unpaid
14
<PAGE> 23
interest and liquidated damages, if any, to the
date of purchase, provided, however, that,
notwithstanding a change of control, the Issuer
will not be obligated to purchase exchange notes
pursuant to a change of control offer in the
event that it has exercised its right to redeem
all the exchange notes, as described under
"-- Optional Redemption." See "Description of
the Exchange Notes -- Change of Control."
Guarantees................... The exchange notes will be fully and
unconditionally guaranteed on an unsecured
senior subordinated basis by Holdings, each of
our U.S. subsidiaries existing on November 12,
1999, each of our U.S. subsidiaries acquired or
formed after November 12, 1999 and each of our
non-U.S. subsidiaries (whether previously
existing or newly acquired or formed) that
guarantees any debt of the Issuer (other than
our outstanding $5,000 of 10 1/2% Senior
Subordinated Notes due 2006) or any of our U.S.
subsidiaries after November 12, 1999. In certain
circumstances, a subsidiary guarantor may be
released from its guarantee. See "Description of
the Exchange Notes -- Guarantees."
On a pro forma basis, as of and for the twelve
months ended August 1, 1999, our subsidiaries
that will not initially guarantee the exchange
notes would have had total liabilities
(excluding intercompany liabilities) of $30.1
million and no outstanding preferred stock,
total assets of the non-guarantor subsidiaries
would have accounted for 14.3% of our assets and
the non-guarantor subsidiaries would have
generated 12.2% of our total net sales and 11.8%
of our EBITDA.
Ranking...................... The exchange notes:
- will be unsecured;
- will be subordinated to all of the Issuer's
existing and future senior debt;
- will rank equally with all of the Issuer's
existing and future senior subordinated debt;
- will rank senior to all of the Issuer's
existing and future subordinated debt;
- will be effectively subordinated to the
Issuer's and its subsidiaries' secured debt to
the extent of the value of the assets securing
such indebtedness; and
- will be effectively subordinated to all
liabilities (including trade payables) and
preferred stock of each existing and future
non-guarantor subsidiary.
15
<PAGE> 24
Similarly, the guarantee of each guarantor:
- will be unsecured;
- will be subordinated to all of such
guarantor's existing and future senior debt;
- will rank equally with all of such guarantor's
existing and future senior subordinated debt;
- will rank senior to all of such guarantor's
future subordinated debt;
- will be effectively subordinated to any
secured debt of such guarantor and its
subsidiaries to the extent of the value of the
assets securing such debt; and
- will be effectively subordinated to all
liabilities (including trade payables) and
preferred stock of each subsidiary of such
guarantor that is a non-guarantor subsidiary.
As of August 1, 1999, on a pro forma basis:
- the Issuer would have had $261.6 million of
senior debt (excluding unused commitments
available under the new credit facilities),
all of which would have been secured;
- the guarantors would have had $58.7 million of
senior debt (including the Holding Notes and
$8.7 million of capital leases, industrial
revenue bonds and other long-term obligations,
but excluding guarantees of the new credit
facilities), $7.4 million of which would have
been secured;
- the Issuer would not have had any senior
subordinated debt other than the exchange
notes and $5,000 of 10 1/2% Senior
Subordinated Notes due 2006, and each
guarantor would not have had any senior
subordinated debt other than its guarantee of
the exchange notes and the $5,000 of 10 1/2%
Senior Subordinated Notes due 2006; and
- the Issuer and the guarantors would not have
had any subordinated debt.
Restrictive Covenants........ We will issue the exchange notes under an
indenture with The Bank of New York, as the
trustee. The indenture will, among other things,
restrict our ability and the ability of our
subsidiaries to:
- incur additional debt (including in the form
of guarantees);
16
<PAGE> 25
- pay dividends, make distributions, redeem
equity interests or redeem subordinated debt;
- make certain types of investments;
- sell or issue capital stock of subsidiaries;
- enter into agreements restricting
distributions from subsidiaries;
- sell certain assets or merge or consolidate
with or into other companies; and
- enter into certain transactions with
affiliates.
These covenants will be subject to a number of
important exceptions. For more details, see
"Description of the Exchange
Notes -- Restrictive Covenants."
Absence of Established
Market for the Notes....... The exchange notes are a new issue of securities
and there is no established trading market for
the exchange notes. We do not intend to apply
for the exchange notes to be listed on any
securities exchange or to arrange for quotation
on any automated dealer quotation system. We
cannot assure you that a liquid market will
develop for the exchange notes.
17
<PAGE> 26
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table presents (1) summary historical consolidated financial
information of Holdings and (2) summary pro forma consolidated financial
information of the Company. The Issuer had no operations or assets prior to the
Asset Dropdown. Pursuant to the Asset Dropdown, Holdings contributed all of its
assets and liabilities (other than those relating to its credit facility
existing prior to the consummation of the Transactions) to the Issuer. As a
result of the Transactions, Holdings has guaranteed the old notes and the new
credit facilities and has no substantial operations or assets other than the
capital stock of the Issuer.
The summary historical consolidated financial information set forth below
as of the end of and for fiscal years 1994 and 1995 is derived from Holdings'
audited consolidated financial statements and the notes thereto, which are not
included in this prospectus. The summary historical consolidated financial
information of Holdings set forth below as of the end of and for fiscal years
1996, 1997 and 1998 and as of and for the nine months ended August 2, 1998 and
August 1, 1999 is derived from Holdings' consolidated financial statements and
the notes thereto, which are included elsewhere in this prospectus. The fiscal
year of Holdings ends on the Sunday following the last Thursday in October.
The summary pro forma consolidated financial information of the Company set
forth below as of and for the twelve months ended August 1, 1999 is derived from
Holdings' unaudited consolidated financial statements and the notes thereto
included elsewhere in this prospectus. The unaudited pro forma consolidated
statement of operations information for the twelve months ended August 1, 1999
gives effect to the Transactions as if they had occurred on November 3, 1997.
The unaudited pro forma consolidated balance sheet information at August 1, 1999
gives effect to the Transactions as if they had occurred on that date. The
summary pro forma consolidated financial information is for informational
purposes only and does not (1) purport to represent what the financial position
or results of operations of the Company would actually have been had the
Transactions in fact occurred on such dates or to project the financial position
or results of operations of the Company for any future period or date, (2)
reflect the effect of certain non-recurring statement of operations charges
resulting from the Transactions or (3) reflect certain insignificant
acquisitions or divestitures.
The information set forth below is qualified in its entirety by and should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Selected Historical Consolidated
Financial Information of Holdings," "Unaudited Pro Forma Financial Information
of the Company," the consolidated financial statements of Holdings, together
with the notes thereto, and the other financial information included elsewhere
in this prospectus.
18
<PAGE> 27
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
COMPANY
PRO FORMA
HOLDINGS TWELVE
------------------------------------------------------------------------------------------- MONTHS
NINE MONTHS ENDED ENDED
FISCAL YEAR ENDED (UNAUDITED) (UNAUDITED)
------------------------------------------------------------------- --------------------- -----------
OCTOBER 30, OCTOBER 29, NOVEMBER 3, NOVEMBER 2, NOVEMBER 1, AUGUST 2, AUGUST 1, AUGUST 1,
1994 1995 1996 1997 1998 1998 1999 1999
----------- ----------- ----------- ----------- ----------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales............ $191,382 $265,726 $399,836 $529,552 $522,516 $389,018 $485,367 $524,408
Cost of sales........ 129,569 186,495 294,164 397,691 381,638 285,891 324,327 377,500
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit......... 61,813 79,231 105,672 131,861 140,878 103,127 161,040 146,908
Selling, general, and
administrative
expenses............ 48,390 60,329 77,980 90,101 94,410 69,125 109,947 94,498
Nonrecurring charges
and Transition
expenses(1)......... -- 10,845 -- -- -- -- 3,371 2,016
-------- -------- -------- -------- -------- -------- -------- --------
Income from
operations.......... 13,423 8,057 27,692 41,760 46,468 34,002 47,722 50,394
Interest expense,
net................. 2,059 4,088 13,143 22,145 13,420 10,382 19,940 42,023
Other income
(expense), net...... 859 1,014 583 2,751 1,042 514 299 808
-------- -------- -------- -------- -------- -------- -------- --------
Income before income
taxes............... 12,223 4,983 15,132 22,366 34,090 24,134 28,081 9,179
Income taxes......... 4,538 2,054 6,422 9,485 14,454 10,220 12,228 5,299
Change in accounting
for income taxes.... 380 -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net income........... $ 8,065 $ 2,929 $ 8,710 $ 12,881 $ 19,636 $ 13,914 $ 15,853 $ 3,880
======== ======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA
(AT END OF PERIOD):
Working capital...... $ 82,886 $ 73,286 $122,086 $ 99,815 $108,918 $ 99,317 $141,554 $129,946
Total assets......... 165,416 264,490 465,347 424,046 468,051 440,241 754,806 515,443
Total debt........... 30,434 108,158 267,926 221,085 121,683 110,882 363,470 377,209
Total shareholders'
equity.............. 111,470 116,351 123,556 137,928 272,909 262,679 284,413 60,644
OTHER FINANCIAL DATA:
EBITDA(2)............ $ 21,495 $ 29,233 $ 43,268 $ 61,647 $ 66,514 $ 48,528 $ 75,067 $ 75,579
EBITDA margin(3)..... 11.2% 11.0% 10.8% 11.6% 12.7% 12.5% 15.5% 14.4%
Depreciation and
amortization........ $ 7,130 $ 9,073 $ 14,682 $ 16,665 $ 18,379 $ 13,544 $ 23,080 $ 21,609
Cash interest
expense(4).......... 1,899 3,928 12,857 21,315 12,399 9,961 19,112 36,357
Capital
expenditures(5)..... 12,100 9,274 10,625 6,829 23,441 15,519 23,365 30,048
Expenditures for
acquisitions,
net(6).............. 3,800 85,705 112,676 -- 47,363 31,267 245,177 261,273
Ratio of earnings to
fixed charges(7).... 6.2x 2.2x 2.1x 2.0x 3.3x 3.2x 2.3x 1.2x
Ratio of EBITDA to
cash interest
expense............. 2.1x
Ratio of total debt
to EBITDA........... 5.0x
Ratio of net debt to
EBITDA(8)........... 4.8x
</TABLE>
See Notes to Summary Historical and Pro Forma Financial Information.
19
<PAGE> 28
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
(1) Non-recurring charges of $10,845 incurred in fiscal year 1995 include
$1,300 for restructuring expenses, $2,200 for facility consolidation
expenses and $7,345 for non-cash asset write-downs. Transition expenses
of $3,371 incurred in the nine months ended August 1, 1999 include
$2,016 for sales force restructuring, comprised primarily of $1,243 for
severance costs, $450 for training and $323 for other transition
expenses, and $1,355 for Circon acquisition and integration related
charges, comprised primarily of $500 for training and $855 for other
transition expenses including bonuses and professional fees as a result
of the acquisition of Circon. Transition expenses of the Company for
the pro forma twelve months ended August 1, 1999 were $2,016 for sales
force restructuring comprised as set forth above.
(2) EBITDA for any relevant period presented above is defined as net income
plus income taxes, interest expense, net, depreciation and
amortization, non-cash stock compensation expense and nonrecurring
charges and transition expenses. Non-cash stock compensation expense
for Holdings was $83, $244, $311, $471 and $625 for fiscal years 1994,
1995, 1996, 1997 and 1998, respectively, and $468 and $595 for the nine
months ended August 2, 1998 and August 1, 1999, respectively. Non-cash
stock compensation expense for the Company was $752 for the pro forma
twelve months ended August 1, 1999. EBITDA is not a measure recognized
by generally accepted accounting principles and should not be
considered in isolation or as a substitute for operating income, as an
indicator of liquidity or as a substitute for net cash provided by
operating activities, which are determined in accordance with generally
accepted accounting principles.
(3) EBITDA margin represents EBITDA as a percentage of net sales.
(4) Cash interest expense is defined as interest expense less amortization
of debt financing costs. Amortization of debt financing costs for
Holdings was $160, $160, $286, $830 and $1,021 for fiscal years 1994,
1995, 1996, 1997 and 1998, respectively, and $421 and $828 for the nine
months ended August 2, 1998 and August 1, 1999, respectively.
Amortization of debt financing costs, accretion of the note discount
and accretion of the warrants was $2,349, $3,109 and $242,
respectively, for the pro forma twelve months ended August 1, 1999.
(5) Capital expenditures exclude expenditures for acquisitions, net of
divestitures.
(6) Expenditures for acquisitions, net of divestitures, for Holdings
consist of (a) for fiscal year 1994, an acquisition of $3,800 relating
to the purchase of Southwest Medical, (b) for fiscal year 1995,
acquisitions of $85,705 consist of the (i) purchase of Medica B.V. (our
current European operations) -- $11,000, (ii) purchase of Bovie product
group -- $2,600, (iii) purchase of property and equipment, inventory
and other assets relating to non-sterile products -- $1,500, and (iv)
purchase of glove operations -- $70,605, (c) for fiscal year 1996, net
acquisitions of $112,676 consist of (i) the purchase of Sterile
Concepts, Inc. -- $118,676, net of (ii) the sale of Henley Healthcare
physical therapy division -- $6,000, (d) for fiscal year 1998,
acquisitions of $47,363 consist of the (i) purchase of Winfield Medical
(the "Winfield Acquisition") -- $31,267 and (ii) purchase of glove
plant assets and assumption of related liabilities -- $16,096,
20
<PAGE> 29
(e) for the nine months ended August 2, 1998, an acquisition of $31,267 relating
to the Winfield Acquisition and (f) for the nine months ended August 1, 1999,
net acquisitions of $245,177 consist of (i) the purchase of Circon -- $246,769,
net of (ii) the sale of non-sterile products -- $1,592. Expenditures for
acquisitions, net of divestitures, for the Company for the pro forma
twelve months ended August 1, 1999 of $261,273 consist of (i) the
purchase of glove plant assets and assumption of related
liabilities -- $16,096, and (ii) the purchase of Circon -- $246,769, net
of (iii) the sale of non-sterile products -- $1,592. There were no
acquisitions or divestitures for Holdings in fiscal year 1997.
(7) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges less capitalized interest) by fixed charges (interest
expense plus capitalized interest and the portion of operating lease
rental expense that represents the interest factor).
(8) Net debt is defined as total debt less cash and cash equivalents. Cash
and cash equivalents for Holdings was $31,869, $5,074, $5,950, $3,130
and $4,125 as of the end of fiscal years 1994, 1995, 1996, 1997 and
1998, respectively, and $12,897 and $5,354 at August 2, 1998 and August
1, 1999, respectively. Pro forma cash and cash equivalents for the
Company was $15,394 as of August 1, 1999.
21
<PAGE> 30
RISK FACTORS
You should carefully consider the following factors and the other
information in this prospectus before deciding to exchange your old notes for
exchange notes. See "The Transactions" for a description of the Transactions
described in the risk factors.
HOLDINGS AND THE COMPANY WILL HAVE A SUBSTANTIAL AMOUNT OF DEBT THAT THEY MAY
NOT BE ABLE TO SERVICE.
As a result of the Transactions, we have a significant amount of debt. As
of August 1, 1999, on a pro forma basis, we would have had $380.3 million of
outstanding debt (excluding unused commitments under the new credit facilities)
and $60.6 million of shareholder's equity. In addition to its guarantees of the
old notes and the debt outstanding under the new credit facilities, Holdings has
$98.5 million principal amount at maturity ($50.0 million aggregate accreted
value outstanding at November 12, 1999) of outstanding senior debt under the
Holdings Notes (see "Description of New Credit Facilities and Other Indebtedness
- -- Holdings Notes"). Subject to restrictions in the new credit facilities and
the indenture, we may borrow more money for working capital, capital
expenditures, acquisitions and other purposes.
Our substantial level of debt could have important consequences for our
operations. For example, our substantial debt could:
- limit our flexibility in planning for, or reacting to, changes in our
business, changes affecting the single-use specialty medical products
industry generally or changes in economic conditions generally;
- require us to dedicate a substantial portion of our cash flow from
operations to make payments on our debt, thereby reducing the
availability of our cash flow for other purposes, including to fund
future working capital, capital expenditures, acquisitions, research and
development and other operating needs and uses;
- make it more difficult for us to satisfy our debt obligations, including
under the exchange notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit, among other things, our ability to borrow additional funds;
- expose us to the risk of increased interest rates because certain of our
borrowings, including borrowings under the new credit facilities, are,
and will continue to be, at variable rates of interest; and
- place us at a competitive disadvantage, because we may have more debt
than certain of our competitors.
Our ability to make payments on our debt, including the exchange notes,
depends on our future operating performance. This performance is dependent upon
general economic and competitive conditions and financial, business and other
factors, many of which we cannot control. If we are not able to generate
sufficient cash flow from our operating activities to make payments on our debt,
we may take certain actions, including:
- delaying or reducing capital expenditures;
- selling assets or operations;
22
<PAGE> 31
- attempting to restructure or refinance our debt; or
- seeking additional equity capital.
We may be unable to take any of these actions on satisfactory terms or in a
timely manner. Moreover, any or all of these actions may not be sufficient to
allow us to service our debt or fund our other requirements.
On a pro forma basis, as of and for the twelve months ended August 1, 1999,
(1) our interest expense would have been $42.0 million and (2) our ratio of
earnings to fixed charges would have been 1.2x.
THE ISSUER AND HOLDINGS ARE DEPENDENT ON THEIR SUBSIDIARIES FOR FUNDS NECESSARY
TO MAKE PAYMENTS ON THE EXCHANGE NOTES AND ON HOLDINGS' GUARANTEE, RESPECTIVELY.
The Issuer and Holdings are holding companies with no significant assets
other than the capital stock of their subsidiaries. All of their operations will
be conducted through the subsidiaries of the Issuer. As a result, the Issuer and
Holdings will be dependent upon dividends or other intercompany transfers of
funds from the subsidiaries of the Issuer for the funds necessary to meet their
debt service obligations, including required payments on the exchange notes and
Holdings' guarantee, respectively, and other obligations. We cannot assure you
that any dividends or other distributions that the Issuer or Holdings receives
from the subsidiaries of the Issuer will be adequate to allow them to make
payments on the exchange notes or Holdings' guarantee, as applicable.
The indenture will limit restrictions on the ability of certain of the
Issuer's subsidiaries to pay dividends or make certain other distributions, but
these limitations will be subject to a number of significant qualifications and
exceptions. In addition, the ability of the Issuer's subsidiaries to pay
dividends or make other distributions may be restricted by applicable laws and
regulations as well as by agreements that these subsidiaries enter into with
other parties.
The claims of creditors and preferred shareholders of a subsidiary are
generally structurally superior in right of payment to the claims of the
creditors of the subsidiary's parent company, unless the obligations of the
parent company to its creditors are guaranteed by such subsidiary. Consequently,
the exchange notes and Holdings' guarantee will be effectively subordinated in
right of payment to the claims of creditors (including trade creditors) and
preferred shareholders of existing and future subsidiaries that do not guarantee
the exchange notes. On a pro forma basis, as of August 1, 1999, the subsidiaries
of the Issuer that will not initially guarantee the exchange notes would have
had $30.1 million of outstanding liabilities (other than intercompany
liabilities) and no outstanding preferred stock. In addition, on a pro forma
basis, for the twelve months ended August 1, 1999, the non-guarantor
subsidiaries would have generated 12.2% of our total net sales and 11.8% of our
EBITDA and would have accounted for 14.3% of our assets.
Although the guarantees provide the holders of the exchange notes with a
direct claim against the assets, if any, of the guarantors:
- enforcement of any guarantee against any guarantor may be subject to
legal challenge in a bankruptcy or reorganization case or a lawsuit by or
on behalf of creditors of such guarantor, and would be subject to certain
defenses available to guarantors generally; and
23
<PAGE> 32
- to the extent that the guarantees are not enforceable, the exchange notes
would be effectively subordinated to all liabilities (including trade
payables) and claims of preferred shareholders of the guarantors.
As a result, in the event of the Issuer's bankruptcy, dissolution,
liquidation or reorganization, holders of the exchange notes may not receive any
amounts with respect to the exchange notes until after the payment in full of
the claims of the creditors and preferred shareholders of the Issuer's
subsidiaries.
THE EXCHANGE NOTES AND THE GUARANTEES WILL BE CONTRACTUALLY SUBORDINATED TO THE
SENIOR DEBT OF THE ISSUER AND THE GUARANTORS, RESPECTIVELY.
The right to payment on the exchange notes will be contractually
subordinated to all the Issuer's existing and future senior debt (including
borrowings under the new credit facilities). Similarly, the guarantee of each
guarantor will be contractually subordinated to all existing and future senior
debt of such guarantor, including such guarantor's guarantee of the new credit
facilities. As of August 1, 1999, on a pro forma basis:
- the Issuer would have had $261.6 million of senior debt outstanding
(excluding unused commitments under the new credit facilities), all of
which would have been secured;
- Holdings would have had $50.0 million of senior debt outstanding
(including the current accreted value of the Holdings Notes, but
excluding Holdings' guarantee of the new credit facilities), none of
which would have been secured; and
- the guarantor subsidiaries would have had $8.7 million of senior debt
outstanding (excluding guarantees of the new credit facilities), $7.4
million of which would have been secured.
In the event of a bankruptcy or similar proceeding with respect to the
Issuer or any guarantor, the Issuer's or such guarantor's assets will be
available to pay obligations on the exchange notes or such guarantor's
guarantee, as applicable, only after all outstanding senior debt of the Issuer
or such guarantor, as the case may be, has been paid in full. There may not be
sufficient assets remaining to make payment of amounts due on any or all of the
exchange notes then outstanding or any guarantee.
Under certain circumstances, a payment default or certain other defaults in
respect of certain senior debt, including debt under the new credit facilities,
will prohibit the Issuer and/or the guarantors from making payments on the
exchange notes or the guarantees until the payment of such senior debt or the
passing of a specified period of time, as applicable.
Further, the new credit facilities will, and the Issuer's future senior
debt may, prohibit the Issuer from purchasing any exchange notes prior to
maturity, even though the indenture requires the Issuer to offer to purchase
exchange notes in certain circumstances. If certain of the Issuer's assets are
disposed of or if a change of control occurs when the Issuer is prohibited from
purchasing exchange notes, the Issuer could ask its lenders under the new credit
facilities (or such future senior debt) for permission to purchase the exchange
notes or the Issuer could attempt to refinance the new credit facilities (or
such future senior debt). If the Issuer does not obtain such a consent to
purchase exchange notes or is unable to refinance such borrowings, the Issuer
would be unable to purchase the exchange notes. The Issuer's failure to purchase
tendered exchange notes at a time
24
<PAGE> 33
when such purchase is required by the indenture would constitute an event of
default under the indenture, which, in turn, would constitute a default under
the new credit facilities, and may constitute an event of default under the
Issuer's future senior debt. In such circumstances, the subordination provisions
in the indenture would restrict payments to you. See "Description of New Credit
Facilities and Other Indebtedness -- New Credit Facilities" and "Description of
Exchange Notes -- Ranking."
THE EXCHANGE NOTES AND THE GUARANTEES WILL BE UNSECURED.
The exchange notes and the guarantees will not be secured by any
collateral. Thus, the exchange notes will effectively rank junior in right of
payment to the Issuer's and its subsidiaries' secured debt, and the guarantee of
each guarantor will effectively rank junior in right of payment to such
guarantor's and its subsidiaries' secured debt, in each case to the extent of
the value of the assets securing such debt.
The Issuer's secured debt includes debt incurred under the new credit
facilities that is secured by all the Issuer's capital stock and, subject to
certain exceptions, all the capital stock of all the Issuer's subsidiaries and
liens on substantially all the Issuer's assets and the assets of each guarantor
of the new credit facilities. If an event of default were to occur under the new
credit facilities:
- the lenders thereunder could foreclose on the collateral securing the
amounts outstanding under the new credit facilities, regardless of any
default with respect to the exchange notes; and
- the assets constituting the collateral would first be used to repay in
full all amounts outstanding under the new credit facilities.
It is possible that there would be insufficient assets remaining after
repayment in full of all amounts outstanding under the new credit facilities to
satisfy in full all claims of holders of the exchange notes. See "Description of
New Credit Facilities and Other Indebtedness -- New Credit Facilities."
THE ISSUER MAY NOT BE ABLE TO SATISFY ITS OBLIGATIONS TO HOLDERS OF THE EXCHANGE
NOTES UPON A CHANGE OF CONTROL.
Upon the occurrence of a change of control of Holdings or the Issuer under
the indenture, each holder of the exchange notes will have the right to require
the Issuer to purchase such holder's exchange notes at a price equal to 101% of
the accreted value thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the date of purchase. In addition,
- a change of control under the indenture will result in a default under
the new credit facilities (and may result in a default or a change of
control put under future senior debt of the Issuer) and thus your right
to payment in respect of a change of control offer will be subordinated
to the rights of the lenders under the new credit facilities (or such
future senior debt) to the extent provided in the indenture;
- the new credit facilities prohibit (and future debt instruments may
prohibit) the payment of principal on the exchange notes, including
pursuant to a change of control offer;
25
<PAGE> 34
- the Issuer's failure to purchase the exchange notes in the event of a
change of control would be a default under the indenture, which would be
a default under the new credit facilities (and may be a default under
future debt instruments); and
- the Issuer's failure to repay all amounts outstanding under the new
credit facilities (and certain future debt instruments) upon an
acceleration of the amounts thereunder would also be a default under the
indenture.
In the event of a change of control, we may not have sufficient assets to
satisfy all of our obligations under the new credit facilities, the indenture
and any other applicable debt instruments. We expect that we would require
third-party financing to satisfy such obligations, and we can provide no
assurance that we would be able to obtain such financing on favorable terms, if
at all.
OUR DEBT INSTRUMENTS CONTAIN RESTRICTIVE COVENANTS THAT MAY LIMIT OUR
FLEXIBILITY.
The indenture and the new credit facilities, among other things, restrict
our ability to:
- incur debt and, in the case of subsidiaries, issue preferred stock;
- pay dividends on capital stock of the Issuer;
- repurchase capital stock;
- repay subordinated debt;
- make certain types of investments;
- use the proceeds of the sale of certain assets or stock of certain
subsidiaries;
- engage in certain transactions with affiliates;
- engage in mergers, consolidations and certain sales of assets;
- engage in business activities unrelated to our current business; and
- permit restrictions on the ability of certain subsidiaries to pay
dividends, and make other distributions or transfers, to us.
In addition, the new credit facilities require the Issuer to maintain a
minimum interest coverage ratio and maximum total and senior debt leverage
ratios. The Issuer's ability to meet those financial ratios can be affected by
events beyond our control and there can be no assurance that the Issuer will
meet those ratios.
The restrictions in the indenture and the new credit facilities may limit
the Issuer's financial and operating flexibility. In addition, if the Issuer
fails to comply with the restrictions contained in the indenture, the holders of
the old notes and exchange notes may accelerate payments under the old notes and
exchange notes, which in turn would allow the lenders to accelerate payment of
all outstanding amounts under the new credit facilities (and may allow future
creditors to accelerate payment of their debt). Similarly, if the Issuer fails
to satisfy the financial ratios or comply with the restrictions under the new
credit facilities, the lenders thereunder could accelerate payment of all
amounts outstanding under the new credit facilities and, if they were to do so,
the holders of the exchange notes may accelerate payments under the exchange
notes. If the lenders under the new credit facilities accelerate the payment of
the debt under the new credit facilities,
26
<PAGE> 35
there can be no assurance that our assets would be sufficient to repay in full
such debt and our other debt, including the exchange notes.
COMPETITION AND TECHNOLOGICAL CHANGE AFFECT OUR BUSINESS.
Our products compete with the products of numerous companies in the
business of developing, manufacturing, distributing and marketing single-use
specialty medical products. Some of these competitors have more extensive
financial resources, research and development facilities, and marketing
organizations than we do. See "Business -- Competition."
In custom procedure trays, four companies, including ourselves, accounted
for approximately 90% of the total sales of custom procedure trays in the United
States in 1998. We compete based on the quality of relationships with hospitals,
surgery centers and individual healthcare providers, price, capacity, size and,
in the case of contracts with Buying Groups, the ability to service accounts
nationally from regional distribution centers. We believe that the barriers to
entry in the custom procedure tray business are fairly low and it would be
reasonably easy for medical products companies currently not in the custom
procedure tray business or others to enter the business. This is because the
business is not highly capital or technology intensive as a supplier of trays
does not need to manufacture single-use specialty medical products. There are
currently many manufacturers that package specialty medical products that may
not technically be "custom procedure trays," but effectively compete with our
custom procedure trays or could be packaged with other products so as to
directly compete with our custom procedure trays. In addition, our end-use
customers could revert to the in-house preparation of a tray containing the same
components that are found in a custom procedure tray. There are also numerous
companies that supply medical procedure trays to niche markets (for example,
dental and eye) that could broaden their product lines. There can be no
assurance that we will be able to continue to compete effectively with our
current competitors or any new competitors in the custom procedure tray portion
of our business. See "Business -- Competition -- Custom Procedure Trays."
Factors affecting medical glove competition include glove price and
performance, and whether the glove is latex or non-latex. Manufacturers also
compete based on manufacturing capacity of non-latex gloves. Over 90% of the
gloves we manufacture are non-latex. Although non-latex gloves sales are growing
faster than sales of latex gloves, there can be no assurance that the factors
influencing this trend will continue. In addition, medical glove performance is
measured by the degree of tactility and barrier protection that the glove
affords, and, as a result, technology plays a major role in the development,
manufacture and sale of medical gloves. Although we have patented formulations
and manufacturing processes for our most technologically advanced non-latex
gloves, and trade secrets or know-how related to certain of our other gloves,
there can be no assurance that our competitors will not develop superior gloves
or gloves which offer a superior combination of price and performance. See
"Business -- Product Development and Patents; Other Intellectual Property" and
"Business -- Competition -- Medical Gloves."
We pursue a policy of seeking exclusive licenses and/or patent protection
both in the United States and abroad for certain of our technology and/or
manufacturing processes. While no patent covered product sales that constituted
5% or more of our pro forma net sales for the twelve months ended August 1,
1999, obtaining or maintaining patents and/or exclusive technology licenses on
certain of our new products or products under
27
<PAGE> 36
development (including our SensiCare(TM) brand gloves) may be critical to the
success of such products, and the failure to obtain or maintain such patents and
licenses could have an adverse effect on our prospects or future operating
results. We also rely on trade secrets and know-how to maintain our competitive
position and to protect significant portions of our technology and/or
manufacturing processes (including our DataStat(TM) and ValuQuote(TM)software
systems and our EnCompass(SM) Integrated Product Packaging System). It is our
practice to enter into confidentiality agreements with key employees and
consultants. There can be no assurance, however, that these measures will
prevent the unauthorized disclosure or use of our trade secrets and know-how, or
that others may not independently develop similar trade secrets or know-how or
obtain access to our trade secrets, know-how or other technology. Although we
pursue product research and development efforts, there can be no assurance that
technological change will not render one or more of our present or proposed
products obsolete. See "Business -- Product Development and Patents; Other
Intellectual Property."
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION.
Our activities are subject to numerous and evolving state, federal and
foreign regulations.
In the United States, most of our products (and products that we are likely
to develop or market in the future) are subject to regulation as medical devices
by the U.S. Food and Drug Administration (the "FDA") pursuant to the U.S. Food,
Drug and Cosmetic Act and regulations promulgated thereunder (collectively, the
"FDCA"). Although we believe we have obtained all necessary clearances from the
FDA for the manufacture and sale of all the products that we currently sell, any
products developed in the future are likely to require FDA approval before they
can be sold in the United States. There is no guarantee that the FDA will
approve or will not challenge the sale of any new products. We anticipate that
all of the products that we are currently developing will qualify for marketing
approval under Section 510(k) of the FDCA, which provides for FDA marketing
approval on an expedited basis if certain criteria are met. However, if we
develop products that do not meet such criteria, we will be required to obtain
FDA approval by submitting a premarket approval application ("PMA"), which is
typically a much more complex application than a Section 510(k) application. The
FDA may not act favorably or quickly in its review of our Section 510(k) or PMA
applications, or we may encounter significant difficulties and costs or be
required to perform additional testing or collect additional data in our effort
to obtain FDA clearance or approval, all of which could delay or preclude the
sale of new products in the United States. In addition, the FDA may place
significant limitations upon the intended use of our products as a condition to
a Section 510(k) clearance or PMA approval. Product applications can also be
denied or withdrawn due to failure to comply with regulatory requirements or the
occurrence of unforeseen problems following approval. Failure to obtain FDA
clearance or approvals of new products we develop, any limitations imposed by
the FDA on new product use or the costs of obtaining FDA clearance or approvals
could have a material adverse effect on our business, financial condition or
results of operations. See "Business -- Government Regulation -- Domestic
Regulation."
Once we obtain FDA clearance or approval for a product, rigorous regulatory
requirements apply to medical devices including, among other things, the FDA's
Quality System Regulation ("QSR"), recordkeeping regulations, labeling
requirements and adverse event reporting regulations. See
"Business -- Government Regulation -- Domestic Regula-
28
<PAGE> 37
tion." In addition, the FDA's mandatory Medical Device Reporting ("MDR")
regulation obligates us to keep records and provide information to the FDA on
injuries alleged to have been associated with the use of a product or in
connection with certain product failures which could cause injury.
Failure to comply with applicable FDA medical device regulatory
requirements could result in, among other things, warning letters, additional
product labeling requirements, fines, injunctions, civil penalties, repairs,
replacements, refunds, recalls or seizures of products, total or partial
suspension of production, the FDA's refusal to grant future premarket clearances
or approvals, withdrawals or suspensions of current product applications and
criminal prosecution. Any of these actions, in combination or alone, could have
a material adverse effect on our business, financial condition or results of
operations. See "Business -- Government Regulation -- Domestic Regulation."
Many of the states in which we do business or in which our products are
sold impose licensing, labeling or certification requirements that are in
addition to those imposed by the FDA. To date, we have not experienced
difficulty in complying with these requirements; however, there can be no
assurance that one or more states will not impose additional regulations or
requirements that have a material adverse effect on our ability to sell our
products. See "Business -- Government Regulation -- Domestic Regulation."
The products we manufacture and sell in Europe are subject to the European
Community regulations for medical devices. The European Community has a
registration process that includes registration of manufacturing facilities
("ISO certification") and product certification ("CE Mark"). We have obtained
ISO certification and CE Mark certification for our existing facilities and
products in Europe as well as for those facilities and products in North America
that are sold into those markets or countries which require such certification.
However, there is no guarantee that we will be successful in obtaining European
certifications for new facilities or products, or that we will be able to
maintain our existing certifications for facilities or products in the future.
In many of the countries in which we do business or in which our products
are sold outside of the United States, we are subject to regulation by national
governments and supranational agencies as well as by local agencies affecting,
among other things, product standards, packaging requirements, labeling
requirements, import restrictions, tariff regulations, duties and tax
requirements. To date, we have not experienced difficulty in complying with
these regulations; however, there can be no assurance that one or more countries
or agencies will not impose additional regulations or requirements that could
have a material adverse effect on our ability to sell our products. The
harmonization of standards in the European Community has caused a shift from a
country-by-country regulatory system to a European Community-wide single
regulatory system. However, many members of the European Community have imposed
additional country specific regulations/requirements. Although our products
generally are already subject to European Community regulation through the ISO
certification and CE Mark certification processes, there can be no assurance
that the changes in the regulatory schemes imposed either by the European
Community, supranational agencies or individual countries affecting our products
will not have a material adverse effect on our ability to sell our products in
Europe. See "Business -- Government Regulation -- International Regulation."
29
<PAGE> 38
OUR BUSINESS IS AFFECTED BY COST CONTAINMENT EFFORTS AND OTHER SIGNIFICANT
TRENDS AFFECTING HEALTHCARE PROVIDERS AND HEALTHCARE BUYING GROUPS.
In recent years, widespread efforts have been made in both the public and
private sectors to control healthcare costs, including the prices of products
such as those sold by the Company, in the United States and abroad. One result
of this focus on cost containment has been a growing trend for hospitals,
surgery centers and other healthcare providers to coordinate their purchases of
medical products through Buying Groups in order to obtain price concessions and
control costs. In response to this trend, we have entered into contracts with
many Buying Groups making available to their members specified products at
agreed upon prices. A majority of our U.S. hospital and surgery center customers
are members of Buying Groups. We believe that our ability to enter into more of
such arrangements will be important to our future success. However, there can be
no assurance that we will be able to obtain new contracts from major Buying
Groups. Because these contracts with Buying Groups involve price concessions
from us, it is important that these contracts result in high sales volumes from
members of the Buying Groups in order to offset the negative impact of lower per
unit prices at lower margins. Although Buying Groups strongly encourage their
members to purchase products under these contracts, compliance by different
members of the Buying Groups may vary. Accordingly, there can be no assurance
that there will be high sales volumes under these contracts. Our failure to
enter into new contracts with Buying Groups in the future or to achieve high
sales volumes under our contracts could have a material adverse effect on our
business, financial condition or results of operations.
Cost containment pressures within the healthcare industry also have been
driving significant consolidation of healthcare providers. Acquisitions of our
significant customers or Buying Groups with which we have contracts have in the
past resulted in, and in the future could result in, the loss of such customer
or contract, as applicable, thereby negatively impacting our business, financial
condition or results of operations. In addition, the consolidation of healthcare
providers often results in renegotiation of terms and in the granting of price
concessions. Many of our customer relationships and Buying Group contracts are
terminable by the customer with little or no penalty. Many Buying Groups are
able to leverage their size and purchasing power when negotiating prices and
this trend has caused us to reduce prices and could have a material adverse
effect on our business, financial condition or results of operations. As Buying
Groups increase in size, each relationship represents a greater concentration of
market share and the adverse consequences of losing a single relationship
increase considerably.
Cost containment has also caused a shift in some of the decision making
functions with respect to the supply of medical products away from healthcare
professionals and towards administrators, resulting in a somewhat greater
emphasis being placed on price, as opposed to features and customer service. We
believe that it is likely that efforts by governmental and private payors to
contain costs through managed care and other efforts and to reform healthcare
systems will continue and that such efforts may have an adverse effect on the
pricing and demand for our products. There can be no assurance that current or
future reform initiatives will not have a material adverse effect on our
business, financial condition or results of operations. See "Business --
Industry" and "Business -- Sales, Marketing and Distribution."
In international markets, where the movement toward healthcare reform and
the development of managed care are generally less advanced than in the United
States, we have experienced downward pressure on product pricing and other
effects of healthcare
30
<PAGE> 39
reform similar to those we have experienced in the United States. We expect
healthcare reform and managed care to continue to develop in our primary
international markets, which we expect will result in further downward pressure
in product pricing. The timing and the effects on us of healthcare reform and
the development of managed care in international markets cannot currently be
predicted.
WE ARE SUBJECT TO LAWS PERTAINING TO THE REGULATION OF FRAUD AND ABUSE IN
HEALTHCARE.
We are subject to various federal and state laws pertaining to healthcare
fraud and abuse, including antikickback laws and physician self-referral laws.
Violations of these laws are punishable by criminal and/or civil sanctions,
including, in some instances, imprisonment and exclusion from participation in
U.S. federal and state healthcare programs, including Medicare, Medicaid and
Veterans Affairs health programs. We believe that our operations are in material
compliance with such laws; however, because of the far-reaching nature of these
laws, we or certain of our sales representatives may be required to alter one or
more of our or their practices to be in compliance with these laws. In addition,
we cannot assure you that the occurrence of one or more violations of these laws
would not result in a material adverse effect on our business, financial
condition or results of operations. If there is a change in law, regulation or
administrative or judicial interpretations, we may have to change our business
practices or our existing business practices could be challenged as unlawful,
which could have a material adverse effect on our business, financial condition
or results of operations.
OUR ACQUISITION STRATEGY POSES SUBSTANTIAL RISK.
Part of our business strategy is to acquire companies and product groups
that expand or complement our existing product groups, increase vertical
integration or enlarge our customer base. We are unable to predict whether or
when any prospective acquisition candidates will become available or the
likelihood of transactions being completed should any negotiations commence. Our
ability to finance acquisitions may be constrained by, among other things, our
high degree of leverage following the Transactions. The new credit facilities
and the indenture significantly limit our ability to make acquisitions and to
incur debt in connection with acquisitions. In addition, our acquisition
strategy is subject to a number of other risks, including:
- our acquisition strategy may not yield anticipated benefits, such as
improvements in gross margin from greater vertical integration of our
custom procedure trays or enlargement of our customer base;
- we may have difficulty integrating the operations, systems and management
of our acquired companies;
- our acquisition strategy may divert management's attention from other
business concerns;
- we may be unable to maintain uniform standards, controls, procedures and
policies; and
- we may lose key employees or customers of acquired companies.
31
<PAGE> 40
WE MAY HAVE EXPOSURE TO PRODUCT LIABILITY AND OTHER LITIGATION RISKS.
We are currently, and are from time to time, subject to claims and lawsuits
arising in the ordinary course of business, including those relating to product
liability, safety and health and employment matters. In some of such actions,
plaintiffs request punitive or other damages or nonmonetary relief, which may
not be covered by insurance, and which could, in the case of nonmonetary relief,
if granted, materially affect the conduct of our business. Although we maintain
insurance that we believe to be reasonable and appropriate, the amount and scope
of any coverage may be inadequate to protect us in the event of a substantial
adverse judgment. In management's opinion (taking third-party indemnities into
consideration), the various asserted claims and litigation in which we are
currently involved are not reasonably likely to have a material adverse effect
on our business, results of operations or financial condition. However, no
assurance can be given as to the ultimate outcome with respect to such claims
and litigation.
Since March 1996, we have been served with lawsuits alleging various
adverse reactions to the latex used in certain of the medical gloves alleged to
have been manufactured by us or the prior owner of the assets relating to our
latex glove operations acquired in June 1995 as well as certain glove products
distributed by us since 1989. We believe that most of such claims relate to
gloves sold or shipped prior to June 1995. We have been, and we believe we will
continue to be, indemnified by the prior owner with regard to such claims.
Because we, as well as our competitors, have continued to manufacture and sell
latex gloves, we may be subject to further claims. We are not entitled to
indemnification from the prior owner for gloves that were manufactured, sold or
shipped in or from one of their or our plants after June 1995. We intend to
vigorously defend against such claims. We are aware that an increasing number of
lawsuits have been brought against latex glove manufacturers with respect to
such adverse reactions. There can be no assurance that we will prevail in any
such lawsuits, that the prior owner will continue to indemnify us or that we
will not incur costs or liabilities relating to such claims that will result in
a material adverse effect on our business, financial condition or results of
operations.
A complaint was filed on June 25, 1999, in state court in Pinellas County,
Florida, by certain former Holdings shareholders on behalf of a purported class
of former public shareholders of Holdings naming Holdings, its former directors
and Fox Paine & Company, LLC as defendants. The lawsuit alleges that the
consideration paid in the merger was unfair and inadequate, and that such former
directors of Holdings breached their fiduciary duties by failing to obtain the
best price for Holdings. As relief, the complaint seeks, among other things,
equitable relief and damages in an unspecified amount. On September 30, 1999,
counsel for the plaintiffs and counsel for defendants entered into a memorandum
of understanding providing that the claims asserted in the case will be settled,
the action will be dismissed and defendants will receive a release of all
claims, however the settlement is subject to court approval and certain other
conditions. In addition, on September 28, 1999, a complaint was filed in state
court in Henderson County, Texas naming Holdings and its former directors as
defendants. The complaint is brought on behalf of a purported class of former
public shareholders of Holdings and alleges, among other things, that the
consideration paid in the merger was unfair and inadequate and that the former
directors of Holdings breached their fiduciary duties by failing to obtain the
best price for Holdings. As relief, the complaint seeks, among other things,
equitable relief and damages in an unspecified amount. The defendants in this
32
<PAGE> 41
action believe the allegations of the complaint are without merit and intend to
vigorously defend the lawsuit.
WE ARE SUBJECT TO ENVIRONMENTAL, HEALTH AND SAFETY LAWS AND REGULATIONS AND
ENVIRONMENTAL RISKS.
Our facilities and operations are subject to federal, state and local
environmental and occupational health and safety requirements of the United
States and foreign countries, including those relating to discharges of
substances to the air, water and land, the handling, storage and disposal of
wastes and the cleanup of properties affected by pollutants. We believe we are
currently in substantial compliance with such requirements and we do not
currently anticipate any material adverse effect on our business, financial
condition or results of operations as a result of such environmental, health or
safety requirements. In the future, federal, state, local or foreign governments
could enact new or more stringent requirements concerning environmental, health
and safety matters that could affect our operations. Also, in the future,
contamination may be found to exist at our current or former facilities or
off-site locations where we have sent wastes. We could be held liable for such
newly discovered contamination. Changes in environmental, health and safety
requirements or liabilities from newly discovered contamination could have a
material effect on our business, financial condition or results of operations.
WE ARE DEPENDENT UPON KEY PERSONNEL.
We believe that our success will depend to a significant extent upon the
efforts and abilities of our senior management team, including Mr. Davidson, our
Chairman of the Board, President and Chief Executive Officer, and our other
executive officers. We do not carry key man life insurance on any of our
executive officers. The loss of the services of Mr. Davidson or one or more of
these senior executives could adversely affect our ability to effectively manage
our overall operations or successfully execute current or future business
strategies, including identifying and completing acquisitions. Eight members of
our senior management team own approximately 8.2% of the outstanding common
equity of Holdings (before giving effect to the exercise of any stock options or
warrants) and, assuming the exercise of their stock options, will own
approximately 22.8% of the outstanding common equity of Holdings on a
fully-diluted basis. See "Security Ownership of Certain Beneficial Owners and
Management," "Certain Relationships and Related Party Transactions -- Treatment
of Continuing Shares and Options" and "Certain Relationships and Related Party
Transactions -- New Management Equity Incentive Plans." In addition, each member
of senior management entered into a five-year employment agreement with Holdings
upon completion of the Transactions. See "Certain Relationships and Related
Party Transactions -- Employment Agreements." Nevertheless, there can be no
assurance that one or more members of senior management will not leave Holdings'
employment. In addition, we believe that failure to attract and retain
additional qualified personnel could adversely affect our operations and future
success.
OUR MANAGEMENT'S TIME AND ATTENTION IS DIVIDED BETWEEN THE COMPANY AND CIRCON,
AND OUR DIRECTORS AND MANAGEMENT MAY HAVE CONFLICTS OF INTEREST, BETWEEN THE
COMPANY AND CIRCON.
As a result of the Transactions, the Company and Circon are separate
companies, are separately capitalized and are separately pursuing their
respective business strategies. However, the same persons who are the directors
of Holdings and the Company are also
33
<PAGE> 42
the directors of Circon Holdings and Circon. See "Management -- Executive
Officers and Directors." Mr. Davidson is the Chairman of the Board of Directors,
President and Chief Executive Officer of both Holdings and the Company and both
Circon Holdings and Circon. In addition, other members of our senior management
team are required under the services agreement with Circon to spend a
considerable amount of time and effort on managing the business and affairs of
Circon and some of them have been, and others may in the future be, named as
senior officers of Circon Holdings and Circon. Mr. Davidson and such other
members of our senior management team who are officers of Circon Holdings and
Circon receive, in addition to the compensation and incentives received from us,
compensation and incentives from Circon Holdings or Circon that is dependent
upon the performance of Circon. As a result of the Transactions, officers and
directors of Holdings own approximately 5.3% of the outstanding common equity of
Circon Holdings (before giving effect to the exercise of any stock options or
warrants) and, assuming the exercise of their stock options, will own
approximately 22.8% of the outstanding common equity of Circon Holdings on a
fully-diluted basis. There can be no assurance that the members of our senior
management team will have sufficient time to conduct our business and affairs as
they currently are proposed to be conducted or that the amount of time the
members of our senior management team spend on the management of the business
and affairs of Circon will not have a material adverse effect on our business,
financial condition or results of operations. The new credit facilities obligate
Holdings and the Issuer to maintain separate books and records and separate
financial statements for Holdings and the Issuer, on the one hand, and Circon
Holdings and Circon, on the other, and to observe a number of other formalities
intended to ensure that Holdings and the Issuer, on the one hand, and Circon
Holdings and Circon, on the other, are managed as separate companies. See "New
Credit Facilities and Other Indebtedness -- New Credit Facilities." There can be
no assurance that such provisions of the new credit facilities will not be
amended, removed or waived in the future. The indenture does not contain any
such requirements.
In addition to the possibility that our senior management team's attention
might be diverted as a result of managing Circon, there also exists the
possibility that the directors and members of our senior management team will
have conflicts of interest as a result of their dual roles. Any decision made by
any such directors or officers involving the Company is required by law to be
made in accordance with their duties and obligations to deal fairly and in good
faith with a view to the best interests of the Company and its shareholders, and
such directors and members of our senior management team who are also officers
of Circon will also owe similar duties to Circon and its shareholders. Other
than these legal requirements, there will be no agreements or arrangements in
place to address such potential conflicts of interest or to address the
allocation of corporate opportunities between the Company and Circon. Despite
these legal requirements, there can be no assurance that any directors or
members of our senior management team involved in any such conflict of interest
will act in the best interests of the Company or that any corporate opportunity
that could benefit both the Company and Circon will be allocated to the Company.
In addition, there can be no assurance that any such conflict of interest or
failure to allocate such corporate opportunity to the Company would not have a
material adverse effect on the Company's business, financial condition or
results of operations.
34
<PAGE> 43
YOUR INTERESTS AS HOLDERS OF THE EXCHANGE NOTES MAY CONFLICT WITH THOSE OF OUR
CONTROLLING SHAREHOLDER.
As a result of the Transactions, the Investors (excluding the Holdco Note
Purchaser) beneficially own approximately 84.1% of the outstanding common equity
of Holdings and have the ability to appoint four of the seven members of
Holdings' board of directors. See "Certain Relationships and Related Party
Transactions -- Shareholders Agreement -- Board of Directors." In addition, the
shareholders agreement does not limit Fox Paine's ability (as majority
shareholder) to add additional directors. Accordingly, Fox Paine has the ability
to control our policies and operations and has the ability to appoint new
management and approve any action requiring shareholder approval (including
adopting amendments to our certificate of incorporation and approving mergers or
sales of substantially all of our assets). There can be no assurance that the
interests of Fox Paine will not conflict with your interests. See "Security
Ownership of Certain Beneficial Owners and Management" and "Certain
Relationships and Related Party Transactions."
OUR INTERNATIONAL SALES AND OPERATIONS SUBJECT US TO CERTAIN RISKS INHERENT IN
INTERNATIONAL OPERATIONS.
Sales outside of North America accounted for approximately 10.1% of our pro
forma total net sales for the twelve months ended August 1, 1999, with
approximately 85% of those sales within the European Community. It is our
objective to increase international sales in the future as we believe there are
growth opportunities abroad, particularly in Europe. See "Business -- Business
Strategy." Generally we generate net sales and expenses in the local currency
where our products are sold and thus are not currently subject to significant
currency exchange risk. In the future, it is possible that a greater portion of
our net sales outside of North America may not be denominated in the same local
currency as the related expenses and thus we may be subject to currency exchange
risks. With respect to international sales, we are subject to translation
adjustment risk, as an increase in the strength of the U.S. dollar could
decrease our reported net sales and margins in respect of such sales to the
extent we are unable or determine not to increase local currency prices. For
example, our international sales have been primarily denominated in Dutch
guilders which have depreciated from an average of 1.65 guilders per U.S. dollar
in fiscal year 1996 to an average of 1.98 guilders per U.S. dollar in the twelve
months ended August 1, 1999, with a corresponding reduction in the reported
amount of our sales in U.S. dollars.
We are also subject to other risks inherent in international operations
including political and economic conditions, foreign regulatory requirements,
exposure to different legal requirements and standards, potential difficulties
in protecting intellectual property, import and export restrictions, increased
costs of transportation or shipping, labor disputes, difficulties in collecting
accounts receivable, longer collection periods and potentially adverse tax
consequences. As we continue to attempt to expand our international business,
our success will be dependent, in part, on our ability to anticipate and
effectively manage these and other risks. There can be no assurance, however,
that we will be successful in anticipating and managing these and other risks.
35
<PAGE> 44
WE AND OUR CUSTOMERS AND SUPPLIERS ARE REQUIRED TO ADDRESS YEAR 2000 BUSINESS
SYSTEMS ISSUES.
The year 2000 problem relates to computer systems that are designed using
two digits, rather than four, to represent a given year. Therefore, such systems
may recognize "00" as the year 1900 rather than the year 2000, possibly
resulting in major system failures or miscalculations and causing disruptions in
our operations. We have established a three-phased approach to address year 2000
issues, including embedded technology utilized in our facilities and equipment.
The three phases included in our approach are (1) identification, (2) compliance
and (3) validation. Internally, we have substantially completed, with the aid of
outside consultants, the identification and compliance phases and will continue
completing the validation phase, which consists primarily of monitoring and
testing of new software and all other components and interfaces that were
implemented or upgraded as part of the software installation or as a result of
other identified year 2000 deficiencies, as appropriate. While we have proceeded
over the past two years in what we believe to be a reasonably prudent manner to
identify and remediate year 2000 issues, there can be no assurance that a
significant interruption in our business due to a year 2000 non-compliance issue
would not have a material adverse effect on our financial position, operations
or liquidity.
Externally, we are formally communicating with significant suppliers,
customers and other third parties to assess their year 2000 readiness and are
currently determining our potential exposure if any of these external parties
fail to correct their year 2000 issues in a timely manner. We cannot assure you
that all of our key suppliers or customers will become compliant in time to
avoid a disruption to our business that could have a material adverse effect on
us. If we or our suppliers or customers fail to completely overcome the year
2000 issue, our business, financial condition or results of operations could be
adversely affected.
FEDERAL AND STATE STATUTES COULD ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO
VOID THE EXCHANGE NOTES AND THE GUARANTEES.
The Issuer's issuance of the exchange notes may be subject to review under
U.S. federal bankruptcy law and comparable provisions of state fraudulent
conveyance laws if a bankruptcy or reorganization case or lawsuit is commenced
by or on behalf of the Issuer's unpaid creditors. Under these laws, if a court
were to find in such a bankruptcy or reorganization case or lawsuit that, at the
time the Issuer issued the old notes, the Issuer:
- issued the old notes with the intent of delaying, hindering or defrauding
present or future creditors; or
- received less than reasonably equivalent value or fair consideration for
issuing the old notes and, at the time it issued the old notes, either
it:
-- was insolvent or rendered insolvent by reason of issuing the old
notes;
-- was engaged, or was about to engage, in a business or transaction for
which its remaining unencumbered assets constituted unreasonably
small capital to carry on its business; or
-- intended to incur, or believed that it would incur, debts beyond its
ability to pay as they mature,
36
<PAGE> 45
then the court could void the obligations under the old notes and the exchange
notes, subordinate the old notes and the exchange notes to the Issuer's other
debt or take other action detrimental to holders of the old notes and the
exchange notes.
The measures of insolvency for purposes of fraudulent transfer laws vary
depending upon the law of the jurisdiction that is being applied in any
proceeding to determine whether a fraudulent transfer has occurred. Generally,
however, a person would be considered insolvent if, at the time it incurred the
debt:
- the sum of its debts, including contingent liabilities, was greater than
the fair saleable value of all its assets;
- the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
- it could not pay its debts as they become due.
There can be no assurance regarding the standard that a court would use to
determine whether or not the Issuer was solvent at the relevant time, or,
regardless of the standard that the court uses, that the issuance of the old
notes and the exchange notes would not be voided or the old notes and the
exchange notes would not be subordinated to the Issuer's other debt.
Each guarantee also may be subject to review under U.S. federal bankruptcy
law and comparable provisions of state fraudulent conveyance laws if a
bankruptcy or reorganization case or lawsuit is commenced by or on behalf of the
unpaid creditors of the applicable guarantor. If such a case were to occur:
- the analysis applicable to the issuance of the old notes would generally
apply to the incurrence of the guarantee; and
- any guarantee incurred by one of the guarantors could also be subject to
the claim that, since the guarantee was incurred for the Issuer's benefit
and only indirectly for the benefit of such guarantor, the obligations of
such guarantor were incurred for less than fair consideration.
A court could thus void the obligations under such guarantee or subordinate such
guarantee to such guarantor's other debt or take other action detrimental to
holders of the exchange notes.
Additionally, under U.S. federal bankruptcy or applicable state insolvency
law, if certain bankruptcy or insolvency proceedings were initiated by or
against the Issuer or any guarantor within 90 days after any payment by the
Issuer with respect to the exchange notes or by such guarantor under its
guarantee or if the Issuer or such guarantor anticipated becoming insolvent at
the time of such payment, all or a portion of such payment could be avoided as a
preferential transfer and the recipient of such payment could be required to
return such payment.
THE ORIGINAL ISSUE DISCOUNT ON THE EXCHANGE NOTES MAY LIMIT THE CLAIM OF A
HOLDER OF EXCHANGE NOTES IN A BANKRUPTCY CASE AGAINST US.
If a bankruptcy case is commenced before the exchange notes have fully
accreted, you may not be able to recover the portion of the original issue
discount that has not yet
37
<PAGE> 46
accrued. If a bankruptcy case is commenced by or against us under the U.S.
Bankruptcy Code after the issuance of the exchange notes, the claim of a holder
of exchange notes relating to the principal amount thereof may be limited to an
amount equal to the sum of (1) the initial offering price of the old notes and
(2) that portion of the original issue discount that is not deemed to constitute
"unmatured interest" for purposes of the U.S. Bankruptcy Code. Any original
issue discount that was not accrued as of any such bankruptcy filing would
constitute "unmatured interest."
THERE IS NO ESTABLISHED TRADING MARKET FOR THE EXCHANGE NOTES, AND ANY MARKET
FOR THE EXCHANGE NOTES MAY BE ILLIQUID.
We cannot assure you that a liquid market will develop for the exchange
notes, that you will be able to sell your exchange notes at a particular time or
that the prices that you receive when you sell will be favorable. The exchange
notes are a new issue of securities with no established trading market.
Moreover, we do not intend to apply for the exchange notes to be listed on any
securities exchange or to arrange for quotation on any automated dealer
quotation system, and the purchasers of the old notes are not obligated to make
a market for the exchange notes. If issued under an effective registration
statement, the exchange notes generally may be resold or otherwise transferred
with no need for further registration, but the offer to exchange the exchange
notes for the old notes will not depend upon the amount of old notes tendered
for exchange.
Future trading prices of the exchange notes will depend on many factors,
including:
- our operating performance and financial condition;
- prevailing interest rates; and
- the market for similar securities.
IF YOU ARE DEEMED TO HAVE RECEIVED RESTRICTED SECURITIES IN EXCHANGE FOR YOUR
OLD NOTES, YOU MAY FACE SIGNIFICANT TRANSFER RESTRICTIONS IF YOU ATTEMPT TO
RESELL THEM.
If you exchange your old notes in the exchange offer, you will be deemed to
have represented, by your acceptance of the exchange offer, that you acquired
the exchange notes in the ordinary course of business and that you are not
engaged in, and do not intend to engage in, a distribution of the exchange
notes. If the SEC determines otherwise, however, you may be deemed to have
received restricted securities. If so, you will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
IF YOU DO NOT EXCHANGE YOUR OLD NOTES, THEY MAY BE DIFFICULT TO RESELL.
It may be difficult for you to sell old notes that are not exchanged in the
exchange offer. If you do not tender your old notes or if we do not accept some
of your old notes, those old notes will continue to be subject to transfer and
exchange restrictions.
These restrictions on transfer of your old notes arise because we issued
the old notes pursuant to an exemption from the registration requirements of the
Securities Act and applicable state securities laws. In general, you may only
offer or sell the old notes if they are registered under the Securities Act and
applicable state securities laws, or offered and
38
<PAGE> 47
sold pursuant to an exemption from the Securities Act and applicable state
securities laws. If you intend to make use of an exemption, you must, if
requested by us, deliver to us an opinion of independent counsel, reasonably
satisfactory in form and substance to us, that the exemption is available. We do
not intend to register the old notes under the Securities Act.
Based on interpretations of the SEC staff, exchange notes issued pursuant
to the exchange offer may be offered for resale, resold or otherwise transferred
by their holders, other than any holder that is our "affiliate" 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 the holders acquired the exchange notes in the ordinary course of the
holders' business and the holders have no arrangement or understanding with
respect to the distribution of the exchange notes to be acquired in the exchange
offer. Any holder who tenders in the exchange offer for the purpose of
participating in a distribution of the exchange notes:
- cannot rely on the applicable interpretations of the SEC; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
To the extent the old notes are tendered and accepted in the exchange
offer, the trading market, if any, for the old notes would be adversely affected
due to a reduction in market liquidity.
39
<PAGE> 48
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We have entered into an exchange and registration rights agreement with the
initial purchasers of the old notes in which we agreed to file a registration
statement relating to an offer to exchange the old notes for exchange notes. We
also agreed to use our reasonable best efforts to cause the exchange offer to be
consummated within 180 days following the original issuance of the old notes.
The exchange notes will have terms substantially identical to the old notes
except that the exchange notes will not contain terms with respect to transfer
restrictions, registration rights and the payment of liquidated damages for our
failure to observe obligations in the registration rights agreement. The old
notes were issued on November 12, 1999.
Under the circumstances set forth below, we will use our reasonable best
efforts to cause the SEC to declare effective a shelf registration statement
with respect to the resale of the old notes and keep the statement effective for
up to two years after the original issue of the old notes. These circumstances
include:
- if any changes in law, SEC rules or regulations or applicable
interpretations by the staff of the SEC do not permit us to effect the
exchange offer as contemplated by the registration rights agreement;
- if any old notes validly tendered in the exchange offer are not exchanged
for exchange notes within 180 days after the original issuance of the old
notes;
- if any initial purchaser of the old notes requests within 20 days of
completion of the exchange offer, but only with respect to any old notes
not eligible to be exchanged for exchange notes in the exchange offer;
- if any holder of the old notes is not permitted by any law or applicable
interpretations by the staff of the SEC to participate in the exchange
offer;
- if any holder of old notes that participates in the exchange offer and
does not receive fully tradeable exchange notes requests within 20 days
of completion of the exchange offer; or
- if we elect to file a shelf registration statement with respect to the
resale of the old notes.
If we fail to comply with our obligations under the registration rights
agreement, we may be required to pay liquidated damages to holders of the old
notes. Please read the section captioned "Exchange and Registration Rights
Agreement" for more details regarding the registration rights agreement.
40
<PAGE> 49
RESALE OF EXCHANGE NOTES
Based on interpretations of the SEC staff set forth in no-action letters
issued to unrelated third parties, we believe that exchange notes issued under
the exchange offer in exchange for old notes may be offered for resale, resold
and otherwise transferred by any exchange note holder without compliance with
the registration and prospectus delivery provisions of the Securities Act, if:
- the holder is not our "affiliate" within the meaning of Rule 405 under
the Securities Act;
- the exchange notes are acquired in the ordinary course of the holder's
business; and
- the holder does not intend to participate in a distribution of the
exchange notes.
Any holder of the old notes using the exchange offer to participate in a
distribution of exchange notes cannot rely on the no-action letters referred to
above. This includes a broker-dealer that acquired old notes directly from us,
but not as a result of market-making activities or other trading activities.
Consequently, the holder must comply with the registration and prospectus
delivery requirements of the Securities Act of 1933 in the absence of an
exemption from such requirements.
Each broker-dealer that receives exchange notes for its own account in
exchange for old notes, as a result of market-making activities or other trading
activities, 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 broker-dealer in connection
with resales of exchange notes received in exchange for old notes where such old
notes were acquired by such broker-dealer as result of market-making activities
or other trading activities. The letter of transmittal states that by
acknowledging and delivering a prospectus, a broker-dealer will not be
considered to admit that is an "underwriter" within the meaning of the
Securities Act of 1933. We have agreed that for a period of 90 days after the
consummation of the exchange offer, we will make this prospectus available to
broker-dealers of use in connection with any such resale. See "Plan of
Distribution."
Except as described above, this prospectus may not be used for an offer to
resell, resale other retransfer of exchange notes.
The exchange offer is not being made to, nor will we accept tenders for
exchange from, holders of old notes in any jurisdiction in which the exchange
offer or the acceptance of it would not be in compliance with the securities or
blue sky laws of such jurisdiction.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept for exchange any old notes
properly tendered and not withdrawn before expiration of the exchange offer. We
will issue $1,000 principal amount of exchange notes in exchange for each $1,000
principal amount of old notes surrendered under the exchange offer. Old notes
may be tendered only in integral multiples of $1,000.
41
<PAGE> 50
The form and terms of the exchange notes will be substantially identical to
the form and terms of the old notes, except the exchange notes:
- will be registered under the Securities Act;
- will not bear legends restricting their transfer; and
- will not provide for the payment of liquidated damages upon our failure
to fulfill our obligations under the registration rights agreement to
file, and cause to become effective, a registration statement, and to
consummate the exchange offer.
The exchange notes will evidence the same debt as the old notes. The
exchange notes will be issued under and entitled to the benefits of the same
indenture that authorized the issuance of the old notes. Consequently, both
series will be treated as a single class of debt securities under that
indenture. For a description of the indenture, see "Description of the Exchange
Notes" below.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of old notes being tendered for exchange.
As of the date of this prospectus, $144.6 million aggregate principal
amount at maturity of the old notes are outstanding. This prospectus and the
letter of transmittal are being sent to all registered holders of old notes.
There will be no fixed record date for determining registered holders of old
notes entitled to participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions
of the registration rights agreement, the applicable requirements of the
Securities Act and the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC. Old notes that are not tendered for exchange
in the exchange offer will remain outstanding and continue to accrue and accrete
interest and will be entitled to the rights and benefits that their holders
currently have under the indenture.
We will be deemed to have accepted for exchange properly tendered old notes
when we have given oral or written notice of their acceptance to the exchange
agent. The exchange agent will act as agent for the tendering holders for the
purposes of receiving the exchange notes from us and delivering the exchange
notes to holders. Subject to the terms of the registration rights agreement, we
expressly reserve the right to amend or terminate the exchange offer, and not to
accept for exchange any old notes not previously accepted for exchange, upon the
occurrence of any of the conditions specified below under the caption
"-- Conditions."
Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old notes. We
will pay all charges and expenses, other than applicable taxes described below,
in connection with the exchange offer. It is important that you read the section
labeled "-- Fees and Expenses" below for more details regarding fees and
expenses incurred in the exchange offer.
EXPIRATION OF THE EXCHANGE OFFER; EXTENSIONS; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time on
, 2000, unless, in our sole discretion, we extend it.
42
<PAGE> 51
In order to extend the exchange offer, we will notify the exchange agent
orally or in writing of any extension. We will notify the registered holders of
old notes of the extension no later than 9:00 a.m., New York City time, on the
business day after the previously scheduled expiration of the exchange offer.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, we will have no obligation to publish, advertise, or
otherwise communicate any public announcement, other than by making a timely
release to a financial news service.
CONDITIONS
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any exchange notes for, any old notes, and we
may terminate the exchange offer as provided in this prospectus before accepting
any old notes for exchange if in our reasonable judgment:
- the exchange notes to be received will not be tradeable by the holder,
without restriction under the Securities Act, the Exchange Act and
without material restrictions under the blue sky or securities laws of
substantially all of the states of the United States;
- the exchange offer, or the making of any exchange by a holder of old
notes, would violate applicable law or any applicable interpretation of
the staff of the SEC; or
- any action or proceeding has been instituted or threatened in any court
or by or before any governmental agency with respect to the exchange
offer that, in our judgment, would reasonably be expected to impair our
ability to proceed with the exchange offer.
In addition, we will not be obligated to accept for exchange the old notes
of any holder that has not made to us:
- the representations described under "-- Resale of Exchange Notes,"
"-- Procedures for Tendering" and "Plan of Distribution"; and
- any other representations that may be reasonably necessary under
applicable SEC rules, regulations or interpretations to make available to
us an appropriate form for registration of the exchange notes under the
Securities Act.
We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. Consequently, we may
delay acceptance of any old notes by giving oral or written notice of an
extension to their holders. During an extension, all old notes previously
tendered will remain subject to the exchange offer, and we may accept them for
exchange. We will return any old notes that we do not accept for exchange for
any reason without expense to their tendering holders as promptly as practicable
after the expiration or termination of the exchange offer.
We expressly reserve the right to amend or terminate the exchange offer,
and to reject for exchange any old notes not previously accepted for exchange,
upon the occurrence of any of the conditions of the exchange offer specified
above. We will give oral or written notice of any extension, amendment,
non-acceptance or termination to the holders of the old notes as promptly as
practicable. In the case of any extension, the notice of extension
43
<PAGE> 52
will be issued no later than 9:00 a.m., New York City time, on the business day
after the previously scheduled expiration of the exchange offer.
These conditions are solely for our benefit and we may assert them
regardless of the circumstances that may give rise to them or waive them in
whole or in part at any time or at various times in our sole discretion. If we
fail at any time to exercise any of the foregoing rights, this failure will not
constitute a waiver of that right. Each of these rights will be deemed an
ongoing right that we may assert at any time or at various times.
In addition, we will not accept for exchange any old notes tendered, and
will not issue exchange notes in exchange for any old notes, if at that time a
stop order is threatened or in effect with respect to the registration statement
of which this prospectus constitutes a part or the qualification of the
indenture under the Trust Indenture Act of 1939.
PROCEDURES FOR TENDERING
Only a holder of record of old notes may tender old notes in the exchange
offer. To tender in the exchange offer, a holder must:
- complete, sign and date the letter of transmittal, or a facsimile of the
letter of transmittal; have the signature on the letter of transmittal
guaranteed if the letter of transmittal so requires; and mail or deliver
the letter of transmittal or facsimile to the exchange agent prior to the
expiration date.
In addition, either:
- the exchange agent must receive old notes along with the letter of
transmittal; or
- the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the exchange agent must receive physical
delivery of the letter of transmittal and other required documents at the
address set forth below under "-- Exchange Agent" before expiration of the
exchange offer.
The tender by a holder that is not withdrawn before expiration of the
exchange offer will constitute an agreement between that holder and us in
accordance with the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE HOLDER'S ELECTION AND
RISK. RATHER THAN MAIL THESE ITEMS, WE RECOMMEND THAT HOLDERS USE AN OVERNIGHT
OR HAND DELIVERY SERVICE. IN ALL CASES, HOLDERS SHOULD ALLOW SUFFICIENT TIME TO
ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE EXPIRATION OF THE EXCHANGE OFFER.
HOLDERS SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR OLD NOTES TO US. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR THEM.
Any beneficial owner whose old notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct it to
tender on the owner's behalf. If the beneficial owner wishes to tender on its
own behalf, it must, prior to completing and executing the letter of transmittal
and delivering its old notes, either:
- make appropriate arrangements to register ownership of the old notes in
the owner's name; or
44
<PAGE> 53
- obtain a properly completed bond power from the registered holder of old
notes.
The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.
Signatures on a letter of transmittal or a notice of withdrawal described
below must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the U.S.
or another "eligible institution" within the meaning of Rule 17Ad-15 under the
Exchange Act, unless the old notes are tendered:
- by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on the
letter of transmittal; or
- for the account of an eligible institution.
If the letter of transmittal is signed by a person other than the
registered holder of any old notes, the old notes must be endorsed or
accompanied by a properly completed bond power. The bond power must be signed by
the registered holder as the registered holder's name appears on the old notes
and an eligible institution must guarantee the signature on the bond power.
If the letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, these
persons should so indicate when signing. Unless we waive this requirement, they
should also submit evidence satisfactory to us of their authority to deliver the
letter of transmittal.
We will determine in our sole discretion all questions as to the validity,
form, eligibility (including time of receipt), acceptance of tendered old notes
and withdrawal of tendered old notes. Our determination will be final and
binding. We reserve the absolute right to reject any old notes not properly
tendered or any old notes the acceptance of which would, in the opinion of our
counsel, be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of tender as to particular old notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of old notes must be cured within the time that we determine. Although we intend
to notify holders of defects or irregularities with respect to tenders of old
notes, neither we, the exchange agent nor any other person will incur any
liability for failure to give notification. Tenders of old notes will not be
deemed made until any defects or irregularities have been cured or waived. Any
old notes received by the exchange agent that are not properly tendered and as
to which those defects or irregularities have not been cured or waived will be
returned by the exchange agent without cost to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
In all cases, we will issue exchange notes for old notes that we have
accepted for exchange under the exchange offer only after the exchange agent
timely receives:
- the old notes; and
- a properly completed and duly executed letter of transmittal and all
other required documents.
45
<PAGE> 54
By signing the letter of transmittal, each tendering holder of old notes
will represent to us that, among other things:
- any exchange notes that the holder receives will be acquired in the
ordinary course of its business;
- the holder has no arrangement or understanding with any person or entity
to participate in the distribution of the exchange notes;
- if the holder is not a broker-dealer, that it is not engaged in and does
not intend to engage in the distribution of the exchange notes;
- if the holder is a broker-dealer, that will receive exchange notes for
its own account in exchange for old notes that were acquired as a result
of market-making activities or other trading activities, that it will
deliver a prospectus, as required by law, in connection with any resale
of those exchange notes (see "Plan of Distribution"); and
- the holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of us or, if the holder is an affiliate, it will comply
with any applicable registration and prospectus delivery requirements of
the Securities Act.
GUARANTEED DELIVERY PROCEDURES
Holders wishing to tender their old notes but whose old notes are not
immediately available or who cannot deliver their old notes, the letter of
transmittal or any other required documents to the exchange agent before
expiration of the exchange offer may tender if:
- the tender is made through an eligible institution;
- before expiration of the exchange offer, the exchange agent receives from
the eligible institution a properly completed and duly executed notice of
guaranteed delivery, by facsimile transmission, mail or hand delivery:
-- setting forth the name and address of the holder and the registered
number(s) and the principal amount of old notes tendered;
-- stating that the tender is being made by guaranteed delivery; and
-- guaranteeing that, within three New York Stock Exchange trading days
after expiration of the exchange offer, the letter of transmittal or
facsimile thereof together with the old notes and any other documents
required by the letter of transmittal will be deposited by the
eligible institution with the exchange agent; and
- the exchange agent receives the properly completed and executed letter of
transmittal or facsimile thereof, as well as all tendered old notes in
proper form for transfer and all other documents required by the letter
of transmittal, within three New York Stock Exchange trading days after
expiration of the exchange offer.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their old notes according to the guaranteed
delivery procedures set forth above.
46
<PAGE> 55
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders of old notes may
withdraw their tenders at any time before expiration of the exchange offer.
For a withdrawal to be effective, the exchange agent must receive a written
notice, which may be by telegram, telex, facsimile transmission or letter, of
withdrawal at one of the addresses set forth below under "-- Exchange Agent."
Any notice of withdrawal must:
- specify the name of the person who tendered the old notes to be
withdrawn;
- identify the old notes to be withdrawn, including the principal amount of
the old notes to be withdrawn; and
- where old notes have been transmitted, specify the name in which the old
notes were registered, if different from that of the withdrawing holder.
If old notes have been delivered or otherwise identified to the exchange
agent, then, prior to the release of those old notes, the withdrawing holder
must also submit:
- the private placement numbers of the particular old notes to be
withdrawn; and
- a signed notice of withdrawal with signatures guaranteed by an eligible
institution, unless the withdrawing holder is an eligible institution.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of notices of withdrawal, and our determination shall
be final and binding on all parties. We will deem any old notes so withdrawn not
to have been validly tendered for exchange for purposes of the exchange offer.
We will return any old notes that have been tendered for exchange but that are
not exchanged for any reason to their holder without cost to the holder as soon
as practicable after withdrawal, rejection of tender or termination of the
exchange offer. You may re-tender properly withdrawn old notes by following one
of the procedures described under "-- Procedures for Tendering" above at any
time on or before expiration of the exchange offer.
47
<PAGE> 56
EXCHANGE AGENT
The Bank of New York has been appointed as exchange agent for the exchange
offer. You should direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for the notice of guaranteed delivery to the exchange agent addressed
as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery:
The Bank of New York The Bank of New York
101 Barclay Street, 101 Barclay Street, Ground Level
Floor 7 East Corporate Trust Services Window
New York, New York 10286 New York, New York 10286
Attention: Reorganization Section Attention: Ayikwei Aryeetzy
Reorganization
Section
</TABLE>
By Facsimile Transmission (for Eligible Institutions Only):
The Bank of New York
(212) 815-6339
To Confirm by Telephone or for Information Call: (212) 815-3687
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SHOWN ABOVE OR
TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY OF THE LETTER OF TRANSMITTAL.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitations by
telegraph, telephone or in person by our officers and regular employees and
those of our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses.
We will pay the cash expenses to be incurred in connection with the
exchange offer. The expenses are estimated in the aggregate to be approximately
[$ ]. They include:
- SEC registration fees;
- fees and expenses of the exchange agent and trustee;
- accounting and legal fees; and
- printing and mailing costs.
48
<PAGE> 57
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of old
notes under the exchange offer. The tendering holder, however, will be required
to pay any transfer taxes, whether imposed on the registered holder or any other
person, if:
- certificates representing old notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of old notes
tendered;
- tendered old notes are registered in the name of any person other than
the person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of old
notes under the exchange offer.
If satisfactory evidence of payment of transfer taxes is not submitted with
the letter of transmittal, the amount of any transfer taxes will be billed to
the tendering holder.
ACCOUNTING TREATMENT
We will record the exchange notes in our accounting records at the same
carrying value as the old notes, as reflected in our accounting records on the
date of exchange. Accordingly, we will not recognize any gain or loss for
accounting purposes in connection with the exchange offer. Any expenses incurred
in the exchange offer will be recorded as deferred financing costs and amortized
over the life of the exchange notes.
OTHER
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. We urge you to consult your financial and tax
advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered old notes in open market or
privately negotiated transactions, through subsequent exchange offers or
otherwise. However, we have no present plans to acquire any old notes that are
not tendered in the exchange offer or to file a registration statement to permit
resales of any untendered old notes.
THE TRANSACTIONS
THE RECAPITALIZATION
On November 12, 1999, we consummated the recapitalization, which included
the following transactions:
- the Asset Dropdown, pursuant to which Holdings contributed all its assets
and liabilities (other than those relating to its previous credit
facility, which was repaid and terminated as part of the
recapitalization) to the Issuer;
49
<PAGE> 58
- the merger, pursuant to which Fox Paine Medic Acquisition Corporation was
merged with and into Holdings with Holdings as the surviving corporation,
in connection with which:
-- the Investors made the Investor Equity Contribution, pursuant to
which they purchased shares of Fox Paine Medic Acquisition
Corporation common stock for $131.8 million in cash prior to the
merger, with such shares of Fox Paine Medic Acquisition Corporation
common stock being converted in the merger into shares of Holdings
common stock (see "Security Ownership of Certain Beneficial Owners
and Management");
-- each outstanding share of Holdings common stock (other than a portion
of the shares held by a group of 10 Holdings shareholders (the
"Continuing Shareholders"), including eight members of Holdings'
senior management (the "Management Investors"), which shares continue
to represent shares of Holdings common stock after the merger) were
converted into the right to receive $26.00 in cash (the "Merger
Consideration") (see "Certain Relationships and Related Party
Transactions -- Treatment of Continuing Shares and Options");
-- options to purchase shares of Holdings common stock (other than
certain options held by the Management Investors, which were canceled
without payment and replaced by Circon Holdings options) were
canceled in return for a cash payment for each share of Holdings
common stock subject to such options equal to the excess of $26.00
over the exercise price of such options (the "Option Consideration,"
and together with the Merger Consideration, the "Cash Consideration")
(see "Certain Relationships and Related Party
Transactions -- Treatment of Continuing Shares and Options"); and
- the Circon Sale, pursuant to which we sold to Circon Holdings all of the
capital stock of Circon in exchange for $208.0 million in cash and the
repayment of $20 million of intercompany indebtedness owed by Circon to
Holdings, as a result of which Circon is pursuing separate business
strategies, is separately capitalized and is operated separately from
Holdings and the Company.
As a result of the Transactions, Holdings is owned approximately 87.8% by
the Investors and approximately 12.2% by the Continuing Shareholders (before
giving effect to the exercise of any stock options or warrants). Assuming the
exercise of stock options that were rolled-over into new stock options and stock
options issued under new stock option incentive programs, the Continuing
Shareholders will own approximately 26.0% of the outstanding common equity of
Holdings on a fully-diluted basis and approximately 26.0% of the outstanding
common equity Circon Holdings on a fully-diluted basis.
FINANCING FOR THE TRANSACTIONS
The recapitalization and the other Transactions required total funding of
approximately $799.6 million (see "Summary -- Sources and Uses"). In addition to
the $110.0 million from the issuance of the old notes and related warrants to
purchase Holdings common stock, the remainder of the financing came from the
following sources:
- $261.6 million in borrowings by the Issuer under the new credit
facilities, consisting of (1) an $80.0 million Term Loan A facility; (2)
a $90.0 million Term Loan B
50
<PAGE> 59
facility; (3) a $90.0 million Term Loan C facility; and (4) $1.6 million
drawn under the $50.0 million revolving credit facility;
- $50.0 million from the issuance of the Holdings Notes and warrants to
purchase shares of Holdings common stock to the Holdco Note Purchaser in
a private placement (see "Description of New Credit Facilities and Other
Indebtedness -- Holdings Notes");
- $131.8 million of cash equity from the Investor Equity Contribution;
- $13.8 million of existing equity from the Rollover Equity (see "Certain
Relationships and Related Party Transactions -- Treatment of Continuing
Shares and Options");
- $4.4 million in cash from the sale of new shares of Holdings common stock
to the Management Investors (which the Management Investors financed with
a portion of the Option Consideration they received) (together with the
Rollover Equity, the "Management Equity Investment") (see "Certain
Relationships and Related Party Transactions -- Treatment of Continuing
Shares and Options"); and
- $228.0 million in cash proceeds from the Circon Sale and repayment of
intercompany indebtedness owed by Circon to Holdings.
REPAYMENT OF EXISTING CREDIT FACILITY AND DEBT TENDER OFFER
In connection with the Transactions, we (1) repaid all amounts outstanding
under Holdings' previous credit facility and (2) consummated the tender offer
for Holdings' $100.0 million aggregate principal amount of 10 1/2% Senior
Subordinated Notes due 2006. Completion of the Transactions would have violated
certain covenants contained in the indenture governing the 10 1/2% Notes.
Accordingly, on September 30, 1999, Holdings commenced a debt tender offer to
acquire all the 10 1/2% Notes and a related consent solicitation. As part of the
tender offer, Holdings solicited consents from holders of the 10 1/2% Notes to
amendments to the terms of the 10 1/2% Notes and the governing indenture in
order to eliminate substantially all of the restrictive covenants contained in
the indenture, including those that would be violated as a result of the
Transactions. Holders of more than 99.9% of the principal amount of the 10 1/2%
Notes consented to the amendments and tendered their notes. Holdings'
obligations under the indenture governing the remaining $5,000 of 10 1/2% Notes
has been assumed by the Issuer, and such notes, as amended through the consent
solicitation process, have become the obligations of the Issuer and will rank
equally with the exchange notes. Holdings remains liable, along with the Issuer,
for payments of principal, premium and interest on the remaining $5,000 of
10 1/2% Notes and each of the subsidiaries of the Issuer has guaranteed the
10 1/2% Notes in each case on a senior subordinated basis.
Other than the 10 1/2% Notes that remain outstanding, all of the debt of
Holdings and the Company outstanding immediately prior to the completion of the
Transactions was repaid in connection with the consummation of the Transactions,
except for $8.7 million in the aggregate of capital leases, industrial revenue
bonds and certain other long term obligations of the Company. See "Description
of New Credit Facilities and Other Indebtedness -- Capital Leases, Industrial
Revenue Bonds and Other Long-Term Obligations."
51
<PAGE> 60
OTHER AGREEMENTS
In connection with the recapitalization:
(1) the Continuing Shareholders and the Investors entered into a
shareholders agreement (see "Certain Relationships and Related Party
Transactions -- Shareholders Agreement"); and
(2) Holdings, the Issuer, Circon Holdings and Circon entered into a
services agreement (see "Certain Relationships and Related Party
Transactions -- Services Agreement").
USE OF PROCEEDS
The net proceeds to the Issuer from the sale of the old notes and related
warrants to purchase Holdings common stock were approximately $106.7 million
(after deducting the take down fee paid to the initial purchasers of the old
notes). We used the gross proceeds from the sale as described under
"Summary -- Sources and Uses" and "The Transactions."
52
<PAGE> 61
CAPITALIZATION
The following table sets forth the Company's unaudited cash and cash
equivalents and unaudited capitalization as of August 1, 1999, on a pro forma
basis giving effect to the Transactions as if they had been consummated on such
date. The information in the following table should be read in conjunction with
"Unaudited Pro Forma Financial Information of the Company," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the consolidated financial statements of Holdings and the notes thereto included
elsewhere in this prospectus.
PRO FORMA CAPITALIZATION OF THE COMPANY
<TABLE>
<CAPTION>
AS OF AUGUST 1, 1999
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Cash and cash equivalents.................................. $ 15,394
========
Total debt (including current portion):
New credit facilities (1)................................ 261,600
Other long-term obligations (2).......................... 8,700
Senior Subordinated Discount Notes due 2009.............. 106,909
Total debt............................................ 377,209
Total shareholder's equity................................. 60,644
--------
Total capitalization.................................. $437,853
========
</TABLE>
- -------------------------
(1) Represents borrowings under the new credit facilities made at the closing of
the Transactions, consisting of $80 million under the Term Loan A facility,
$90.0 million under the Term Loan B facility, $90.0 million under the Term
Loan C facility and $1.6 million under the revolving credit facility. Upon
consummation of the Transactions, we had $48.4 million of borrowing capacity
under the revolving credit facility. See "The Transactions -- Financing for
the Transactions" and "Description of New Credit Facilities and Other
Indebtedness -- New Credit Facilities."
(2) Includes approximately $2.8 million of industrial revenue bonds, $4.6
million of capital leases and $1.3 million of other long-term obligations.
See "Description of New Credit Facilities and Other Indebtedness -- Capital
Leases, Industrial Revenue Bonds and Other Long-Term Obligations."
After giving effect to the Transactions as if they had been consummated on
August 1, 1999, Holdings would have had aggregate outstanding long-term
indebtedness of $50.0 million under the Holdings notes (in addition to its
guarantees of the obligations of the Issuer under the old notes and the new
credit facilities) and shareholders' equity equal to approximately $24.2
million.
53
<PAGE> 62
UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE COMPANY
The following unaudited pro forma financial information of the Company has
been prepared based on the historical consolidated financial statements of
Holdings included elsewhere in this prospectus, adjusted to give pro forma
effect to the Transactions and the purchase of Winfield Medical (the "Winfield
Acquisition," which was consummated on June 26, 1998), as applicable. Certain
acquisitions and divestitures consummated during the periods presented have not
been reflected in the unaudited pro forma consolidated financial information as
they were considered immaterial to the operations of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." For a description of the Transactions, see "The Transactions."
As part of the Transactions, Holdings contributed all of its assets and
liabilities (other than with respect to its previous credit facility) to the
Issuer. As a result of the Transactions, Holdings is a guarantor of the old
notes and the new credit facilities and has no substantial operations or assets
other than the capital stock of the Issuer. As a result, the consolidated
financial position and results of operations of Holdings are substantially the
same as those of the Issuer, except as described in footnote (b) to the
Unaudited Pro Forma Consolidated Balance Sheet and footnote (b) to the Unaudited
Pro Forma Consolidated Statements of Operations.
The Unaudited Pro Forma Consolidated Balance Sheet at August 1, 1999 gives
effect to the Transactions as if they had occurred on that date. The Unaudited
Pro Forma Consolidated Statements of Operations (1) for the twelve months ended
and nine months ended August 1, 1999 give effect to the Transactions as if they
had occurred on November 3, 1997 and (2) for the nine months ended August 2,
1998 and the fiscal year ended November 1, 1998 give effect to the Transactions
and the Winfield Acquisition as if they had occurred on November 3, 1997. The
recapitalization is being accounted for as a recapitalization and therefore has
no impact on the historical basis of the assets and liabilities as reflected in
the consolidated financial statements. For a discussion of the recapitalization,
see "The Transactions."
The Winfield Acquisition was accounted for using the purchase method of
accounting. The total purchase price was allocated to the assets acquired and
liabilities assumed based on their respective fair values.
The unaudited pro forma adjustments, which are based upon available
information and upon certain assumptions that management believes are
reasonable, are described in the accompanying notes. The unaudited pro forma
consolidated financial information is for informational purposes only and does
not (1) purport to represent what the financial position or results of
operations of the Company would actually have been had the Transactions or the
Winfield Acquisition in fact occurred on the dates assumed or the financial
position or results of operations of the Company for any future period or date,
(2) reflect the effect of certain non-recurring statement of operations charges
expected to result from the Transactions, as described in the footnotes hereto,
or (3) reflect certain insignificant acquisitions and divestitures. The
unaudited pro forma consolidated financial information should be read in
conjunction with "Selected Historical Consolidated Financial Information of
Holdings," the consolidated financial statements of Holdings, together with the
notes thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the other financial information included elsewhere in
this prospectus.
54
<PAGE> 63
MAXXIM MEDICAL GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF AUGUST 1, 1999
<TABLE>
<CAPTION>
PRO FORMA
COMPANY ADJUSTMENTS FOR THE
PRO FORMA ------------------------
HOLDINGS AFTER ASSET CIRCON OTHER COMPANY
HISTORICAL DROPDOWN(a)(b) SALE(c) TRANSACTIONS PRO FORMA
---------- -------------- --------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents............ $ 5,354 $ 5,354 $ 228,000 $ (217,960)(d) $ 15,394
Accounts receivable,
net.................... 101,188 101,188 (33,692) -- 67,496
Inventory, net........... 131,512 131,512 (40,672) -- 90,840
Net current deferred tax
asset.................. 16,398 16,398 (6,507) 6,459(e) 16,350
Prepaid expenses and
other.................. 7,717 7,717 (1,126) -- 6,591
-------- -------- --------- ----------- ----------
Total current assets... 262,169 262,169 146,003 (211,501) 196,671
Property & equipment,
net.................... 183,612 183,612 (44,511) -- 139,101
Goodwill, net............ 272,656 272,656 (128,132) -- 144,524
Other assets, net........ 36,369 31,083 (13,255) 17,319(e) 35,147
-------- -------- --------- ----------- ----------
Total assets........... $754,806 $749,520 $ (39,895) $ (194,182) $ 515,443
======== ======== ========= =========== ==========
CURRENT LIABILITIES:
Current maturities of
long-term debt......... $ 25,000 $ -- $ -- $ -- $ --
Current maturities of
other long-term
obligations............ 1,853 1,853 -- -- 1,853
Accounts payable......... 42,117 42,117 (6,766) -- 35,351
Accrued liabilities...... 51,645 51,645 (22,124) -- 29,521
-------- -------- --------- ----------- ----------
Total current
liabilities.......... 120,615 95,615 (28,890) -- 66,725
Long term debt, net of
current maturities..... 229,700 -- -- 261,600(f) 261,600
Industrial revenue
bonds.................. 2,370 2,370 -- -- 2,370
10 1/2% Senior
Subordinated Notes due
2006................... 100,000 100,000 -- (100,000)(g) --
Senior Subordinated
Discount Notes due
2009................... -- -- -- 106,909(h) 106,909
Other long-term
obligations, net of
current maturities..... 4,547 4,547 (70) -- 4,477
Deferred tax
liabilities............ 13,161 13,161 (443) -- 12,718
-------- -------- --------- ----------- ----------
Total liabilities...... 470,393 215,693 (29,403) 268,509 454,799
SHAREHOLDERS' EQUITY:
Preferred stock.......... -- -- -- -- --
Common stock............. 14 -- -- -- --
Additional paid in
capital................ 220,322 547,207 -- (436,669)(i) 110,538
Retained earnings
(accumulated
deficit)............... 80,739 -- (12,274) (26,022)(e) (38,296)
Subscriptions
receivable............. (5,200) (1,918) 1,918 -- --
Accumulated other
Comprehensive loss..... (11,462) (11,462) (136) -- (11,598)
-------- -------- --------- ----------- ----------
Total shareholders'
equity............... 284,413 533,827 (10,492) (462,691) 60,644
-------- -------- --------- ----------- ----------
Total liabilities &
shareholders'
equity............... $754,806 $749,520 $ (39,895) $ (194,182) $ 515,443
======== ======== ========= =========== ==========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Balance Sheet.
55
<PAGE> 64
MAXXIM MEDICAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) Reflects the pro forma consolidated financial position of the Company after
giving effect to the Asset Dropdown. In connection with the Transactions,
Holdings contributed all of its assets and liabilities (other than the
liabilities under its previous credit facility ($254,700 as of August 1,
1999) and $5,286 of capitalized financing costs related to its previous
credit facility) to the Issuer. The previous credit facility was repaid and
terminated in connection with the Transactions. The Asset Dropdown reflects
the net equity contributed to the Issuer of $533,827.
(b) As a result of the Transactions, the consolidated financial position and
results of operations of Holdings are substantially the same as those of
the Issuer, except that Holdings has outstanding $98,500 aggregate
principal amount at maturity ($50,000 aggregate accreted value outstanding
at November 12, 1999) of Holdings Notes which are obligations of Holdings
and not the Issuer, $2,400 of capitalized financing costs related to the
Holdings Notes, deferred tax assets totaling $6,400 for the write-off of
financing costs related to Holdings' previous credit facility not
contributed to the Issuer and non-cash compensation expense recorded by
Holdings for the cash-out of employees' and certain Management Investors'
options, and $1,000 of tax loans to be issued by Holdings to the Continuing
Shareholders in connection with the Transactions.
(c) Reflects the receipt of $228,000 cash proceeds from (i) the sale of Circon
to Circon Holdings and (ii) the repayment of intercompany indebtedness owed
by Circon to Holdings on or prior to the closing of the Transactions.
Circon's rights in certain property and equipment with a carrying value of
$4,785 and associated liabilities with a carrying value of $2,775 were
transferred by Circon to the Company apart from the Circon Sale and are now
a part of the Company's operations. In connection with the Circon Sale, a
loss of $(12,274), calculated as the purchase price paid by Circon Holdings
for Circon's capital stock less the carrying value of Circon's net assets
(after giving effect to the transfer of Circon's rights in certain assets
and liabilities described in the preceding sentence), has been reflected as
a charge to retained earnings. This adjustment has not been reflected in
the pro forma statements of operations and was charged to operations upon
consummation of the Transactions.
(d) Reflects the following:
<TABLE>
<S> <C>
SOURCES OF CASH
New credit facilities -- see note (f)............... $ 261,600
Sale of Senior Subordinated Discount Notes due 2009
and Warrants -- see note (h)...................... 110,000
USES OF CASH
Repayment of 10 1/2% Senior Subordinated Notes due
2006 -- see note (g).............................. (100,000)
Dividends to Holdings -- see note (i)............... (439,760)
Transaction fees and expenses of the Issuer -- see
note (e).......................................... (49,800)
---------
$(217,960)
=========
</TABLE>
56
<PAGE> 65
MAXXIM MEDICAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
BALANCE SHEET -- (CONTINUED)
(e) Reflects the following fees and expenses:
<TABLE>
<CAPTION>
OTHER RETAINED
ASSETS, NET DEFERRED TAXES EARNINGS TOTAL
----------- -------------- --------- -------
<S> <C> <C> <C> <C>
Capitalized financing
costs................ $19,452 $ -- $ -- $19,452
Tender premium and
consent payment on
10 1/2% Senior
Subordinated Notes
due 2006........... -- 4,256 6,944 11,200
Key executive
bonuses............ 1,392 2,271 3,663
Other fees and
expenses........... 15,485 15,485
Write-off of
unamortized
financing fees on
10 1/2% Senior
Subordinated Notes
due 2006
refinanced......... (2,133) 811 1,322 --
------- ------ ------- -------
$17,319 $6,459 $26,022 $49,800
======= ====== ======= =======
</TABLE>
Total estimated transaction fees and expenses are $52,200, consisting of
(i) $2,400 of expenses incurred by Holdings related to the issuance of
$98,500 aggregate principal amount at maturity of Holdings Notes, (ii)
$19,452 of capitalized fees and expenses related to the issuance of the old
notes and related warrants and the new credit facilities and (iii) $30,348
of other fees and expenses, $24,700 of which was charged against
shareholders' equity following consummation of the Transactions. Such other
fees and expenses consist of (i) $11,200 related to the tender premium and
consent payment for the repayment of the 10 1/2% Senior Subordinated Notes
due 2006 (reflected as a charge to retained earnings of $6,944, net of a
tax benefit of $4,256, and charged to operations following consummation of
the Transactions), (ii) $3,663 for the estimated bonus expense associated
with the key executive special bonuses paid in connection with the merger
(reflected as a charge to retained earnings of $2,271, net of a tax benefit
of $1,392, and charged to operations following consummation of the
Transactions) and (iii) $15,485 for estimated other fees and expenses
consisting of (a) professional and advisory fees and expenses and (b) other
fees and expenses such as printing and filing fees. No tax benefit has been
provided for the $15,485 of other fees and expenses, as such expenses are
not deductible for tax purposes.
The $2,133 write-off relates to unamortized financing fees on the 10 1/2%
Senior Subordinated Notes due 2006 refinanced, net of a tax benefit of
$811. This adjustment has not been reflected in the pro forma statements of
operations and was charged to operations upon consummation of the
Transactions.
(f) Reflects the incurrence of debt under the new credit facilities.
57
<PAGE> 66
MAXXIM MEDICAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
BALANCE SHEET -- (CONTINUED)
(g) Reflects the purchase in the debt tender offer of all of the outstanding
10 1/2% Senior Subordinated Notes due 2006.
(h) Reflects the issuance of the old notes. The old notes have a face value of
$144,552 and are recorded net of a $34,552 discount. The discount will be
accreted over 10 years, the life of the old notes. Sold together with each
old note was a warrant to purchase 0.8226 shares of Holdings common stock
(a total of 144,552 warrants). Each warrant is valued at $21.38, for a
total warrant value of $3,091. The value allocated to the warrants will be
amortized over the life of the old notes (and exchange notes, if old notes
are exchanged for exchange notes). Since Holdings has issued these warrants
in connection with the Company's issuance of the old notes, the value of
the warrants is reflected in the Company's additional paid in capital. See
note (i) below.
(i) Represents the $3,091 value allocated to the warrants issued with the old
notes (see note (h) above), and the estimated dividends to Holdings from
its subsidiaries to finance a portion of the Transactions as follows:
<TABLE>
<S> <C>
USES REQUIRED BY HOLDINGS:
Repayment of previous credit facility................ $254,700
Financing costs on Holdings Notes.................... 2,400
Merger Consideration................................. 356,722
Option Consideration................................. 11,148
Management tax loans................................. 1,000
--------
$625,970
--------
LESS:
HOLDINGS SOURCES:
Holdings Notes and warrants.......................... $ 50,000
Investor Equity Contribution......................... 131,800
Management Investors' option proceeds invested....... 4,410
--------
$186,210
========
Dividends to Holdings................................ $439,760
========
</TABLE>
58
<PAGE> 67
MAXXIM MEDICAL GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED AUGUST 1, 1999
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS FOR THE
-----------------------------
HOLDINGS ASSET OTHER THE COMPANY
HISTORICAL(a) DROPDOWN(b) CIRCON SALE(c) TRANSACTIONS PRO FORMA
------------- ----------- -------------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............ $618,865 $ -- $(94,457) $ -- $524,408
Cost of sales........ 420,074 -- (42,574) -- 377,500
-------- -------- -------- -------- --------
Gross profit....... 198,791 -- (51,883) -- 146,908
Selling, general, and
administrative
expenses........... 135,232 -- (39,490) (1,244)(d) 94,498
Transition
expenses........... 3,371 -- (1,355) -- 2,016
-------- -------- -------- -------- --------
Income from
operations....... 60,188 -- (11,038) 1,244 50,394
Interest expense,
net................ 22,978 (12,302)(e) 95 31,252(f) 42,023
Other income, net.... 827 -- (19) -- 808
-------- -------- -------- -------- --------
Income before
income taxes..... 38,037 12,302 (11,152) (30,008) 9,179
Income taxes......... 16,462 4,675(g) (5,464) (10,374)(g) 5,299
-------- -------- -------- -------- --------
Net income......... $ 21,575 $ 7,627 $ (5,688) $(19,634) $ 3,880
======== ======== ======== ======== ========
EBITDA(h)............ 75,579
EBITDA margin(h)..... 14.4%
</TABLE>
FOR THE FISCAL YEAR ENDED NOVEMBER 1, 1998
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS FOR THE
------------------------------
HOLDINGS WINFIELD ASSET OTHER THE COMPANY
HISTORICAL ACQUISITION(i) DROPDOWN TRANSACTIONS PRO FORMA
---------- --------------- --------- ------------ -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales.............. $522,516 $ 19,598 $ -- $ -- $542,114
Cost of sales.......... 381,638 11,602 -- -- 393,240
-------- -------- -------- -------- --------
Gross profit......... 140,878 7,996 -- -- 148,874
Selling, general, and
administrative
expenses............. 94,410 6,986 -- (1,244)(d) 100,768
616(j)
-------- -------- -------- -------- --------
Income from
operations......... 46,468 394 -- 1,244 48,106
Interest expense,
net.................. 13,420 273 (3,231)(e) 31,177(f) 41,639
Other income, net...... 1,042 19 -- -- 1,061
-------- -------- -------- -------- --------
Income before income
taxes.............. 34,090 140 3,231 (29,933) 7,528
Income taxes........... 14,454 349 1,228(g) (10,374)(g) 5,657
-------- -------- -------- -------- --------
Net income........... $ 19,636 $ (209) $ 2,003 $(19,559) $ 1,871
======== ======== ======== ======== ========
EBITDA(h).............. 68,903
EBITDA margin(h)....... 12.7%
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Operations.
59
<PAGE> 68
MAXXIM MEDICAL GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED AUGUST 1, 1999
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS FOR THE
--------------------------------------------
HOLDINGS ASSET OTHER THE COMPANY
HISTORICAL(a) DROPDOWN(b) CIRCON SALE(c) TRANSACTIONS PRO FORMA
------------- ----------- -------------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............ $485,367 $ -- $(94,457) $ -- $390,910
Cost of sales........ 324,327 -- (42,574) -- 281,753
-------- -------- -------- --------- --------
Gross profit....... 161,040 -- (51,883) -- 109,157
Selling, general, and
administrative
expenses........... 109,947 -- (39,490) (933)(d) 69,524
Transition
expenses........... 3,371 -- (1,355) -- 2,016
-------- -------- -------- --------- --------
Income from
operations....... 47,722 -- (11,038) 933 37,617
Interest expense,
net................ 19,940 (12,069)(e) 95 23,377(f) 31,343
Other income, net.... 299 -- (19) -- 280
-------- -------- -------- --------- --------
Income before
income taxes..... 28,081 12,069 (11,752) (22,444) 6,554
Income taxes......... 12,228 4,586(g) (5,464) (7,762)(g) 3,588
-------- -------- -------- --------- --------
Net income......... $ 15,853 $ 7,483 $ (5,688) $ (14,682) $ 2,966
======== ======== ======== ========= ========
EBITDA (h)........... $ 57,282
EBITDA margin (h).... 14.7%
</TABLE>
FOR THE NINE MONTHS ENDED AUGUST 2, 1998
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS FOR THE
------------------------------------------ THE
HOLDINGS WINFIELD ASSET OTHER COMPANY
HISTORICAL ACQUISITION(i) DROPDOWN TRANSACTIONS PRO FORMA
---------- -------------- -------- ------------ ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales................... $389,018 $19,598 $ -- $ -- $408,616
Cost of sales............... 285,891 11,602 -- -- 297,493
-------- ------- ------- ----------- --------
Gross profit.............. 103,127 7,996 -- -- 111,123
Selling, general, and
administrative expenses... 69,125 6,986 -- (933)(d) 75,794
616(j)
-------- ------- ------- ----------- --------
Income from operations.... 34,002 394 -- 933 35,329
Interest expense, net....... 10,382 273 (2,998)(e) 23,303(f) 30,960
Other income, net........... 514 19 -- -- 533
-------- ------- ------- ----------- --------
Income before income
taxes................... 24,134 140 2,998 (22,370) 4,902
Income taxes................ 10,220 349 1,139(g) (7,762)(g) 3,946
-------- ------- ------- ----------- --------
Net income................ $ 13,914 $ (209) $ 1,859 $ (14,608) $ 956
======== ======= ======= =========== ========
EBITDA(h)................... 50,606
EBITDA margin(h)............ 12.4%
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Operations.
60
<PAGE> 69
MAXXIM MEDICAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) Includes the unaudited results of Circon for the period January 6, 1999 to
August 1, 1999.
(b) As a result of the Transactions, the consolidated financial position and
results of operations of Holdings are substantially the same as those of
the Issuer, except that Holdings has outstanding $98,500 aggregate
principal amount at maturity ($50,000 aggregate accreted value outstanding
at November 12, 1999) of Holdings Notes which are obligations of Holdings
and not the Issuer, $2,400 of capitalized financing costs related to the
Holdings Notes, deferred tax assets totaling $6,400 for the write-off of
financing costs related to Holdings' previous credit facility not
contributed to the Issuer and non-cash compensation expense recorded by
Holdings for the cash-out of employees' and certain Management Investors'
options, and $1,000 of tax loans to be issued by Holdings to the Continuing
Shareholders in connection with the Transactions.
(c) Reflects the adjustments to the Company's Statements of Operations
necessary to give effect to the Circon Sale.
(d) Adjustment reflects the following:
<TABLE>
<CAPTION>
TWELVE MONTHS FISCAL YEAR NINE MONTHS ENDED
ENDED ENDED ---------------------
AUGUST 1, NOVEMBER 1, AUGUST 2, AUGUST 1,
1999 1998 1998 1999
------------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Fox Paine Advisory
Fee(1)............... $ 756 $ 756 $ 567 $ 567
Management Services
Fee(2)............. (2,000) (2,000) (1,500) (1,500)
------- ------- ------- -------
$(1,244) $(1,244) $ (933) $ (933)
======= ======= ======= =======
</TABLE>
(1) Reflects the estimated management advisory fee that would have been
charged to the Issuer by Fox Paine during such periods. See "Certain
Relationships and Related Party Transactions -- Services Agreement."
(2) Reflects the estimated fee that would have been paid by Circon to the
Company under the services agreement for management services provided
to Circon by the Company during such periods. See "Certain
Relationships and Related Party Transactions -- Services Agreement."
(e) Reflects the interest expense (including amortization of financing fees) on
Holdings' previous credit facility not contributed to the Company in
connection with the Asset Dropdown. In connection with the Transactions,
Holdings contributed all of its assets and liabilities (other than the
liabilities under the its previous credit facility ($254,700 as of August
1, 1999) and $5,286 of debt financing costs related to the its previous
credit facility) to the Issuer. The previous credit facility was repaid and
terminated in connection with the Transactions.
61
<PAGE> 70
MAXXIM MEDICAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS -- (CONTINUED)
(f) Adjustment to interest expense to reflect the following:
<TABLE>
<CAPTION>
TWELVE FISCAL
MONTHS YEAR NINE MONTHS ENDED
ENDED ENDED ---------------------
AUGUST 1, NOVEMBER 1, AUGUST 2, AUGUST 1,
1999 1998 1998 1999
--------- ----------- --------- ---------
<S> <C> <C> <C> <C>
FINANCING INCURRED WITH
THE TRANSACTIONS:
Revolving credit
facility ($1,600 at
8.75%)................ $ 140 $ 140 $ 105 $ 105
Revolving credit
facility commitment
fee(1)................ 242 242 181 181
Term Loan A facility
($80,000 at 8.75%).... 7,000 7,000 5,236 5,236
Term Loan B facility
($90,000 at 9.25%).... 8,325 8,325 6,227 6,227
Term Loan C facility
($90,000 at 9.5%)..... 8,550 8,550 6,394 6,394
Senior Subordinated
Discount Notes due
2009 ($110,000 at
11%).................. 12,100 12,100 9,050 9,050
Amortization of
financing costs
resulting from the
Transactions ($19,452
amortized between 6 to
10 years)............. 2,349 2,349 1,762 1,762
Accretion of note
discount.............. 3,109 3,046 2,279 2,342
Accretion of warrants... 242 230 173 184
------- ------- ------- -------
$42,057 $41,982 $31,407 $31,481
Less: Historical
interest expense
related to the 10 1/2%
Senior Subordinated
Notes due 2006........ 10,805 10,805 8,104 8,104
------- ------- ------- -------
Pro forma adjustment.... $31,252 $31,177 $23,303 $23,377
======= ======= ======= =======
</TABLE>
(1) The $50,000 revolving credit facility bears a commitment fee equal to 50
basis points times the undrawn portion of the facility.
The effect of a 0.25% change in the annual interest rate of the revolving
credit facility, Term Loan A facility, Term Loan B facility, Term Loan C
facility and the old notes would change pro forma interest expense by $929
for the twelve months ended August 1, 1999 and the fiscal year ended
November 1, 1998, and $695 for the nine months ended August 2, 1998 and
August 1, 1999.
62
<PAGE> 71
MAXXIM MEDICAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS -- (CONTINUED)
(g) Adjustments to reflect the tax effect of the pro forma adjustments at the
combined federal and state statutory rate of 38%. In calculating the tax
adjustment, the goodwill amortization as calculated in note (j) below is
non-deductible for income tax purposes.
(h) EBITDA for any relevant period presented is defined as net income plus
income taxes, interest expense, net, depreciation and amortization,
non-cash stock compensation expense and transition expenses. Non-cash stock
compensation expense was $752 for the pro forma twelve months ended August
1, 1999, $625 for the fiscal year ended November 1, 1998, $468 for the nine
months ended August 2, 1998 and $595 for the nine months ended August 1,
1999. Transition expenses of $3,371 incurred in the nine months ended
August 1, 1999 include $2,016 incurred for sales force restructuring and
$1,355 incurred for the acquisition of Circon and integration related
charges. EBITDA is not a measure recognized by generally accepted
accounting principles and should not be considered in isolation or as a
substitute for operating income, as an indicator of liquidity or as a
substitute for net cash provided by operating activities, which are
determined in accordance with generally accepted accounting principles.
EBITDA margin represents EBITDA as a percentage of net sales.
(i) Includes the unaudited results for Winfield Medical for the period November
3, 1997 to June 26, 1998 (the date of acquisition).
(j) Reflects the amortization of Winfield Medical goodwill for the eight months
ended June 26, 1998. Approximately $27,700 of goodwill was recorded in the
Winfield Acquisition and the Winfield goodwill is being amortized over 30
years. As the goodwill is non-deductible for tax purposes, the goodwill was
not tax affected in calculating the pro forma tax adjustment.
63
<PAGE> 72
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF HOLDINGS
The following table sets forth selected historical consolidated financial
information of Holdings as of the end of and for fiscal years 1994, 1995, 1996,
1997 and 1998 and as of and for the nine months ended August 2, 1998 and August
1, 1999. The fiscal year of Holdings ends on the Sunday following the last
Thursday in October.
The historical consolidated financial information as of the end of and for
fiscal years 1994 and 1995 has been derived from Holdings' audited consolidated
financial statements and the notes thereto, which are not included in this
prospectus. The historical consolidated financial information as of the end of
and for fiscal years 1996, 1997 and 1998 and as of and for the nine months ended
August 2, 1998 and August 1, 1999 has been derived from Holdings' consolidated
financial statements and the notes thereto, which are included elsewhere in this
prospectus. The unaudited consolidated financial statements of Holdings include,
in the opinion of management, all adjustments (which consist only of normal
recurring accruals) necessary for a fair presentation of the results of
operations and financial position for and as of the end of such periods. Results
of operations for the nine months ended August 1, 1999 are not necessarily
indicative of the results to be expected for the full year or for any future
period. Results for the fiscal year ended November 1, 1998 include the results
of Winfield Medical for the period from June 26, 1998 (the date of the Winfield
Acquisition) to November 1, 1998. Results for the nine months ended August 1,
1999 include the results of Circon for the period from January 6, 1999 (the date
of the acquisition of Circon) to August 1, 1999. Circon was sold as part of the
Transactions. During the periods reported, there have been other acquisitions
and divestitures which have impacted the reported results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Issuer had no operations or assets prior to the Asset Dropdown.
Pursuant to the Asset Dropdown, Holdings contributed all of its assets and
liabilities (other than those relating to Holdings' previous credit facility) to
the Issuer. As a result of the Transactions, Holdings guaranteed the old notes
and the new credit facilities (and will guarantee any exchange notes) and has no
substantial operations or assets other than the capital stock of the Issuer.
The information set forth below is qualified in its entirety by and should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
of Holdings and the notes thereto included elsewhere in this prospectus.
64
<PAGE> 73
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF HOLDINGS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------------------------------- ---------------------
OCTOBER 30, OCTOBER 29, NOVEMBER 3, NOVEMBER 2, NOVEMBER 1, AUGUST 2, AUGUST 1,
1994 1995 1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales.................. $191,382 $ 265,726 $ 399,836 $529,552 $522,516 $389,018 $ 485,367
Cost of sales.............. 129,569 186,495 294,164 397,691 381,638 285,891 324,327
-------- --------- --------- -------- -------- -------- ---------
Gross profit............... 61,813 79,231 105,672 131,861 140,878 103,127 161,040
Selling, general, and
administrative
expenses................. 48,390 60,329 77,980 90,101 94,410 69,125 109,947
Nonrecurring charges and
transition expenses(1)... -- 10,845 -- -- -- -- 3,371
-------- --------- --------- -------- -------- -------- ---------
Income from operations..... 13,423 8,057 27,692 41,760 46,468 34,002 47,722
Interest expense, net...... 2,059 4,088 13,143 22,145 13,420 10,382 19,940
Other income, net.......... 859 1,014 583 2,751 1,042 514 299
-------- --------- --------- -------- -------- -------- ---------
Income before income
taxes.................... 12,223 4,983 15,132 22,366 34,090 24,134 28,081
Income taxes............... 4,538 2,054 6,422 9,485 14,454 10,220 12,228
Change in accounting for
income taxes............. 380 -- -- -- -- -- --
-------- --------- --------- -------- -------- -------- ---------
Net income................. $ 8,065 $ 2,929 $ 8,710 $ 12,881 $ 19,636 $ 13,914 $ 15,853
======== ========= ========= ======== ======== ======== =========
BALANCE SHEET DATA (AT END
OF PERIOD):
Working capital............ $ 82,886 $ 73,286 $ 122,086 $ 99,815 $108,918 $ 99,317 $ 141,554
Total assets............... 165,416 264,490 465,347 424,046 468,051 440,241 754,806
Total debt................. 30,434 108,158 267,926 221,085 121,683 110,882 363,470
Total shareholders'
equity................... 111,470 116,351 123,556 137,928 272,909 262,679 284,413
OTHER FINANCIAL DATA:
Net cash provided by
operating activities..... 13,422 3,295 357 49,577 55,542 51,847 36,649
Net cash used in investing
activities............... (15,900) (106,879) (124,921) (3,199) (67,954) (44,086) (268,206)
Net cash provided by (used
in) financing............ 31,534 75,782 125,484 (48,807) 13,371 2,110 232,974
Depreciation and
amortization............. 7,130 9,073 14,682 16,665 18,379 13,544 23,080
Capital expenditures(2).... 12,100 9,274 10,625 6,829 23,441 15,519 23,365
Ratio of earnings to fixed
charges(3)............... 6.2x 2.2x 2.1x 2.0x 3.3x 3.2x 2.3x
</TABLE>
- -------------------------
(1) Non-recurring charges include $10,845 incurred in fiscal year 1995 comprised
primarily of $1,300 for restructuring expenses, $2,200 for facility
consolidation expenses and $7,345 for non-cash asset write-downs. Transition
expenses of $3,371 incurred in the nine months ended August 1, 1999 include
$2,016 for sales force restructuring, comprised primarily of $1,243 for
severance costs, $450 for training and $323 for other transition expenses,
and $1,355 for Circon acquisition and integration related charges, comprised
primarily of $500 for training and $855 for other transition expenses
including bonuses and professional fees as a result of the acquisition of
Circon.
(2) Capital expenditures exclude expenditures for acquisitions, net of
divestitures.
(3) The ratio of earnings to fixed charges has been computed by dividing
earnings available for fixed charges (earnings before income taxes plus
fixed charges less capitalized interest) by fixed charges (interest expense
plus capitalized interest and the portion of operating lease rental expense
that represents the interest factor).
65
<PAGE> 74
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Pursuant to the Asset Dropdown, Holdings contributed all of its assets and
liabilities (other than those relating to the Holdings' previous credit
facility) to the Issuer. The Issuer did not have any operations or assets prior
to the Asset Dropdown. As a result of the Transactions, Holdings has guaranteed
the old notes (and will guarantee any exchange notes) and the new credit
facilities and has no material assets or operations other than its ownership of
all of the Issuer's capital stock. References to "we," "our" and "us" in the
discussion below refer to Holdings and its subsidiaries.
The following discussion and analysis of Holdings' financial condition and
results of operations covers only periods prior to the Transactions.
Accordingly, the discussion and analysis of historical periods does not reflect
the significant impact that the Transactions had on Holdings and the Issuer,
including significantly increased leverage and liquidity requirements. See "Risk
Factors" and "-- Liquidity and Capital Resources." In order to provide holders
of old notes a basis for comparison, we have excluded the effects of our January
1999 acquisition of Circon (which was sold to Circon Holdings Corporation as
part of the Transactions) from certain of the analyses. You should read the
following discussion in conjunction with Holdings' historical consolidated
financial statements and the related notes and the pro forma and other financial
information included elsewhere in this prospectus.
RECENT ACQUISITIONS AND DIVESTITURES
Since 1986, we have completed 21 acquisitions, including Circon. We have
pursued acquisitions that have expanded or complemented existing product groups,
increased vertical integration or enlarged our customer base. Our most recent
acquisitions are as follows:
CIRCON. In January 1999, we acquired Circon for $260.0 million,
including the repayment of $32.5 million of Circon debt and certain fees
and expenses incurred in connection with the acquisition. We obtained all
funds required in connection with the acquisition through borrowings under
our previous credit facility. Circon is a producer of endoscope systems,
urology endoscopes, gynecology endoscopes, gynecology sterilization
products, suction/irrigation products and premium urology stents. Circon
Holdings acquired Circon as part of the Transactions and Circon is now
pursuing its business strategy separately from us and the Company.
GLOVE PLANT. In September 1998, we purchased a glove manufacturing
plant for approximately $16.1 million, funded from cash on hand. The plant
is located in Eaton, Ohio and produces non-latex examination gloves used
primarily in hospitals and surgery centers. The acquisition provided us
with additional glove-manufacturing capacity and an experienced work force.
WINFIELD MEDICAL. In June 1998, we acquired Winfield Medical for
approximately $31.3 million, funded from cash on hand, and the assumption
of approximately $5.3 million of capital lease obligations. Winfield
Medical was a developer, manufacturer and distributor of single-use
specialty medical products, primarily bio-safety containment products.
66
<PAGE> 75
STERILE CONCEPTS. In July 1996, we acquired Sterile Concepts for
approximately $110.0 million in cash (net of cash on hand at Sterile
Concepts), excluding acquisition costs of approximately $8.6 million paid
in fiscal year 1996. The cash purchase price, repayment of approximately
$34.2 million of Sterile Concepts' debt and refinancing of approximately
$72.7 million of our then-existing debt were funded through approximately
$121.0 million of borrowings under our previous credit facility and the net
proceeds of $97.0 million from the issuance of $100.0 million principal
amount of 10 1/2% Senior Subordinated Notes due 2006. Sterile Concepts
assembled, packaged and distributed custom procedure trays for hospitals,
outpatient surgery centers and medical clinics. The acquisition of Sterile
Concepts increased our custom procedure tray business by over 200%, thereby
significantly expanding vertical integration opportunities in custom
procedure trays. As a result of the acquisition, we became the second
leading supplier of custom procedure trays in the United States.
We have also divested companies or product lines in recent years which
did not support our focus as a leading developer, manufacturer, distributor
and marketer of single-use specialty medical products. Significant
divestitures are as follows:
NON-STERILE PRODUCTS. In December 1998, we sold certain assets and
liabilities associated with our non-sterile products to CareLine, Inc. for
approximately $3.1 million, which consisted of approximately $1.2 million
in cash and a $1.9 million promissory note. This product group contributed
net sales of $11.8 million, $13.8 million and $16.3 million in fiscal years
1998, 1997 and 1996, respectively.
HENLEY MEDICAL. In May 1996, we sold certain assets related to our
Henley Healthcare division operations to Henley Healthcare, Inc. (formerly
Lasermedics Inc.) for approximately $13.0 million, which consisted of
approximately $6.0 million in cash and a $7.0 million convertible note. In
fiscal year 1998, Holdings elected to convert $4.0 million of the
convertible note into 2,000,000 shares of the purchaser's common stock.
Subsequent to this conversion, Holdings sold 975,000 shares during fiscal
year 1998 in various private transactions. The assets sold in this
divestiture were used by the Henley division to manufacture and sell
various types of physical medicine, rehabilitation and pain management
products. Fiscal year 1996 net sales include sales of $8.3 million of
Henley division products.
VERTICAL INTEGRATION
Our ability to vertically integrate the products we manufacture into our
custom procedure trays greatly affects our profitability because
self-manufactured products typically generate higher gross margins than those
generated by components purchased from third parties. Most of the items included
in our custom procedure trays, based on the cost of materials, are currently
purchased from third parties. Since the acquisition of Sterile Concepts in July
1996, we have increased over time the percentage of self-manufactured content in
our custom procedure trays. We intend to further increase the percentage of
self-manufactured products in our custom procedure trays through an on-going
marketing effort designed to encourage hospitals and surgery centers to select
products that we manufacture when selecting the components of the custom
procedure trays we sell.
67
<PAGE> 76
HEALTH CARE REFORM; BUYING GROUPS
In recent years, widespread efforts have been made in both the public and
private sectors to control healthcare costs, including the prices of products
such as those we sell, in the United States and abroad. One result of this focus
on cost containment has been a growing trend for hospitals and surgery centers
and other healthcare providers to coordinate their purchases of medical products
through Buying Groups in order to obtain price concessions and control costs. In
response to this trend, we have entered into contracts with many Buying Groups
making available to their members specified products at agreed upon prices. A
majority of our U.S. hospital and surgery center customers are members of Buying
Groups. We believe that our ability to enter into more of such arrangements will
be important to our future success. However, there can be no assurance that we
will be able to obtain new contracts from major Buying Groups. In addition,
because these contracts with Buying Groups involve price concessions from us, it
is important that these contracts result in high sales volumes from members of
the Buying Groups in order to offset the negative impact of lower per unit
prices at lower margins. Although Buying Groups strongly encourage their members
to purchase products under these contracts, compliance by different members of
the Buying Groups may vary. Accordingly, there can be no assurance that there
will be high sales volumes under these contracts. Our failure to enter into new
contracts with Buying Groups in the future or to achieve high sales volumes
under our contracts could have a material adverse effect on our business,
financial condition or results of operations.
We also believe that 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 and that such efforts may have an adverse effect on
the pricing and demand for the Company's products. There can be no assurance
that current or future reform initiatives will not have a material adverse
effect on the Company's business, financial condition or results or operations.
See "Business -- Industry" and "Business -- Sales, Marketing and Distribution."
INTERNATIONAL SALES
For the twelve months ended August 1, 1999, approximately 10.1% of our net
sales (excluding Circon) were to customers outside North America, primarily in
Europe. One of our growth strategies is to increase the percentage of our sales
of products to international markets, primarily in Europe.
In international markets, where the movement towards healthcare reform and
the development of managed care are generally less advanced than in the United
States, we have experienced downward pressure on product pricing and other
effects of healthcare reform similar to those we have experienced in the United
States. We expect that continued development of healthcare reform and managed
care in our primary international markets will result in further downward
pressure on product prices.
68
<PAGE> 77
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, our statement of
operations line items and the percentage of net sales that each amount
represents. You should read the information below in conjunction with
"Summary -- Summary Historical and Pro Forma Financial Information," "Selected
Historical Consolidated Financial Information of Holdings," the historical
consolidated financial statements of Holdings and the accompanying notes
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------------
NOVEMBER 3, 1996 NOVEMBER 2, 1997 NOVEMBER 1, 1998
--------------------- --------------------- ---------------------
FINANCIAL % OF FINANCIAL % OF FINANCIAL % OF
RESULTS NET SALES RESULTS NET SALES RESULTS NET SALES
--------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $399.8 100.0% $529.6 100.0% $522.5 100.0%
Cost of sales........... 294.1 73.6 397.7 75.1 381.6 73.0
------ ----- ------ ----- ------ -----
Gross profit............ 105.7 26.4 131.9 24.9 140.9 27.0
Selling, general and
administrative
expenses.............. 78.0 19.5 90.1 17.0 94.4 18.1
------ ----- ------ ----- ------ -----
Income from
operations......... 27.7 6.9 41.8 7.9 46.5 8.9
Interest expense........ 13.1 3.3 22.1 4.2 13.4 2.6
Other income, net....... 0.5 0.2 2.7 0.5 1.0 0.2
------ ----- ------ ----- ------ -----
Income before income
taxes.............. 15.1 3.8 22.4 4.2 34.1 6.5
Income taxes............ 6.4 1.6 9.5 1.8 14.5 2.8
------ ----- ------ ----- ------ -----
Net income............ $ 8.7 2.2% $ 12.9 2.4% $ 19.6 3.7%
====== ===== ====== ===== ====== =====
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------------------------------------------
AUGUST 2, 1998 AUGUST 1, 1999 AUGUST 1, 1999*
--------------------- --------------------- ---------------------
FINANCIAL % OF FINANCIAL % OF FINANCIAL % OF
RESULTS NET SALES RESULTS NET SALES RESULTS NET SALES
--------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $389.0 100.0% $485.4 100.0% $390.9 100.0%
Cost of sales........... 285.9 73.5 324.3 66.8 281.8 72.1
------ ----- ------ ----- ------ -----
Gross profit.......... 103.1 26.5 161.1 33.2 109.1 27.9
Selling, general and
administrative
expenses.............. 69.1 17.8 110.0 22.7 69.5 17.7
Transition expenses..... -- -- 3.4 0.7 2.0 0.5
------ ----- ------ ----- ------ -----
Income from
operations......... 34.0 8.7 47.7 9.8 37.6 9.7
Interest expense........ 10.4 2.6 19.9 4.1 10.1 2.6
Other income, net....... 0.5 0.1 0.3 0.1 0.1 --
------ ----- ------ ----- ------ -----
Income before income
taxes.............. 24.1 6.2 28.1 5.8 27.6 7.1
Income taxes............ 10.2 2.6 12.2 2.5 10.9 2.8
------ ----- ------ ----- ------ -----
Net income............ $ 13.9 3.6% $ 15.9 3.3% $ 16.7 4.3%
====== ===== ====== ===== ====== =====
</TABLE>
- -------------------------
* Amounts shown exclude the effects of the acquisition of Circon in January
1999.
69
<PAGE> 78
NINE MONTHS ENDED AUGUST 1, 1999 COMPARED TO NINE MONTHS ENDED
AUGUST 2, 1998
NET SALES -- Reported net sales for the first nine months of fiscal year
1999 were $485.4 million. Excluding Circon, net sales for the first nine months
of fiscal year 1999 were $390.9 million compared to $389.0 million for the first
nine months of fiscal year 1998. While total sales excluding Circon remained
approximately constant year over year, product group sales fluctuated. Custom
procedure tray sales declined in the nine months ended August 1, 1999 compared
to the nine months ended August 2, 1998, due to the planned cessation of low
margin business. Medical glove sales increased slightly for the first nine
months of fiscal year 1999 compared to the first nine months of fiscal year
1998. Sales of bio-safety containment products increased in the nine months
ended August 1, 1999 from the nine months ended August 2, 1998, due to the
Winfield Acquisition in June 1998.
GROSS PROFIT -- Reported gross profit for the nine months ended August 1,
1999 was $161.1 million. Excluding Circon, for the nine months ended August 1,
1999 and the nine months ended August 2, 1998, gross profit increased to $109.1
million from $103.1 million, or 27.9% and 26.5% of net sales, respectively. This
improvement was due to the planned cessation of low margin custom procedure tray
business, an increase in the vertical integration percentage for custom
procedure trays period over period and improved margins for bio-safety
containment products resulting from the elimination of certain administrative
activities and consolidation of certain manufacturing facilities, partially
offset by a slight decline in gross profit margins for gloves due to increased
OEM sales in connection with the acquisition of the Eaton, Ohio glove
manufacturing facility in September 1998 and competitive pressures on glove
pricing resulting from price cuts by manufacturers of non-latex gloves.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- Reported selling, general
and administrative expenses for the first nine months of fiscal year 1999 were
$110.0 million. Excluding Circon, selling, general and administrative expenses
for the first nine months of fiscal years 1999 and 1998 were $69.5 million and
$69.1 million, respectively, or 17.7% and 17.8% of net sales in each period,
respectively. Excluding Circon, marketing and selling expenses increased $5.7
million in the nine months ended August 1, 1999 compared to the nine months
ended August 2, 1998 due to the higher selling costs of the Winfield Medical
business and an increase in the administrative fees which are payable to Buying
Groups under our Buying Group contracts. General and administrative expense
excluding Circon decreased $5.3 million period to period primarily due to the
reduction of Winfield Medical's administrative costs.
TRANSITION EXPENSES -- Reported transition expenses for the first nine
months of fiscal year 1999 were $3.4 million. Excluding Circon, in the first
quarter of fiscal year 1999, Holdings recorded transition expenses of $2.0
million related to the restructuring of its sales force, which were unrelated to
Circon.
INCOME FROM OPERATIONS -- Reported income from operations for the nine
months ended August 1, 1999 was $47.7 million. Excluding Circon, income from
operations increased to $37.6 million, or 9.7% of net sales, for the nine months
ended August 1, 1999 from $34.0 million, or 8.7% of net sales, in the comparable
period of the prior fiscal year. This is an increase of 10.9% over the prior
fiscal period.
70
<PAGE> 79
INTEREST EXPENSE -- Reported interest expense for the first nine months of
fiscal year 1999 was $19.9 million. Excluding Circon, interest expense decreased
to $10.1 million for the nine months ended August 1, 1999 from $10.4 million for
the nine months ended August 2, 1998. This decrease in interest expense was due
to a modest reduction in debt balances.
INCOME TAXES -- Holdings' effective tax rate for the nine months ended
August 1, 1999 was 43.5%. Excluding Circon, the effective tax rate for the nine
month periods ended August 1, 1999 and August 2, 1998 was 39.4% and 42.3%,
respectively, and was higher than the statutory rate primarily due to
nondeductible amortization of goodwill resulting from acquisitions.
NET INCOME -- Reported net income for the nine months ended August 1, 1999
was $15.9 million. Excluding Circon, net income for the first nine months of
fiscal years 1999 and 1998 was $16.7 million and $13.9 million, respectively,
due to the factors discussed above.
FISCAL YEAR ENDED NOVEMBER 1, 1998 COMPARED TO FISCAL YEAR ENDED NOVEMBER 2,
1997
NET SALES -- Net sales for fiscal year 1998 were $522.5 million, compared
to $529.6 million reported for fiscal year 1997. The 1.3% decrease is primarily
attributable to the planned cessation of low margin custom procedure tray
business during fiscal year 1998. The decrease in custom procedure tray sales
was partially offset by the addition of bio-safety containment products in the
third and fourth quarters following the Winfield Acquisition in June 1998 and an
increase in glove sales throughout the year. The increase in glove sales during
the year was primarily due to changes in product mix and the acquisition of our
Eaton, Ohio glove plant in the fourth quarter of fiscal year 1998.
GROSS PROFIT -- Gross profit increased to $140.9 million in fiscal year
1998 from $131.9 million reported in fiscal year 1997. The corresponding gross
profit margin rose to 27.0% in fiscal year 1998 from 24.9% in fiscal year 1997.
Gross profit dollar and gross margin rate increases were primarily due to our
fiscal year 1998 focus on product profitability. The 2.1 percentage point gross
profit margin year-over-year improvement resulted from the planned cessation of
low margin custom procedure tray business, greater vertical integration of
self-manufactured components in custom procedure trays, increased glove
manufacturing efficiency, a shift to sales of higher margin gloves and the
addition of higher margin bio-safety containment products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- Marketing and selling
expenses increased to $65.8 million in fiscal year 1998 from $62.6 million in
fiscal year 1997. As a percentage of net sales, these expenses were 12.6% and
11.8% in fiscal years 1998 and 1997, respectively. This increase in both total
dollars and percent of net sales was the result of an increase in the
administrative fees which are payable to Buying Groups under our Buying Group
contracts, lower net sales in fiscal year 1998, and higher selling costs
associated with bio-safety containment products. General and administrative
expenses increased modestly from $27.5 million in fiscal year 1997 to $28.6
million in fiscal year 1998, and were 5.5% of net sales in fiscal year 1998 and
5.2% of net sales in fiscal year 1997. The increase in general and
administrative expenses is primarily attributable to the Winfield Acquisition in
June 1998.
71
<PAGE> 80
INCOME FROM OPERATIONS -- Income from operations increased 11.3% to $46.5
million in fiscal year 1998, from $41.8 million in fiscal year 1997. As a
percentage of sales, income from operations increased 1.0 percentage points in
fiscal year 1998 to 8.9%, from 7.9% in fiscal year 1997.
INTEREST EXPENSE -- Interest expense decreased to $13.4 million in fiscal
year 1998 from $22.1 million in fiscal year 1997. The reduction in interest
expense was due to the repayment of outstanding borrowings under our previous
credit facility using the proceeds of Holdings' secondary common stock offering
completed in March 1998.
INCOME TAXES -- Holdings' effective income tax rate was 42.4% in both
fiscal year 1998 and fiscal year 1997. Our effective tax rate was higher than
the statutory rate primarily as a result of nondeductible amortization resulting
from goodwill recorded in past acquisitions.
NET INCOME -- As a result of the foregoing, fiscal year 1998 net income
increased 52.4% to $19.6 million, compared to fiscal year 1997 net income of
$12.9 million.
FISCAL YEAR ENDED NOVEMBER 2, 1997 COMPARED TO FISCAL YEAR ENDED NOVEMBER 3,
1996
NET SALES -- Net sales for fiscal year 1997 were $529.6 million, a 32.4%
increase over the $399.8 million reported for fiscal year 1996, due to the
increase in sales of custom procedure trays. Fiscal year 1997 sales reflected a
full year of Sterile Concepts custom procedure tray sales compared to three
months of sales of Sterile Concepts products in fiscal year 1996.
GROSS PROFIT -- Gross profit was $131.9 million for fiscal year 1997, a
24.8% increase over the $105.7 million reported for fiscal year 1996. The gross
profit margin declined to 24.9% in fiscal year 1997 from 26.4% in fiscal year
1996 primarily due to the acquisition of Sterile Concepts (which had a gross
margin of 19.1% in fiscal year 1996). However, gross margins improved each
quarter since the acquisition from 23.4% in the fourth quarter of fiscal year
1996 to 25.6% in the fourth quarter of fiscal year 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -- Marketing and selling
expenses increased from $51.8 million in fiscal year 1996 to $62.6 million in
fiscal year 1997; however, as a percentage of net sales, these expenses dropped
from 13.0% to 11.8% in the same periods. General and administrative expenses
increased from $26.2 million in fiscal year 1996 to $27.5 million in fiscal year
1997; as a percentage of net sales, these expenses also dropped from 6.5% to
5.2% for the respective periods. Operating expenses for fiscal year 1996
included approximately $1.6 million of one-time expenses in connection with the
integration of Sterile Concepts. The reduction in expense rates resulted from
the leveraging of the Sterile Concepts operations with our existing operations.
INCOME FROM OPERATIONS -- Income from operations increased 50.8% to $41.8
million in fiscal year 1997, from $27.7 million in fiscal year 1996. Excluding
the one-time expenses in fiscal year 1996 discussed above, income from
operations increased from $29.3 million, or 7.3% of net sales in fiscal year
1996, to $41.8 million, or 7.9% of net sales in fiscal year 1997.
INTEREST EXPENSE -- Interest expense increased to $22.1 million in fiscal
year 1997 from $13.1 million in fiscal year 1996. Interest expense for fiscal
year 1996 included approximately $1.9 million of one-time bridge financing
expenses related to the acquisition
72
<PAGE> 81
of Sterile Concepts. The increase in interest expense was the direct result of
the increase in outstanding debt incurred to finance the acquisition of Sterile
Concepts.
INCOME TAXES -- Holdings' effective income tax rate was 42.4% in both
fiscal year 1997 and fiscal year 1996. Our effective tax rate was higher than
the statutory rate as a result of nondeductible amortization expenses resulting
from goodwill recorded in past acquisitions.
NET INCOME -- As a result of the foregoing, fiscal year 1997 net income was
$12.9 million, compared to fiscal year 1996 net income of $8.7 million.
LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL
Net cash provided by operating activities was $0.4 million, $49.6 million,
$55.5 million, $51.9 million and $36.6 million in fiscal years 1996, 1997 and
1998 and the nine months ended August 2, 1998 and the nine months ended August
1, 1999, respectively. The decrease of $15.3 million in the nine months ended
August 1, 1999 compared to the nine months ended August 2, 1998 reflects a
general decrease in working capital, partially offset by an increase in net
income and an increase in depreciation and amortization related to various
acquisitions during the period. The increase of $5.9 million in fiscal year 1998
compared to fiscal year 1997 was primarily due to an increase in net income,
partially offset by an increase in inventory period over period. The increase of
$49.2 million in fiscal year 1997 compared to fiscal year 1996 was due to
declines in accounts receivable and inventory and increases in accrued
liabilities and net income, partially offset by a decline in accounts payable.
Cash flows used in investing activities were $124.9 million, $3.2 million,
$68.0 million, $44.1 million and $268.2 million in fiscal years 1996, 1997 and
1998 and the nine months ended August 2, 1998 and the nine months ended August
1, 1999, respectively. The acquisition of Circon used $246.8 million of
investing sources in the nine months ended August 1, 1999. Capital expenditures
totaled $23.4 million in the first nine months of fiscal year 1999 due primarily
to our investment in glove manufacturing capacity expansion. The Winfield
Acquisition used $31.3 million of investing sources in fiscal year 1998. Capital
expenditures totaled $23.4 million in fiscal year 1998 and were used primarily
to increase glove manufacturing capacity. Additionally, we invested $16.1
million for the purchase of glove plant assets in fiscal year 1998. Fiscal year
1997 investing activities were primarily related to capital expenditures offset
by proceeds from the sale of investment securities. In fiscal year 1996, we
acquired Sterile Concepts for $118.7 million, net of cash acquired.
Cash flows provided by (used in) financing activities were $125.5 million,
$(48.8) million, $13.4 million, $2.1 million and $233.0 million in fiscal years
1996, 1997 and 1998 and the nine months ended August 2, 1998 and the nine months
ended August 1, 1999, respectively. We entered into a new credit facility in
connection with the acquisition of Circon in January 1999, and additional
borrowings under the facility totaled $240.9 million during the nine month
period ended August 1, 1999. In March 1998, we completed an offering of
4,025,000 shares of common stock at a price to the public of $24.00 per share.
After deducting offering costs and commissions, we received net proceeds of
approximately $91.4 million. We used the proceeds to repay amounts due under our
previous credit facility. In fiscal year 1997, we used $48.3 million to repay
amounts due under such credit
73
<PAGE> 82
facility and to reduce overdrafts. In July 1996, we issued $100.0 million
principal amount of 10 1/2% Senior Subordinated Notes due 2006, from which we
received net proceeds of approximately $97.0 million. In addition, pursuant to
the terms of our previous credit facility, we established a $90.0 million term
loan and a $75.0 million revolving line of credit.
At August 1, 1999, our balance sheet included net goodwill of $272.7
million. The majority of this balance represents goodwill from our three most
recent acquisitions. In January 1999, we acquired Circon. As of August 1, 1999
unamortized goodwill from the Circon acquisition totaled $128.1 million or 47.0%
of net goodwill. In June 1998, we acquired Winfield Medical. Unamortized
goodwill from the Winfield Acquisition totaled $22.9 million at August 1, 1999,
which represents 8.4% of net goodwill as of that date. In July 1996, we acquired
Sterile Concepts. Unamortized goodwill from the Sterile Concepts acquisition
totaled $108.6 million at August 1, 1999, and represented 39.8% of net goodwill
as of that date. The remaining $13.1 million of unamortized goodwill at August
1, 1999, relates to various other acquisitions made between 1992 and 1999. All
components of goodwill are being amortized on a straight line basis over the
applicable useful life. Useful lives have been estimated at 30 years for both
Circon and Winfield Medical, 40 years for Sterile Concepts and 5 to 20 years for
the remaining goodwill components. Total amortization expense for the three and
nine months ended August 1, 1999 was $2.4 million and $6.2 million,
respectively. Management believes that there is no persuasive evidence that any
material portion of this intangible asset will dissipate over a period shorter
than the determined useful life.
EFFECTS OF THE TRANSACTIONS
As a result of the consummation of the Transactions, interest payments on
the old notes, senior debt service under the new credit facilities, working
capital and capital expenditures represent the Company's significant liquidity
requirements. Future, but as yet unidentified, acquisition opportunities may
also represent potentially significant liquidity requirements.
The new credit facilities are provided by a syndicate of banks and other
institutions led by The Chase Manhattan Bank, as administrative agent and
collateral agent, and Chase Securities Inc., as arranger. The new credit
facilities provide for (1) a $50.0 million revolving credit facility, which will
terminate six years from the date of the initial borrowings under the new credit
facilities, (2) a fully drawn $80.0 million Term Loan A facility with a maturity
of six years, (3) a fully drawn $90.0 million Term Loan B facility with a
maturity of seven-and-one-half years and (4) a fully drawn $90.0 million Term
Loan C facility with a maturity of eight-and-one-half years. The revolving
credit facility is available for general corporate purposes, including working
capital and capital expenditures, and includes sublimits of $25.0 million and
$10.0 million, respectively, for letters of credit and swingline loans. Upon the
closing of the Transactions, the Company had $48.4 million of unused borrowing
capacity under the revolving credit facility. For a description of the
amortization and interest rates with respect to the new credit facilities, see
"Description of New Credit Facilities and Other Indebtedness -- New Credit
Facilities."
The new credit facilities impose certain restrictions on Holdings, the
Issuer and the Issuer's subsidiaries, and the indenture imposes certain
restrictions on the Issuer and its subsidiaries, including restrictions on their
ability to incur additional indebtedness, issue preferred stock, pay dividends
and make certain distributions, make investments, sell
74
<PAGE> 83
assets, create liens, enter into certain transactions with affiliates and engage
in certain other activities. In addition, the new credit facilities require the
Issuer to maintain certain financial ratios. The new credit facilities and the
guarantees thereunder are secured by substantially all of the assets of the
Issuer and the guarantors of the new credit facilities, including real and
personal property, inventory, accounts receivable and other intangibles (in each
case subject to certain limited exceptions), and by the capital stock of the
Issuer held by Holdings. See "Description of New Credit Facilities and Other
Indebtedness -- New Credit Facilities." See "Unaudited Pro Forma Financial
Information of the Company."
Holdings and the Company incurred fees and expenses of approximately $52.2
million in connection with the Transactions. See "Unaudited Pro Forma Financial
Information of the Company." In addition, Holdings and the Company substantially
increased their indebtedness upon consummation of the Transactions. If the
Transactions had been completed on August 1, 1999, the Company's pro forma
outstanding indebtedness would have totaled $377.2 million and Holdings'
consolidated pro forma outstanding indebtedness would have totaled $427.2
million, compared to actual historical outstanding indebtedness of Holdings at
such date of $363.5 million. As a result of the new credit facilities and the
old notes (together with any exchange notes exchanged for old notes), the
Company's liquidity requirements will be significantly increased relative to
Holdings' historical requirements, primarily due to increased interest expense
obligations and, commencing on October 31, 2000, principal payment obligations
under the new credit facilities. See "Risk Factors -- Holdings and the Company
will have a substantial amount of debt that they may not be able to service."
We estimate that capital expenditures for fiscal year 2000 will be $11.0
million.
The Issuer's ability to satisfy its debt obligations and to pay principal
and interest on debt, including the old notes and any exchange notes, fund
working capital and make anticipated capital expenditures, will depend on the
Company's future performance, which is subject to general economic, financial
and other factors, some of which are beyond the Company's control. Management
believes that based on current levels of operations and anticipated growth, cash
flow from operations, together with borrowings under the revolving credit
facility, will be adequate for the foreseeable future to make required payments
of principal and interest on the Issuer's debt, including the old notes and any
exchange notes, to fund working capital, and to make expected capital
expenditures. There can be no assurance, however, that the Company's business
will generate sufficient cash flow from operations or that future borrowings
will be available under the revolving credit facility in an amount sufficient to
enable the Issuer to service its debt, including the old notes and any exchange
notes, or to fund other liquidity needs. See "Risk Factors."
BACKLOG
It is our policy and practice to maintain an inventory of finished products
or component parts and materials sufficient to ship products within a few days
of receipt of a product order. As a result, we had no significant backlog of
unshipped orders at August 1, 1999. Management believes that such policy and
practice are typical of industry practice.
75
<PAGE> 84
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks. Market risk is the potential loss arising
from adverse changes in market prices, interest rates and foreign currency
exchange rates. We do not enter into derivative or other financial instruments
for trading or speculative purposes.
INTEREST RATE RISK -- The Company is subject to market risk exposure
related to changes in interest rates on the new credit facilities. Interest on
borrowings under the new credit facilities are at a fixed percentage point
spread from either (1) the greater of prime, base CD or federal funds rates or
(2) LIBOR. The Issuer is able to, at its option, fix the interest rate for LIBOR
for periods ranging from one to six months. The interest rate on all outstanding
obligations under the new credit facilities are currently set off of one month
LIBOR. The Issuer is obligated to enter into within 120 days of the closing of
the new credit facilities, and maintain for at least three years, one or more
interest rate protection agreements in order to fix or limit the Issuer's
interest costs with respect to at least 50% of the outstanding term loans under
the new credit facilities.
FOREIGN CURRENCY EXCHANGE RATE RISK -- Generally we generate net sales and
expenses in the local currency where our products are sold and thus are not
currently subject to significant currency exchange risk. In the future, it is
possible that a greater portion of our net sales outside of North America may
not be denominated in the same local currency as the related expenses and thus
we may be subject to currency exchange risks in connection therewith.
INFLATION
We believe that inflation has not had a material effect on our results of
operations for the past three years. Historically, we believe that we have been
able to minimize the effect of inflation by increasing the selling prices of our
products, improving our manufacturing efficiency and increasing our employee
productivity.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 131, "Disclosure About Segments
of an Enterprise and Related Information" (SFAS No. 131), which is effective for
our fiscal year ending October 31, 1999. This statement establishes standards
for reporting segment information in annual and interim financial statements. It
also establishes standards for related disclosure of products and services,
geographical areas and major customers. Under SFAS No. 131, reporting segments
are determined consistent with the way management organizes and evaluates
financial information internally for making operating decisions and assessing
performance. Management does not believe the adoption of SFAS No. 131 will have
a material impact on its consolidated financial statements.
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133), was issued by the
FASB in June 1998. SFAS No. 133 standardizes the accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts. Under the standard, entities are required to carry all derivative
instruments in the statement of financial position at fair value. SFAS No. 133
is effective for all fiscal quarters of all fiscal years beginning after June
15, 2000. We will adopt SFAS No. 133 beginning in the first quarter of fiscal
year 2001.
76
<PAGE> 85
YEAR 2000
The year 2000 problem relates to computer systems that are designed using
two digits, rather than four, to represent a given year. Therefore, such systems
may recognize "00" as the year 1900 rather than the year 2000, possibly
resulting in major system failures or miscalculations and causing disruptions in
our operations.
We rely on electronic information systems technology to operate our
business. We continuously seek to improve these systems in order to provide
better service to customers and to support our growth objectives. We have
established a three-phased approach to address year 2000 issues, including
embedded technology utilized in our facilities and equipment. The three phases
included in our approach are (1) identification, (2) compliance and (3)
validation. Internally, we have substantially completed, with the aid of outside
consultants, the identification and compliance phases and will continue
completing the validation phase as appropriate. The validation phase consists
primarily of monitoring and testing of new software and all other components and
interfaces that were implemented or upgraded as part of the software
installation or as a result of other identified year 2000 deficiencies. We have
completed most phases of the year 2000 project. Our management is not currently
aware of any significant exposure that would prevent us from being year 2000
compliant on a timely basis.
Externally, we are formally communicating with significant suppliers,
customers and other third parties to assess their year 2000 readiness. We are
also currently determining our potential exposure if any of these external
parties fail to correct their year 2000 issues in a timely manner. We are
currently working with all of our significant external parties in the compliance
and validation phases, which include the monitoring and testing of significant
interfaces with those external parties among other things. There can be no
guarantee that such external parties will achieve year 2000 compliance on a
timely basis, and failure by such significant external parties to achieve
compliance could have a material adverse effect on us.
We have not yet obtained information sufficient to quantify the potential
effects of possible internal and external year 2000 non-compliance, to determine
the likely worst case scenarios or to develop contingency plans to deal with
such scenarios. Having completed the bulk of our year 2000 project, we are now
developing the appropriate contingency plans. While we have proceeded over the
past two years in what we believe to be a reasonably prudent manner to identify
and remediate year 2000 issues, there can be no assurances that our internal and
external contingency plans, once developed, will substantially reduce the risk
of year 2000 non-compliance. A significant interruption in our business due to a
year 2000 non-compliance issue could have a material adverse effect on our
financial position, operations and liquidity.
The total incremental direct and indirect costs of our year 2000 project
are estimated to be approximately $1.5 million, including approximately $0.8
million incurred through August 1, 1999. The estimated costs of the year 2000
project are not expected to have a material impact on our business, operations
or financial condition in the future periods. The anticipated impact and the
total costs of the year 2000 project are based on management's best estimates
and information currently available.
77
<PAGE> 86
BUSINESS
OVERVIEW
We are a leading developer, manufacturer, distributor and marketer of a
broad range of single-use specialty medical products primarily used in the
operating rooms of hospitals and surgery centers. Through our North American and
European sales force of 156 full-time representatives, we sell approximately
23,000 products to approximately 7,000 customers. Our products (and the
percentage they represented of our pro forma total net sales for the twelve
months ended August 1, 1999) include:
- custom procedure trays (56.6%);
- gloves for medical examinations and surgical procedures (21.0%);
- imaging and critical care products for cardiology and radiology (6.7%);
- bio-safety containment products (5.8%);
- drapes and gowns (4.6%); and
- other single-use specialty medical products (5.3%).
We are the second leading supplier of custom procedure trays in the United
States, with approximately 29% of sales of such products in 1998, and we are the
leading supplier of non-latex medical examination gloves to hospitals, surgery
centers and other acute care facilities in the United States, with approximately
35% of sales of such products to such customers for the three months ended March
31, 1999. For the twelve months ended August 1, 1999, approximately 89.9% of our
pro forma total net sales were in North America (substantially all of which were
in the United States) and 10.1% of our pro forma total net sales were outside
the United States (primarily in Europe). For the twelve months ended August 1,
1999, we generated pro forma net sales of $524.4 million and pro forma EBITDA of
$75.6 million.
Our custom procedure trays are kits containing single-use products (such as
surgical drapes and gowns, needles, syringes, pressure syringes, bulb syringes,
scalpels, tubing, skin markers, bowls, cotton towels, towel clamps and other
non-powered instruments) used in surgical and other medical procedures. We
currently assemble approximately 4,000 different custom procedure trays. We
design these custom procedure trays in accordance with the specific preferences
of individual end users (primarily hospitals and surgery centers) that select
components from a list of approximately 9,000 components manufactured by us or
other third party manufacturers. Hospitals and surgery centers have increased
their use of custom procedure trays in recent years in order to increase
efficiency, reduce inventory levels, protect against product contamination and
allow for easier identification of costs associated with specific medical
procedures.
The gloves we manufacture include non-latex medical examination gloves,
which are manufactured entirely from synthetic materials, as well as non-latex
and latex gloves for use in surgical procedures. A June 1997 report published by
the National Institute for Occupational Safety and Health heightened the
awareness and concern of healthcare professionals about allergic reactions from
exposure to latex and has, we believe, contributed to non-latex gloves becoming
the fastest growing portion of medical glove sales. To capitalize on this
expanding business, we have increased our glove capacity from 2.2 billion to 3.5
billion non-latex gloves per year by investing approximately $36.0 million
78
<PAGE> 87
since the beginning of fiscal year 1998 in additional plant capacity, including
two new state-of-the-art production lines. We believe our increased capacity and
high product quality position us to grow in the expanding non-latex medical
glove business.
Hospitals and surgery centers are the primary end-use customers of our
products. Our North American sales force, consisting of approximately 140
full-time representatives, maintains close, direct relationships with the
healthcare professionals and administrators who make the purchasing decisions
for these customers. In addition, a majority of our U.S. hospital and surgery
center customers are members of Buying Groups. See "-- Industry" for a
description of Buying Groups. Our nationwide customer service and distribution
capabilities, broad product offerings and sophisticated supply management
systems, combined with the efforts of our 10 national account managers, have
enabled us to develop close relationships with a number of Buying Groups,
including the six largest Buying Groups, as ranked by number of member
hospitals -- Premier Research Worldwide Ltd., AmeriNet, Inc., Novation, LLC,
Mid-Atlantic Group Network of Shared Services Inc., MHA/MedEcon and Health
Services Corporation of America. Buying Groups typically enter into contracts
with various suppliers that provide that the suppliers will make available
specified products at agreed-upon prices to members of the Buying Groups. Buying
Groups strongly encourage their members to purchase these products, although
compliance by different Buying Group members may vary. Our sales efforts at the
hospital and surgery center level, which are strengthened by the use of our
proprietary DataStat(TM) and ValuQuote(TM) systems (see "-- Business
Strengths"), increase demand for our products among our end-use customers,
including those that make purchases under Buying Group contracts.
Led by our Chairman, President and Chief Executive Officer, Kenneth W.
Davidson, and a team of senior managers who average approximately 18 years of
experience in the medical products industry, we have grown through strategic
acquisitions as well as through the development of new products. Our strategy
has been to acquire companies and develop products that expand or complement
existing product groups, increase vertical integration or enlarge our customer
base. Since Mr. Davidson's arrival in 1986, we have completed 20 acquisitions
(excluding Circon) which, when combined with internal growth, have generated
compound annual growth rates through August 1, 1999 of 44.9% in net sales and
48.8% in EBITDA (in each case, excluding Circon).
INDUSTRY
We compete primarily in the $5.3 billion (based on 1998 sales) U.S.
single-use specialty medical products industry, which has been growing at a
compound annual rate of approximately 6.6% since 1993 and is expected to grow at
a compound annual rate of approximately 6.3% through 2003. The products included
in the U.S. single-use specialty medical products industry are latex and
non-latex medical gloves, custom procedure trays, drapes, gowns, shoe covers,
face masks, non-powered instruments, headgear, needles, syringes, tubing and
prepackaged needle kits and trays, all of which we sell. The primary customers
for single-use specialty medical products are hospitals, surgery centers,
alternate site care providers and physician practices.
We believe several trends have had and will continue to have an impact on
the single-use specialty medical products industry. First, we expect the
projected aging of the population to increase demand for such products because
older people tend to undergo more surgical procedures. Second, we expect efforts
to reduce the transmission of
79
<PAGE> 88
infectious diseases and to address the occupational safety of healthcare
professionals to favorably impact demand for single-use specialty medical
products. Finally, in recent years, widespread efforts have been made in both
the public and private sectors to control healthcare costs in the United States
and abroad. Among other implications, this has led to a growing trend in the
United States for hospitals and surgery centers to consolidate and/or to join
Buying Groups, which are groups of independent hospitals and surgery centers
that coordinate their purchasing and supply requirements on a regional or
national basis in order to obtain price concessions and contain costs. We
believe this trend favors suppliers, like us, that are able to serve national
contracts with a broad product line, sophisticated supply management processes,
high brand name recognition with member hospitals and other end use customers
and nationwide customer service and distribution capabilities.
CUSTOM PROCEDURE TRAYS. The custom procedure tray portion of the U.S.
single-use specialty medical products industry, estimated at $1.1 billion (based
on 1998 sales), has been growing at a compound annual rate of approximately 7.2%
since 1993 and is expected to grow at a compound annual rate of approximately
6.3% through 2003. Custom procedure trays were used in approximately 65% of all
surgical procedures in the United States in 1998. We believe several factors
will contribute to continued growth in demand for custom procedure trays in the
United States, including (1) continued growth in the number of overall surgical
procedures, (2) growth in the number of more complex surgical procedures for
which custom procedure trays are used and (3) growing demand for products that
improve productivity and contain costs.
MEDICAL EXAMINATION AND SURGICAL GLOVES. The medical glove portion of the
U.S. single-use specialty medical products industry, estimated at $1.2 billion
(based on 1998 sales), has been growing at a compound annual rate of
approximately 8.9% since 1993 and is expected to grow at a compound annual rate
of approximately 10.0% through 2003. The medical glove portion can be divided
into latex gloves and non-latex gloves, each of which can be designed either for
medical examinations or surgical procedures. U.S. sales of medical examination
gloves, estimated at $940 million in 1998, are projected to grow at a compound
annual rate of approximately 9.9% through 2003, with the non-latex category
estimated to grow at a compound annual rate of approximately 17.5% through 2003.
U.S. sales of surgical procedure gloves, estimated at $223 million in 1998, are
projected to grow at a compound annual rate of approximately 10.1% through 2003,
with the non-latex category estimated to grow at a compound annual rate of
approximately 30.9% through 2003. A greater emphasis on protecting healthcare
professionals from the transmission of infectious diseases is expected to help
drive growth in sales of both latex and non-latex gloves. A June 1997 report
published by the National Institute for Occupational Safety and Health
heightened the awareness and concern of healthcare professionals about allergic
reactions from exposure to latex and has, we believe, contributed to non-latex
gloves becoming the fastest growing portion of medical glove sales.
EUROPEAN INDUSTRY TRENDS. Although we believe the number of surgical
procedures performed in Europe is only slightly less than the number of surgical
procedures performed in the United States, the use of single-use specialty
medical products, including custom procedure trays, currently is not as
prevalent in Europe as it is in the United States. Custom procedure trays were
used in approximately 8% of all surgical procedures in Europe in 1998 versus
approximately 65% in the United States during such time. We believe that
European healthcare providers will increase their use of single-use specialty
medical products, including custom procedure trays, as demand increases in
Europe for
80
<PAGE> 89
products that improve productivity, help contain healthcare costs and reduce the
transmission of infectious diseases.
BUSINESS STRENGTHS
We believe that the following business strengths provide us with a
foundation to further enhance growth, profitability and our position as an
industry leader:
LEADING SALES POSITIONS. We are the second leading supplier of custom
procedure trays in the United States, with approximately 29% of sales of
such products in 1998, and we are the leading supplier of non-latex medical
examination gloves to hospitals, surgery centers and other acute care
facilities in the United States, with approximately 35% of sales of such
products to such customers for the three months ended March 31, 1999. We
believe our strong reputation for high-quality products, superior customer
service and cost competitiveness makes doing business with us attractive to
our end-use customers as well as to Buying Groups, and has helped us to
establish our leading sales positions. Our leading sales positions in these
products give our products a significant presence in the operating rooms of
hospitals and surgery centers, which we believe allows us to expand the
variety and increase the volume of products sold to our customers.
STRONG CUSTOMER RELATIONSHIPS. We have developed and maintain strong
relationships with Buying Groups, their member hospitals and surgery
centers which purchase and use our products under Buying Group contracts
and independent hospitals and surgery centers. At the Buying Group level,
our nationwide customer service and distribution capabilities, broad
product offerings and sophisticated supply management systems, combined
with the efforts of our 10 national account managers, have enabled us to
develop close relationships with a number of Buying Groups, including the
six largest Buying Groups, as ranked by number of member hospitals --
Premier Research Worldwide Ltd., AmeriNet, Inc., Novation, LLC,
Mid-Atlantic Group Network of Shared Services Inc., MHA/MedEcon and Health
Services Corporation of America. At the hospital and surgery center level,
our North American sales force, consisting of approximately 140 full-time
representatives, maintains close, direct relationships with the healthcare
professionals and administrators who make the purchasing decisions for
these customers, providing value-added solutions and superior customer
service. By working closely with these customers and learning about their
individualized needs, we are able to design, assemble and deliver highly
customized procedure trays quickly on a cost effective basis, which further
strengthens our relationships and reputation with these customers.
VALUE-ADDED CUSTOMER SUPPORT SYSTEMS. We have created and implemented
process innovations that provide significant value to our customers,
including our DataStat(TM) and ValuQuote(TM) software systems and our
EnCompass(SM) Integrated Product Packaging system. Our DataStat(TM)
software system enables us to help our customers measure efficiency and
cost by reviewing various surgical procedures, tracking which components
are used in each procedure and recording surgery time and operating room
delays. Our ValuQuote(TM) software system allows our account managers to
search our component database for cost-effective components that meet the
product and sequencing needs of each customer. We use these two software
systems to design custom procedure trays that address the specific
preferences and requirements of each individual customer. Our EnCompass(SM)
Integrated Product Packaging system is an innovative system that packages
most of the single-use
81
<PAGE> 90
components used in a surgical procedure, together with the custom procedure
tray, into a single modular container. These containers are specially
designed and labeled to meet the inventory and operating room set-up,
turnaround and disposal needs of hospitals and surgery centers. We believe
that these proprietary systems have had and will continue to have an
important impact on our customers' decisions to select the Company to be
their single-use specialty medical products supplier.
MANUFACTURING EXPERTISE. We believe we have developed significant
expertise in the manufacture of non-latex medical examination gloves and in
the assembly and supply management processes that are important to the sale
of custom procedure trays. Technology plays a major role in the
development, manufacture and sale of medical gloves because medical glove
performance is measured by the degree of tactility and barrier protection
that the glove affords. Our most technologically advanced non-latex gloves
are manufactured using a combination of trade secrets and patented
formulations and manufacturing processes that we believe provide us with
technological and performance advantages over our competitors. Similarly,
the assembly and preparation of custom procedure trays from a selection of
approximately 9,000 components requires sophisticated assembly and supply
management processes, as well as extensive systems for processing customer
data. We believe we have developed the physical and technological
infrastructure -- including systems for ordering and tracking components,
coordinating information received from customers and reducing turn-around
and delivery times -- that is necessary to compete effectively in the
custom procedure tray business.
PROVEN MANAGEMENT TEAM WITH SUBSTANTIAL EQUITY OWNERSHIP. Our senior
management team is comprised of eight individuals who average approximately
18 years of experience in the medical products industry. Mr. Davidson, our
Chairman, President and Chief Executive Officer, has 29 years of medical
products industry experience. Since joining the Company in 1986, he has
overseen 20 acquisitions (excluding Circon), that have helped the Company
increase its net sales from $4.6 million in fiscal year 1986 to $524.4
million for the twelve months ended August 1, 1999 (excluding Circon). As a
result of the Transactions, the eight Management Investors own
approximately 8.2% of the outstanding common equity of Holdings (before
giving effect to the exercise of stock options or warrants) and, assuming
the exercise of their stock options, will own approximately 22.8% of the
outstanding common equity of Holdings on a fully-diluted basis.
BUSINESS STRATEGY
Our key business objectives are to enhance growth, profitability and our
position as an industry leader through the following key strategic initiatives:
EMPHASIZE RELATIONSHIPS WITH BUYING GROUPS. We believe that the trend
among Buying Groups to concentrate their supply contracting with fewer,
larger suppliers favors suppliers, like us, that offer the ability to serve
national contracts with a broad product line, sophisticated supply
management processes, high brand name recognition with Buying Group members
and nationwide customer service and distribution capabilities. We intend to
leverage our strengths in these areas and our existing relationships in
order to (1) increase the number of Buying Groups with which we do
business, (2) increase the number of our products approved by each Buying
Group for purchase by its members and (3) increase sales of approved
products to the members of each Buying Group.
82
<PAGE> 91
SEEK GREATER VERTICAL INTEGRATION. Our profitability is greatly
affected by our ability to vertically integrate the products we manufacture
into our custom procedure trays. Most of the items included in our custom
procedure trays, based on the cost of materials, are purchased from third
parties. We intend to increase the percentage of our products integrated
into our custom procedure trays through an aggressive marketing effort
designed to encourage hospitals and surgery centers to select
Company-manufactured products when selecting the components of the custom
procedure trays we sell.
CONTINUE GROWTH THROUGH STRATEGIC ACQUISITIONS AND PRODUCT
DEVELOPMENT. An important focus of our overall strategy is to:
- acquire companies and product groups that expand or complement our
existing product groups, increase vertical integration or enlarge
our customer base; and
- continue our internal product development and enhancement efforts in
order to maintain a leadership position in the medical glove
business and to increase the number of Company-manufactured products
that either can be sold directly or can be included in our custom
procedure trays.
We have successfully used acquisitions to build the Company into a
leading single-use specialty medical products company and we intend to
continue to grow through additional select acquisitions. Since 1986, we
have successfully completed 20 acquisitions (excluding Circon) which, when
combined with internal growth, have generated compound annual growth rates
through August 1, 1999 of 44.9% in net sales and 48.8% in EBITDA (in each
case, excluding Circon). We believe the Company is an attractive platform
from which to grow for the following reasons:
- our strong relationships with Buying Groups and approximately 7,000
end-use customers;
- our North American and European sales force of 156 full-time
representatives;
- our senior management team's experience and track record of
integrating acquisitions; and
- our custom procedure tray business, which creates margin-improvement
opportunities from the vertical integration of newly acquired or
developed products that can be included in our trays.
EXPAND EUROPEAN PRESENCE. We plan to increase our penetration of the
expanding European single-use specialty medical products business by using
our current European operations as a platform for growth and by leveraging
the expertise we have developed from our U.S. experience in the
manufacture, assembly, marketing and distribution of these products. We
believe that European healthcare providers will increase their use of
single-use specialty medical products, including custom procedure trays, as
demand increases in Europe for products that improve productivity, help
contain healthcare costs and reduce the transmission of infectious
diseases. We first introduced products in Europe in January of 1995 through
the acquisition of our Medica subsidiary. For the twelve months ended
August 1, 1999, our pro forma net sales into Europe were $45.2 million, or
8.6% of our pro forma total net sales.
83
<PAGE> 92
PRODUCTS
CUSTOM PROCEDURE TRAYS. Our custom procedure trays are kits containing
single-use products (such as surgical drapes and gowns, needles, syringes,
pressure syringes, bulb syringes, scalpels, tubing, skin markers, bowls, cotton
towels, towel clamps and other non-powered instruments) used in surgical and
other medical procedures. We currently assemble approximately 4,000 different
custom procedure trays. We design these custom procedure trays in accordance
with the specific preferences of individual end users (primarily hospitals and
surgery centers) that select components from a list of approximately 9,000
component parts manufactured by us and third party manufacturers. For a
description of the components that we manufacture and those that we purchase
from third party manufacturers, see "-- Manufacturing." The price of custom
procedure trays ranges from $5 to $1,200 depending on the complexity of the
procedure, with a weighted average selling price of approximately $50 per tray
for the twelve months ended August 1, 1999. For the twelve months ended August
1, 1999, our pro forma net sales from custom procedure trays were $296.9
million, representing 56.6% of our pro forma total net sales.
By using our custom procedure trays, customers receive the following
benefits:
- productivity increases, by reducing the amount of preparation and
turnaround time required for surgical procedures;
- improved supply management, by access to approximately 9,000 single-use
specialty medical components for use in procedures without the need to
maintain a significant inventory of these products;
- cost savings, by reducing the commitment of capital and personnel needed
in the administration, inventory management and sterilization of a large
number of reusable medical supplies for surgical and other medical
procedures; and
- cost information and reporting on a procedure-specific basis, which is
important for determining a hospital's or surgery center's cost per
procedure.
Our custom procedure trays are also used as a component in our
EnCompass(SM) Integrated Product Packaging system, which is an innovative system
that packages most of the single-use sterile and non-sterile components used in
a surgical procedure, together with the custom procedure tray, into a single
modular container. These containers are specially designed and labeled to meet
inventory and operating room set-up, turnaround and disposal needs of hospitals
and surgery centers.
In addition, our custom procedure tray sales are supported by our
proprietary DataStat(TM) software system, which reviews various surgical
procedures, tracks components used in each procedure and records surgery time
and operating delays, and ValueQuote(TM) software system, which allows account
managers to search our component database for cost-effective component parts
that meet the sequencing needs of each customer.
GLOVES. We manufacture gloves for medical examinations and surgical
procedures. Our gloves, which are sold under brand names such as Tru-Touch(TM),
SensiCare(TM), Sensicare PF(R), Tradition(TM), Eudermic(TM), Integron(TM) and
Neolon(TM), are manufactured from synthetic rubber, various non-latex materials
or latex and are offered lightly powdered or powder-free. For the twelve months
ended August 1, 1999, pro forma sales of non-latex medical examination gloves,
latex surgical gloves and non-latex surgical gloves accounted for 87.3%, 10.9%
and 1.8% of our pro forma total glove net sales, respectively. We believe that
our non-latex medical gloves provide a viable alternative to traditional latex
gloves. A
84
<PAGE> 93
June 1997 report published by the National Institute for Occupational Safety and
Health heightened the awareness and concern of healthcare professionals about
allergic reactions from exposure to latex and has, we believe, contributed to
non-latex gloves becoming the fastest growing portion of medical glove sales. In
addition, we expect that the increasing concern of healthcare professionals
regarding allergic reactions to, or the mess caused by, the powder commonly used
as a lubricant will increase demand for our powder-free glove products.
Our most technologically advanced non-latex gloves are manufactured using a
combination of trade secrets and patented formulations and manufacturing
processes that we believe provide us with technological and performance
advantages over our competitors in these product areas. These advantages include
greater tactility and barrier protection for the user. In order to maintain our
advantage, we continue to research and develop new compounds to improve our
non-latex products and powder-free products. For the twelve months ended August
1, 1999, our pro forma net sales from gloves were $110.3 million (excluding
immaterial net sales of gloves sold as part of our custom procedure trays),
representing 21.0% of our pro forma total net sales.
IMAGING AND CRITICAL CARE PRODUCTS. Our imaging and critical care product
group consists of single-use specialty vascular access and pressure monitoring
products for use in cardiology and interventional radiology, such as
transducers, guidewires, needles, introducers and catheters. These products are
generally sold under the Argon(TM) and Argon BiCath(R) brand names. Our imaging
and critical care products are sold primarily on a standalone basis rather than
as part of our custom procedure trays. For the twelve months ended August 1,
1999, our standalone pro forma net sales from imaging and critical care products
were $35.1 million, representing 6.7% of our pro forma total net sales.
BIO-SAFETY CONTAINMENT PRODUCTS. Bio-safety containment products, such as
plastic boxes and bags, are used to dispose of sharp medical instruments and
biological waste. Our bio-safety containment products are sold primarily on a
standalone basis rather than as part of our custom procedure trays. For the
twelve months ended August 1, 1999, standalone pro forma net sales from
bio-safety containment products totaled $30.3 million, representing 5.8% of our
pro forma total net sales.
DRAPES AND GOWNS. Our drapes and gowns product group includes single-use,
non-woven infection control apparel for operating room personnel and patient
draping systems such as drapes, gowns, face masks, headgear and shoe coverings.
We manufacture drapes and gowns for our custom procedure trays as well as for
sale on a standalone basis. Our drapes and gowns products are sold under the
Boundary(R) brand name. For the twelve months ended August 1, 1999, our
standalone pro forma net sales from drapes and gowns were $24.2 million,
representing 4.6% of our pro forma total net sales.
OTHER PRODUCTS. Our other products include a variety of single-use medical
bowls and special purpose containers, as well as our Medica(TM) products, which
include various Company-manufactured and assembled single-use specialty medical
products such as scrub brushes and swabbing sticks, and custom procedure kits
for transfusions, infusions and patient monitoring. These products are sold
primarily on a standalone basis rather than as part of our custom procedure
trays. For the twelve months ended August 1, 1999, our standalone pro forma net
sales from these products were $27.7 million, representing approximately 5.3% of
our pro forma total net sales.
85
<PAGE> 94
PRODUCT DEVELOPMENT AND PATENTS; OTHER INTELLECTUAL PROPERTY
Although we have developed a number of our own products, most of our
research and development efforts have historically been directed towards product
improvement and enhancement of previously developed or acquired products, with
an emphasis on medical gloves. We bring a team approach to research and
development that involves the cooperative effort of our engineering,
manufacturing and marketing resources, including 65 dedicated research and
development employees. By working closely with our sales force, our research and
development teams get up-to-date feedback and information from the hospitals,
surgery centers and healthcare professionals that use our products. Our research
and development expenses were $5.6 million, $5.2 million and $5.1 million in
fiscal years 1998, 1997 and 1996, respectively.
We pursue a policy of seeking exclusive licenses and/or patent protection
both in the United States and abroad for certain of our technology and/or
manufacturing processes. While no patent covered product sales that constituted
5% or more of our pro forma total net sales for the twelve months ended August
1, 1999, obtaining or maintaining patents and/or exclusive technology licenses
on certain of our new products or products under development (including for our
SensiCare(TM) brand gloves) may be critical to the success of such products, and
the failure to obtain or maintain such patents and licenses could have an
adverse effect on our prospects or future operating results.
We also rely on trade secrets and know-how to maintain our competitive
position and to protect significant portions of our technology and/or
manufacturing processes (including our DataStat(TM) and ValuQuote(TM) software
systems and our EnCompass(SM) Integrated Product Packaging System). It is our
practice to enter into confidentiality agreements with key employees and
consultants. There can be no assurance, however, that these measures will
prevent the unauthorized disclosure or use of our trade secrets and know-how or
that others may not independently develop similar trade secrets or know-how or
obtain access to our trade secrets, know-how or proprietary technology.
Maxxim Medical(TM) is a registered trademark of the Company. Other
important registered and common law trademarks, service marks and copyrights of
the Company include Argon(TM), Argon BiCath(R), Boundary(R), DataStat(TM),
EnCompass(SM), Eudermic(TM), Integra(TM), Medica(TM), Neolon(TM), SensiCare(R),
SensiCare PF(R), Tradition(TM), Tru-Touch(R) and ValuQuote(TM).
MANUFACTURING
Our products are manufactured and/or assembled from a variety of component
parts and materials. The products included in our custom procedure trays are
finished products, all of which we expect to continue to be readily available at
reasonable costs from a variety of manufacturers and suppliers, including, where
applicable, our manufacturing facilities. We assemble our custom procedure trays
at our plants in California, Florida, Texas and Virginia in the United States
and Ommen in The Netherlands. Each custom procedure tray is assembled to the
exact specifications of the end-use customer using a procedure in which
employees are provided with exact directions as to which components to include
and how to assemble them on the custom procedure tray. The products we purchase
from third-party vendors for inclusion in our custom procedure trays include
drapes and gowns, bowls, tubing, syringes, pressure syringes, bulb syringes,
towel clamps, scalpels, cotton towels and skin markers; of these products, we
manufacture a portion of the drapes and gowns, bowls, tubing, syringes, pressure
syringes and towel clamps that we use. Currently,
86
<PAGE> 95
most of the items included in our custom procedure trays, based on the cost of
materials, are purchased from third parties. No single third-party manufacturer
is material to our custom procedure tray sales.
We also manufacture approximately 95% of the gloves we sell. The primary
raw materials used to manufacture our medical gloves are synthetic resins,
polymers and latex. All of the gloves that we manufacture are manufactured at
our facilities in California, Ohio and South Carolina in the United States and
Canada and Belgium. Our glove manufacturing facilities are highly automated,
unlike most of our other operations, which are labor intensive. Gloves are
manufactured utilizing two different processes. The primary process is a
high-speed continuous line that transports a single line of glove molds through
dipping, curing, automatic glove stripping and automatic packaging. The
secondary and less widely used process is a medium-speed process that transports
a batch of multiple side-by-side molds through dipping, curing, automatic glove
stripping and automatic packaging. Process logic controllers and sensors control
both processes and allow on-line real-time manufacturing and quality
adjustments.
From the summer of 1997 through the spring of 1999, we were unable to meet
demand for our non-latex medical examination gloves due to manufacturing
capacity constraints. As a result, during that time period, our share of U.S.
sales of non-latex medical examination gloves to hospitals, surgery centers and
acute care centers declined from approximately 55% in 1997 to approximately 35%
for the three months ended March 31, 1999, although our total net sales of such
products remained approximately constant. To remedy our capacity limitations, we
have spent $36 million since the beginning of fiscal year 1998 in additional
plant capacity, including two new state-of-the-art production lines and, as a
result, have increased our capacity from 2.2 billion to 3.5 billion non-latex
gloves per year.
All of the imaging and critical care products that we manufacture are
manufactured at our facility in Texas; all of the bio-safety containment
products that we manufacture are manufactured at our facilities in California
and West Virginia; all of the drapes and gowns that we manufacture are
manufactured at our facilities in Mississippi and the Dominican Republic; and
the products that we describe as our other products are manufactured at our
facilities in Texas and The Netherlands. For products other than gloves, our
manufacturing operations currently operate using one or two shifts per day and,
as a result, we have the capacity to produce more of such products by adding
additional shifts.
SALES, MARKETING AND DISTRIBUTION
Through our North American and European sales force of 156 full-time sales
representatives, we sell approximately 23,000 products (including approximately
4,000 different custom procedure trays) to approximately 7,000 customers. For
the twelve months ended August 1, 1999, 89.9% of our pro forma total net sales
were in North America (substantially all of which were in the United States),
8.6% were in Europe (primarily in The Netherlands, Germany and Belgium) and 1.5%
were in the rest of the world.
NORTH AMERICA. Our primary customers are hospitals and surgery centers, a
majority of whom purchase our products under supply contracts negotiated with us
by the Buying Group of which the hospital or surgery center is a member. As a
result, our sales and marketing efforts target both hospitals and surgery
centers as well as Buying Groups. To increase sales and awareness of our
products at the hospital and surgery center level, our
87
<PAGE> 96
North American sales force of approximately 140 full-time representatives
maintains close, direct relationships with the healthcare professionals and
administrators who make the purchasing decisions for these customers, including
by offering access to our proprietary DataStat(TM) and ValuQuote(TM) systems. At
the same time, our 10 national account managers focus on building relationships
with Buying Groups. The Buying Group contracts typically contain the key
purchasing terms and conditions, including price, for a list of products
approved by the Buying Group for purchase by its member hospitals and surgery
centers. Buying Groups strongly encourage their members to purchase under their
Buying Group contracts, although compliance by different Buying Group members
may vary.
Whether purchasing independently or under a Buying Group contract, our
North American hospitals and surgery center customers have the option of having
our products delivered directly by us or through a distributor. In the event a
customer chooses to purchase though a distributor, the distributor purchases our
product from us and resells them to the end-use customer. In general, customers
who choose to have products delivered by a distributor do so in order to
streamline their purchasing process and to consolidate deliveries, and such
customers bear the cost of such distributor. Under such arrangements we maintain
purchase orders or supply agreements directly with the hospital or surgery
center customer which set forth the basic terms upon which the hospital or
surgery center purchases our products from the distributor including price. If
the customer is a member of a Buying Group, the terms, including price, will
ordinarily be dictated by the contract between the Buying Group and us. Because
we typically maintain direct contact with the hospital or surgery center even if
a Buying Group or distributor is involved, our sales representatives can provide
superior customer service to increase sales of our products that are currently
under contract with the Buying Group, and introduce and sell certain of our
products that are not included on the Buying Group contract. For the twelve
months ended August 1, 1999, direct sales to hospitals/surgery centers and
distributors accounted for 20.9% and 79.1%, respectively, of our pro forma total
net sales in North America. We believe that direct sales to distributors were
made primarily on behalf of hospitals and surgery centers with which we had a
purchase order or supply contract but which elected to have the products
distributed by a distributor. In each of the past three fiscal years, no
individual hospital or surgery center that purchased directly or through a
distributor represented more than 5% of our total net sales.
For products that we do not directly ship to customers, we distribute
primarily through major distributors in the United States such as Owens & Minor,
Inc., which typically serve as distributors under a purchase order or supply
agreement between the end-user and the Company. Sales through Owens & Minor,
Inc., our largest distributor, were 25.4% of our North American pro forma total
net sales for the twelve months ended August 1, 1999, and 25.7%, 23.1% and 31.3%
of our North American total net sales in fiscal years 1998, 1997 and 1996,
respectively. For the twelve months ended August 1, 1999, no other single
distributor accounted for more than 10% of our North American pro forma total
net sales. We believe that in most cases, our relationship with and sales to any
hospital or surgery center is not dependent upon our relationship with the
distributor.
In North America, we utilize distribution centers in 17 U.S. states and in
the province of Ontario, Canada.
EUROPE. Our sales and marketing efforts in The Netherlands, Belgium and,
increasingly, France closely track our North American model by focusing on the
end-users of our products. In the rest of Europe, dealers play a large role in
our sales, marketing and distribution efforts. In such countries, dealers
typically purchase for their own account, and
88
<PAGE> 97
are responsible for selling and marketing the product to the end-user. In these
cases, we typically do not maintain standing purchase orders with hospitals and
surgery centers and our sales representatives generally have less contact with
the end-users of our products. For the twelve months ended August 1, 1999,
direct sales to dealers accounted for 44.5% and direct sales to end-users
accounted for 55.5% of our pro forma total net sales in Europe.
In Europe, we utilize a contract warehousing and logistics company to
deliver products to our customers, including dealers. Our products are primarily
warehoused at facilities in The Netherlands and Belgium that are linked to our
European computer system at our headquarters in 's-Hertogenbosch, The
Netherlands.
FACILITIES
Our principal executive and administrative offices are located in
Clearwater, Florida. The following table sets forth information with respect to
our principal facilities:
<TABLE>
<CAPTION>
BUILDING AREA
OWNED OR LEASED (SQUARE
LOCATION USE FACILITIES FEET)
- -------- --- --------------- -------------
<S> <C> <C> <C>
Los Gatos, California.... Glove Manufacturing; Owned 79,000
Distribution
San Diego, California.... Bio-Safety Containment
Manufacturing; Leased 45,000
Distribution
Temecula, California..... Tray Manufacturing; Leased 162,500
Distribution
Clearwater, Florida...... Tray Manufacturing Owned 189,500
Clearwater, Florida...... Headquarters Owned 21,000
Oldsmar, Florida......... Distribution; Leased 20,000
Office/Warehouse
Columbus, Mississippi.... Drapes and Gowns Owned 135,000
Manufacturing;
Distribution
Eaton, Ohio.............. Glove Manufacturing; Owned 230,000
Distribution
Honea Path, South
Carolina............... Glove Manufacturing; Owned 89,000
Distribution
Athens, Texas............ Imaging, Critical Care Owned 142,900
Manufacturing;
Distribution
Richmond, Virginia....... Tray Manufacturing; Leased 253,000
Distribution
Clarksburg, West
Virginia............... Bio-Safety Containment Owned 45,000
Manufacturing;
Distribution
Aalst/Erembodegem,
Belgium................ Glove Manufacturing Owned 150,700
Mississauga, Ontario,
Canada................. Glove Manufacturing; Owned 170,000
</TABLE>
89
<PAGE> 98
<TABLE>
<CAPTION>
BUILDING AREA
OWNED OR LEASED (SQUARE
LOCATION USE FACILITIES FEET)
- -------- --- --------------- -------------
<S> <C> <C> <C>
La Romana, Dominican
Republic Drapes and Gowns Leased 69,000
Manufacturing
's-Hertogenbosch, The
Netherlands............ Distribution; Owned 25,000
Headquarters
's-Hertogenbosch, The
Netherlands............ Medica Products Leased 20,580
Manufacturing
Ommen, The Netherlands... Tray Manufacturing; Owned 24,340
Distribution
</TABLE>
COMPETITION
Our products compete with the products of numerous companies in the
business of developing, manufacturing, distributing and marketing single-use
specialty medical products. Some of these competitors have more extensive
financial resources, research and development facilities and marketing
organizations than we do. We do not typically provide the least expensive
products available. Instead, we emphasize overall value through a combination of
pricing, product quality and customer service.
CUSTOM PROCEDURE TRAYS. Four companies accounted for approximately 90% of
the total sales of custom procedure trays in the United States in 1998. These
four companies were Cardinal Health, Inc.'s Allegiance Corporation subsidiary,
the Company, DeRoyal Industries, Inc. and Medline Industries, Inc. We compete
based on the quality of relationships with hospitals, surgery centers and
individual healthcare providers, price, capacity, size and, in the case of
contracts with Buying Groups, the ability to service accounts nationally from
regional distribution centers. We believe that the barriers to entry in the
custom procedure tray business are fairly low and it would be reasonably easy
for medical products companies currently not in the custom procedure tray
business or others to enter the business. This is because the business is not
highly capital or technology intensive as a supplier of trays does not need to
manufacture single-use specialty medical products. There are currently many
manufacturers that package specialty medical products that may not technically
be "custom procedure trays," but that effectively compete with our custom
procedure trays or could be packaged with other products so as to directly
compete with our custom procedure trays. In addition, our end-use customers
could revert to the in-house preparation of a tray containing the same
components that are found in a custom procedure tray. There are also numerous
companies that supply medical procedure trays to niche markets (for example,
dental and eye) that could broaden their product lines.
MEDICAL GLOVES. Our primary North American competitors in the manufacture
of medical examination and surgical procedure gloves include Cardinal Health
Inc.'s Allegiance Corporation subsidiary, Safeskin Corporation, Ansell Perry,
Inc., Johnson & Johnson and Medline Industries, Inc. Factors affecting medical
glove competition include glove price and performance and whether the glove is
latex or non-latex. Medical glove performance is measured by the degree of
tactility and barrier protection that the glove affords and, as a result,
technology plays a significant role in the development, manufacture
90
<PAGE> 99
and sale of medical gloves. See "-- Product Development and Patents; Other
Intellectual Property."
EUROPE. In Europe, our primary competitors in custom procedure trays
include the European divisions of Cardinal Health, Inc., DeRoyal Industries,
Inc. and Medline Industries, Inc. as well as locally based competitors such as
Schneider Worldwide (which is a unit of Pfizer, Inc.) and Molnlycke Health Care
AB, and our primary competitors in medical examination gloves include the
European divisions of Cardinal Health, Inc., Safeskin Corporation, Ansell Perry,
Inc., Johnson & Johnson and Medline Industries, Inc., as well as locally based
competitors such as Schneider Worldwide and Molnlycke Health Care AB. Factors
affecting competition in Europe that differ from those affecting competition in
the United States include the ability to address local market concerns (such as
language and product labeling) and, because direct sales are smaller in Europe,
strength of the manufacturer's relationship with dealers. See "-- Sales,
Marketing and Distribution -- Europe."
GOVERNMENT REGULATION
Our activities are subject to numerous and evolving state, federal and
foreign regulations.
DOMESTIC REGULATION. In the United States, most of our products (and
products that we are likely to develop or market in the future) are subject to
regulation as medical devices by the FDA pursuant to the FDCA. The FDA regulates
the research, testing, manufacture, safety, labeling, storage, record keeping,
promotion and distribution of medical devices in the United States to ensure
that medical products distributed domestically are safe and effective for their
intended uses.
Pursuant to the FDCA, a medical device is classified as either a Class I,
Class II or Class III device depending on the degree of risk associated with the
device and the extent of control necessary to ensure safety and effectiveness.
Class I devices are those for which safety and effectiveness can be assured by
adherence to a set of general controls and guidelines that are applicable to all
medical devices. Such controls include compliance with the applicable portions
of the Quality Systems Regulations ("QSR") regarding FDA registration and
inspections of facilities, "Good Manufacturing Practices," labeling, promotion
and advertising, maintenance of records, reporting of adverse medical events and
filings with the FDA (the "General Controls"). Some Class I devices also require
premarket clearance by the FDA through the Section 510(k) premarket notification
process described below. Class II devices are those that are subject to the
General Controls and most require premarket demonstration of adherence to
certain performance standards or other special controls, as specified by the
FDA, and clearance by the FDA. Class III devices are those that have a new
intended use or are based on advanced technology that is not substantially
equivalent to a use or technology with respect to a legally marketed device.
Most of our products are Class II devices and the remainder are Class I
devices. We do not manufacture and are not developing any products that are or
that we expect to be classified as Class III devices. FDA marketing approval of
Class II devices is obtained through the premarket notification procedure under
Section 510(k) of the FDCA. For most Class II devices, the manufacturer must
submit to the FDA a premarket notification submission, demonstrating that the
device is "substantially equivalent" to either (1) a device that was legally
marketed prior to May 28, 1976, the date upon which the Medical
91
<PAGE> 100
Device Amendments of 1976 were enacted, or (2) another commercially available,
similar device that was subsequently cleared through the Section 510(k) process.
If the FDA agrees that the device is substantially equivalent, it will grant
clearance to commercially market the device. By regulation, the FDA is required
to clear a Section 510(k) application within 90 days of submission of the
application. As a practical matter, clearance often takes longer. The FDA may
require further information, including clinical data, to make a determination
regarding substantial equivalence. If the FDA determines that the device, or its
intended use, is not "substantially equivalent," the FDA will place the device,
or the particular use of the device, into Class III, and the device sponsor must
then fulfill much more rigorous PMA process.
Approval of a PMA from the FDA is required before the marketing of products
that are Class Ill devices can proceed. The PMA process is much more demanding
than the Section 510(k) premarket notification process. A PMA application, which
is intended to demonstrate that the device is safe and effective, must be
supported by extensive data, including data from preclinical studies and human
clinical trials and existing research material, and must contain a full
description of the device and its components, a full description of the methods,
facilities and controls used for manufacturing and proposed labeling. Following
receipt of a PMA application, once the FDA determines that the application is
sufficiently complete to permit a substantive review, the FDA will accept the
application for review. The FDA, by statute and by regulation, has 180 days to
review a filed PMA application, although the review of an application more often
occurs over a significantly longer period of time, up to several years. In
approving a PMA application or clearing a Section 510(k) application, the FDA
may also require some form of post-market surveillance whereby the manufacturer
follows certain patient groups for a number of years and makes periodic reports
to the FDA on the clinical status of those patients when necessary to protect
the public health or to provide additional safety and effectiveness data for the
device.
In addition, our manufacturing processes are required to comply with the
applicable portions of the QSR, which covers the methods and documentation of
the design, testing, production, processes, controls, quality assurance,
labeling, packaging and shipping of our products. The QSR also, among other
things, requires maintenance of a device master record, device history record
and complaint files. Our facilities, records and manufacturing processes are
subject to periodic unscheduled inspections by the FDA. In addition, all of our
products must be periodically listed with the FDA. Labeling and promotional
activities are subject to scrutiny by the FDA and, in certain instances, by the
Federal Trade Commission. The export of devices is also subject to regulation in
certain instances.
The mandatory MDR reporting regulation obligates us to keep records and
provide information to the FDA on injuries alleged to have been associated with
the use of a product or in connection with certain product failures that could
cause injury. If, as a result of FDA inspections, MDR reports or other
information, the FDA believes that we are not in compliance with the law, the
FDA can institute proceedings to detain or seize products, enjoin future
violations, impose product labeling restrictions or enforce product recalls or
withdrawals from the market.
Failure to comply with the applicable FDA medical device regulatory
requirements could result in, among other things, warning letters, additional
product labeling requirements, fines, injunctions, civil penalties, repairs,
replacements, refunds, recalls or seizures of products, total or partial
suspension of production, the FDA's refusal to grant future premarket clearances
or approvals, withdrawals or suspensions of current product applications and
criminal prosecution. There are currently no adverse regulatory compli-
92
<PAGE> 101
ance issues or actions pending with the FDA at any of our facilities or relating
to our products and no recent FDA audit of our facilities has resulted in any
enforcement action by the FDA.
There are no restrictions under United States law on the export from the
United States of any medical device that can be legally distributed in the
United States. Certificates for export (certifying the status of a product under
the FDCA) are not required by the FDA for export. However, they are often
required by the foreign country importing the product.
Many of the states in which we do business or in which our products are
sold impose licensing, labeling or certification requirements that are in
addition to those imposed by the FDA. To date, we have not experienced
difficulty in complying with these requirements; however, there can be no
assurance that one or more states will not impose additional regulations or
requirements that have a material adverse effect on our ability to sell our
products. In addition, numerous other federal, state and local agencies, such as
environmental, fire hazard control, working condition and other similar
regulators, have jurisdiction to take actions that could have a material adverse
effect upon our business, financial condition or results of operations, though
none have done so to date.
We are subject to various federal and state laws pertaining to healthcare
fraud and abuse, including antikickback laws and physician self-referral laws.
Violations of these laws are punishable by criminal and/or civil sanctions,
including, in some instances, imprisonment and exclusion from participation in
federal and state healthcare programs, including Medicare, Medicaid and Veterans
Affairs health programs. We believe that our operations are in material
compliance with such laws; however, because of the far-reaching nature of these
laws, we or certain of our sales representatives may be required to alter one or
more of our or their practices to be in compliance with these laws. In addition,
we cannot assure you that the occurrence of one or more violations of these laws
would not result in a material adverse effect on our business, financial
condition or results of operations. If there is a change in law, regulation or
administrative or judicial interpretations, we may have to change our business
practices or our existing business practices could be challenged as unlawful,
which could have a material adverse effect on our business, financial condition
or results of operations.
INTERNATIONAL REGULATION. The products manufactured and sold by us in
Europe are subject to the European Community regulations for medical devices.
The European Community has a registration process which includes ISO
certification of manufacturing facilities and CE Mark certification. ISO
certification requires that there be functioning quality systems at each
facility. Following an acceptable certification inspection, the facility
receives an ISO certification number. The CE Mark certification is granted once
it is determined that certain products or product types meet the European
Community requirements for those products. Following CE Mark certification, the
"CE" symbol is printed on the product label to show the customer that the
product complies with the requirements of the European Community. We have
obtained ISO certification and CE Mark certification for our facilities and
products in Europe as well as for those facilities and products in North America
that are sold into those markets or countries which require such certification.
However, there is no guarantee that we will be successful in obtaining European
certifications for new facilities or products, or that we will be able to
maintain our existing certifications for facilities or products in the future.
In many of the countries in which we do business or in which our products
are sold outside of the United States, we are subject to regulation by national
governments and
93
<PAGE> 102
supranational agencies as well as by local agencies affecting, among other
things, product standards, packaging requirements, labeling requirements, import
restrictions, tariff regulations, duties and tax requirements. To date, we have
not experienced difficulty in complying with these regulations; however, there
can be no assurance that one or more countries or agencies will not impose
additional regulations or requirements that could have a material adverse effect
on our ability to sell our products. The harmonization of standards in the
European Community has caused a shift from a country-by-country regulatory
system to a European Community-wide single regulatory system. However, many
members of the European Community have imposed additional country specific
regulations and/or requirements. Although our products generally are already
subject to European Community regulation through the ISO certification and CE
Mark certification processes, there can be no assurance that the changes in the
regulatory schemes imposed either by the European Community, supranational
agencies or individual countries affecting our products will not have a material
adverse effect on our ability sell our products in Europe.
ENVIRONMENTAL AND OTHER MATTERS
Our facilities and operations are subject to federal, state and local
environmental and occupational health and safety requirements of the United
States and foreign countries, including those relating to discharges of
substances to the air, water and land, the handling, storage and disposal of
wastes and the cleanup of properties affected by pollutants. We believe we are
currently in substantial compliance with such requirements and we do not
currently anticipate any material adverse effect on our business or financial
condition as a result of such environmental, health or safety requirements. In
the future, federal, state, local or foreign governments could enact new or more
stringent requirements concerning environmental, health and safety matters that
could affect our operations. Also, in the future, contamination may be found to
exist at our current or former facilities or off-site locations where we have
sent wastes. We could be held liable for such newly discovered contamination.
Changes in environmental, health and safety requirements or liabilities from
newly discovered contamination could have a material adverse effect on our
business, financial condition or results of operations.
EMPLOYEES
At August 1, 1999, we had 2,891 full-time domestic employees and 1,237
full-time foreign employees. Approximately 116 employees in Canada were covered
by a collective bargaining agreement that expired in October 1999. The Company
currently is renegotiating the extension of this agreement. Additionally, we are
currently negotiating a collective bargaining agreement that will cover
approximately 72 employees in the United States. We have never experienced any
strikes or other work stoppages; however, there can be no assurance that we will
not experience strikes or work stoppages in the future. We believe that our
relations with our employees are satisfactory.
LEGAL PROCEEDINGS
GENERAL. We are currently, and are from time to time, subject to claims
and lawsuits arising in the ordinary course of business, including those
relating to product liability, safety and health and employment matters. In some
of such actions, plaintiffs request punitive or other damages or nonmonetary
relief, which may not be covered by insurance, and which could, in the case of
nonmonetary relief, if granted, materially affect the conduct of our business.
Although we maintain insurance that we believe to be reasonable
94
<PAGE> 103
and appropriate, the amount and scope of any coverage may be inadequate to
protect us in the event of a substantial adverse judgment. In management's
opinion (taking third party indemnities into consideration), these various
asserted claims and litigation in which we are currently involved are not
reasonably likely to have a material adverse effect on our business, results of
operations or financial position. However, no assurance can be given as to the
ultimate outcome with respect to such claims and litigation.
LATEX GLOVE LITIGATION. Since March 1996, we have been served with
lawsuits alleging various adverse reactions to the latex used in certain of the
medical gloves alleged to have been manufactured by us or the prior owner of the
assets relating to our latex glove operations acquired in June 1995 as well as
certain glove products distributed by us since 1989. We believe that most of
such claims relate to gloves sold or shipped prior to June 1995. We have been
and we believe we will continue to be indemnified by the prior owner with regard
to such claims. Because we, as well as our competitors, have continued to
manufacture and sell latex gloves, we may be subject to further claims. We are
not entitled to indemnification from the prior owner for gloves that were
manufactured, sold or shipped in or from one of their plants or our plants after
June 1995. We intend to vigorously defend against such claims. We are aware that
an increasing number of lawsuits have been brought against latex glove
manufacturers with respect to such adverse reactions. There can be no assurance
that we will prevail in any such lawsuits, that the prior owner will continue to
indemnify us or that we will not incur costs or liabilities relating to such
claims that will result in a material adverse effect on our business, financial
condition or results of operations.
SHAREHOLDER LITIGATION. A complaint was filed on June 25, 1999 in state
court in Pinellas County, Florida, naming Holdings, its former directors and Fox
Paine & Company, LLC as defendants. The complaint is brought on behalf of a
purported class of former public shareholders of Holdings and alleges that the
consideration paid in the merger was unfair and inadequate, and that the former
directors of Holdings breached their fiduciary duties by failing to obtain the
best price for Holdings. As relief, the complaint seeks, among other things,
equitable relief and damages in an unspecified amount. The case is titled
Burnetti v. Maxxim Medical, Inc. et al. No. 99-4347-CI-15 (6th Judl. Circ.,
Pinellas Cty., Fla.). On September 30, 1999, counsel for the plaintiffs and
counsel for defendants entered into a memorandum of understanding providing
that, subject to court approval and certain other conditions, the claims
asserted in the case will be settled, the action will be dismissed and
defendants will receive a release of all claims.
On September 28, 1999, a complaint was filed in state court in Henderson
County, Texas naming Holdings and its former directors as defendants. The
complaint is brought on behalf of a purported class of former public
shareholders of Holdings and alleges, among other things, that the consideration
paid in the merger was unfair and inadequate and that the former directors of
Holdings breached their fiduciary duties by failing to obtain the best price for
Holdings. As relief, the complaint seeks, among other things, equitable relief
and damages in an unspecified amount. This case is titled Krim v. Maxxim
Medical, Inc., et al., No. 99-143 (3rd Judl. Dist., Henderson Cty., Tex). The
defendants in this action believe the allegations of the complaint are without
merit and intend to vigorously defend the lawsuit.
95
<PAGE> 104
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
As a result of the Transactions, the executive officers and directors of
Holdings have also become the executive officers and directors of the Issuer. In
accordance with the shareholders agreement among Holdings' shareholders, the
Continuing Shareholders have the right to designate up to three members and Fox
Paine has the right to designate up to four members of the board of directors of
Holdings. The initial representatives of the Continuing Shareholders are Kenneth
W. Davidson and Ernest J. Henley, Ph.D., and one other individual to be chosen
by Mr. Davidson in the future. The initial representatives of Fox Paine are Saul
A. Fox, W. Dexter Paine, III, and Jason B. Hurwitz, and one other individual to
be chosen by Fox Paine in the future. So long as Mr. Davidson remains as the
Chief Executive Officer or Chairman of Holdings' board, he will be entitled to
designate all three representatives of the Continuing Shareholders. Thereafter,
the representatives of the Continuing Shareholders will be elected by plurality
vote of the shares held by the Continuing Shareholders. See "Certain
Relationships and Related Party Transactions -- Shareholders Agreement -- Board
of Directors."
The following table sets forth the names, ages and positions with Holdings
and the Issuer of the individuals who serve as the executive officers and
directors of Holdings and the Issuer. Subject to Holdings' obligations under the
investor participation agreement and the employment agreements described under
"Certain Relationships and Related Party Transactions -- Employment Agreements,"
the directors and officers of Holdings and the Issuer will be elected at
Holdings' or the Issuer's annual meeting of shareholders, respectively, and will
serve until they resign or are removed or until their successors are elected and
qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Kenneth W. Davidson................. 52 Chairman of the Board, President and
Chief Executive Officer
Peter M. Graham..................... 52 Senior Executive Vice President,
Chief Operating Officer and
Secretary
David L. Lamont..................... 52 Executive Vice President, Research
and Development
Alan S. Blazei...................... 43 Executive Vice President, Controller
and Treasurer
Henry T. DeHart III................. 52 Executive Vice President,
Manufacturing Operations
Joseph D. Dailey.................... 50 Executive Vice President,
Information Services
Jack F. Cahill...................... 49 Executive Vice President, Sales and
Marketing
Suzanne R. Garon.................... 46 Executive Vice President, Human
Resources
</TABLE>
96
<PAGE> 105
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Rob W. Beek......................... 54 Executive Vice President, Managing
Director, Maxxim Medical Europe
Ernest J. Henley, Ph.D.............. 72 Director
Saul A. Fox......................... 46 Director
W. Dexter Paine, III................ 38 Director
Jason B. Hurwitz.................... 27 Director
</TABLE>
KENNETH W. DAVIDSON has served as a director of Holdings since 1982, and as
Chairman of the Board of Directors, Chief Executive Officer and President of
Holdings since November 1, 1986. Mr. Davidson is also a director of Henley
Healthcare, Inc., a manufacturer of products used in physical therapy; Encore
Orthopedics, Inc., a designer and manufacturer of implantable orthopedic
devices, and Bovie Medical Corporation, a manufacturer and marketer of
electrosurgical medical devices.
PETER M. GRAHAM has served as Senior Executive Vice President of Holdings
since January 1999, as Executive Vice President and Chief Operating Officer of
Holdings since January 1986, and as Secretary of Holdings since July 1997. Mr.
Graham also served as Treasurer of Holdings from April 1986 through June 1997.
DAVID L. LAMONT has served as Executive Vice President, Research and
Development of Holdings since January 1999 and as Vice President of Holdings
since March 1988. Mr. Lamont also served as Group Vice President of Holdings
from July 1993 through December 1998, and as President of the Argon Medical
division of Holdings from January 1992 through July 1993.
ALAN S. BLAZEI has served as Executive Vice President and Controller of
Holdings since January 1999 and as Vice President and Controller of Holdings
since December 1990, and as Treasurer of Holdings since July 1997.
HENRY T. DEHART has served as Executive Vice President, Manufacturing
Operations of Holdings since January 1999 and as Vice President of Holdings
since November 1993. Mr. DeHart also served as Executive Vice President
Manufacturing Operations, Case Management of Holdings from June 1995 through
December 1998, and as President of the Boundary Healthcare division of Holdings
from December 1992 through July 1995.
JOSEPH D. DAILEY has served as Executive Vice President, Information
Services of Holdings since January 1999 and as Vice President, Information
Services of Holdings since August 1994. Mr. Dailey served as Director of
Information Services of Holdings from January 1992 until August 1994.
JACK F. CAHILL has served as Executive Vice President, Sales and Marketing
of Holdings since January 1999 and as Vice President of Holdings since May 1995.
Mr. Cahill served as Executive Vice President Sales and Marketing, Case
Management of Holdings from June 1995 through December 1998, President of the
Sterile Design division of Holdings from May 1994 through June 1995, and
Executive Vice President, Sterile Design division of Holdings from July 1993
through May 1994.
SUZANNE R. GARON has served as Executive Vice President, Human Resources of
Holdings since January 1999 and as Vice President of Holdings since January
1997. Ms. Garon served as Vice President Human Resources, Case Management of
Holdings
97
<PAGE> 106
beginning August 1995, and Manager of Human Resources, Sterile Design division
of Holdings from July 1993 through August 1995.
ERNEST J. HENLEY, PH.D. has served as a director of Holdings since 1976.
Dr. Henley served as a consultant to Holdings from 1976 until May 1996. Dr.
Henley's principal employment for more than the past five years has been as a
Professor of Chemical Engineering at the University of Houston. Dr. Henley also
is a consultant and director of Henley Healthcare, Inc.
SAUL A. FOX has served as a director of Holdings since November 1999. Mr.
Fox is the founder and has been a managing member of Fox Paine & Company, LLC
and of Fox Paine Capital, LLC since their respective formations in 1997 and has
served as a director of Alaska Communications Holdings Group, Inc. and Alaska
Communications Systems Holdings since May, 1999. Prior to founding Fox Paine,
Mr. Fox was a general partner of Kohlberg Kravis Roberts & Co.
W. DEXTER PAINE, III has served as a director of Holdings since November
1999. Mr. Paine is the founder and has been a managing member of Fox Paine &
Company, LLC and of Fox Paine Capital, LLC since their respective formations in
1997 and has served as a director of Alaska Communications Holdings Group, Inc.
since October, 1998 and Alaska Communications Systems Holdings since July, 1998.
Prior to founding Fox Paine, Mr. Paine was a general partner of Kohlberg &
Company.
JASON B. HURWITZ has been a director of Holdings since November 1999. Mr.
Hurwitz has been a director, vice president, treasurer and secretary of Circon
Holdings since its formation on June 10, 1999. Mr. Hurwitz has been employed at
Fox Paine & Company, LLC since June 1997 and has served as an associate, Vice
President and, currently, a director of Fox Paine & Company, LLC. Mr. Hurwitz
was an associate at McCown De Leeuw & Co. from August 1996 to June 1997 and was
an analyst at James D. Wolfensohn Incorporated from July 1994 to July 1996.
No family relationships exist between any of the directors and the
executive officers of Holdings; however, Davis C. Henley, who is a Vice
President but not an executive officer of Holdings, is the son of Dr. Ernest J.
Henley.
COMPENSATION OF DIRECTORS
The directors of Holdings, as well as those of the Issuer, presently serve
without monetary compensation for their service as directors. In the past,
Holdings issued options to purchase shares of Holdings common stock to
non-employee directors. In connection with the merger, the Management Investors
were granted options to acquire shares of Holdings common stock and shares of
Circon Holdings common stock. These options have an exercise price of $26.00 per
share and are fully vested. See "The Transactions" and "Certain Relationships
and Related Party Transactions -- Treatment of Continuing Shares and Options."
COMPENSATION OF EXECUTIVE OFFICERS
The compensation, incentive and employment arrangements for the executive
officers of Holdings and the Issuer, as well as such individuals' compensation
and incentive arrangements with Circon Holdings, are described under "Certain
Relationships and Related Party Transactions."
98
<PAGE> 107
The following table is a summary of the compensation paid or accrued by
Holdings for the last three fiscal years for services in all capacities to each
of the individuals who qualified as a "named executive officer" (as defined in
Item 402(a)(3) of Regulation S-K under the Exchange Act) during fiscal year
1998.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
--------------------------- OTHER ANNUAL OPTIONS OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) COMPENSATION(2) (#)(3) COMPENSATION(4)
- --------------------------- ---- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth W. Davidson.....
Chief Executive 1998 $350,000 $192,500 $109,305 40,000 $4,750
Officer 1997 320,000 160,000 70,525 40,000 4,750
1996 320,000 160,000 22,853 50,000 4,750
Peter M. Graham.........
Senior Executive Vice 1998 200,000 110,000 44,349 25,000 3,001
President 1997 140,000 68,750 23,343 25,000 4,750
1996 135,000 67,500 -- 35,000 5,471
Alan S. Blazei..........
Executive Vice 1998 175,000 96,250 35,329 20,000 2,913
President 1997 125,000 60,000 18,208 20,000 4,750
1996 99,500 28,750 -- 30,000 4,065
Jack F. Cahill..........
Executive Vice 1998 165,000 90,750 35,631 20,000 2,475
President 1997 140,000 68,750 20,542 20,000 4,750
1996 135,000 67,500 -- 30,000 5,091
David L. Lamont.........
Executive Vice 1998 150,000 82,500 34,359 20,000 2,526
President 1997 125,000 61,250 18,208 20,000 4,750
1996 120,000 60,000 -- 30,000 4,109
Henry T. DeHart III.....
Executive Vice 1998 150,000 82,500 34,359 20,000 2,526
President 1997 125,000 61,250 18,208 20,000 4,750
1996 120,000 60,000 -- 17,000 4,572
</TABLE>
- -------------------------
(1) Compensation deferred at the election of a named executive officer is
included in the category (e.g., salary or bonus) and year it would have
otherwise been reported had it not been deferred.
(2) Includes the value of the interest imputed on non-interest bearing loans
made by Holdings and Holdings' matching contributions on compensation
deferred by the named executive officers.
(3) Fiscal year 1998 includes options granted effective as of January 8, 1999
with respect to the performances of the named executive officers during
fiscal year 1998. Fiscal year 1997 includes options granted effective as of
November 3, 1997 with respect to the performances of the named executive
officers during fiscal year 1997. Fiscal year 1996 includes options granted
effective as of November 4, 1996 with respect to the performances of the
named executive officers during fiscal year 1996.
(4) Includes contributions made by Holdings to its 401(k) plan on behalf of the
employee. Each eligible employee has the option to contribute up to 15% of
his or her salary (up to a maximum of $9,500), and to have such deferred
amounts invested in the 401(k) plan. Holdings may, but is not required to,
make a matching contribution
99
<PAGE> 108
to the 401(k) plan of up to the first 6% of the salary of such participating
employee. All employee contributions are fully vested. Holdings'
contributions vest over a six-year period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the merger, the Compensation Committee was comprised of Mr.
Davidson, Donald R. DePriest and Richard O. Martin. Messrs. DePriest and Martin
ceased to be directors upon the consummation of the merger. The new board of
directors has not appointed a Compensation Committee.
Mr. Davidson is the Chairman of the Board, President and Chief Executive
Officer of Holdings. Holdings entered into an employment agreement with Mr.
Davidson effective November 1, 1997 that replaced a previous employment
agreement effective November 1, 1994. Among other things, that employment
agreement required Holdings to make a loan or loans to Mr. Davidson not to
exceed an aggregate of $500,000, including loans made under Mr. Davidson's
previous employment agreement, to enable Mr. Davidson to pay any federal income
taxes associated with the exercise by him of options to purchase shares of
Holdings common stock. Each loan made to Mr. Davidson is non-interest bearing,
unsecured and is repayable in ten equal annual installments, on the third
through twelfth anniversaries of the date of such loan. The total amount
outstanding under all such loans at August 1, 1999 was $500,000. Mr. Davidson
was, during fiscal year 1998, and at August 1, 1999, current in all of his
repayment obligations under the loans.
In connection with, and effective upon the completion of, the
recapitalization (1) Mr. Davidson's employment agreement was terminated and he
and Holdings entered into a new employment agreement, the terms of which are
summarized under "Certain Relationships and Related Party
Transactions -- Employment Agreements," (2) all options held by Mr. Davidson
were treated as set forth in "Certain Relationships and Related Party
Transactions -- Treatment of Continuing Shares and Options" and (3) all loans
made to Mr. Davidson in connection with his past employment agreements remain
outstanding and will be repaid pursuant to the terms thereof.
In May 1997, Mr. Davidson purchased 100,000 shares of Holdings common stock
from Holdings at a price of $13.00 per share under the Senior Management Stock
Purchase Plan (the "Stock Purchase Plan"). Payment for the shares was made by
means of a full recourse promissory note in the amount of $1.3 million, the
payment of which is secured by a pledge of the shares. The note is non-interest
bearing until its due date. If the note is not paid when due, it will bear
interest at the highest maximum legal rate, or, if no maximum rate is
established under applicable law, then at 18% per year. In connection with the
merger, the note was amended to extend the due date until the 10th anniversary
of the completion of the merger. See "Certain Relationships and Related Party
Transactions -- Treatment of Continuing Shares and Options."
THE CONTINUING SHAREHOLDERS AND THE MANAGEMENT INVESTORS
Messrs. Davidson, Graham, Lamont, Blazei, DeHart, Dailey and Cahill and Ms.
Garon are the Management Investors. The Management Investors, together with Dr.
Henley and Mr. Davis Henley, are the Continuing Shareholders. Dr. Henley, in
addition to serving as a director of Holdings, is Professor of Chemical
Engineering at the University of Houston. Mr. Henley is the son of Dr. Henley
and is a Vice President of Holdings.
100
<PAGE> 109
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the outstanding capital stock of the Issuer is owned by Holdings.
The following table sets forth certain information regarding beneficial
ownership of the Holdings common stock and the Circon Holdings common stock
after the Transactions by (1) each person known by the Company to own
beneficially more than 5% of the Holdings common stock or the Circon Holdings
common stock, (2) each director and each named executive officer of Holdings and
the other Continuing Shareholders and (3) all executive officers and directors
of Holdings as a group. Except as otherwise indicated in the footnotes below,
each beneficial owner has the sole power to vote and to dispose of all shares
held by such owner.
<TABLE>
<CAPTION>
PERCENT OF CIRCON PERCENT OF FOX
HOLDINGS HOLDINGS HOLDINGS PAINE CIRCON
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
BENEFICIALLY OUTSTANDING BENEFICIALLY OUTSTANDING
OWNED AFTER THE AFTER THE OWNED AFTER THE AFTER THE
NAME TRANSACTIONS TRANSACTIONS TRANSACTIONS TRANSACTIONS
---- --------------- ------------ --------------- --------------
<S> <C> <C> <C> <C>
Fox Paine Capital, LLC(1)...... 4,850,824 84.1% 3,691,484 86.8%
Fox Paine Capital Fund,
L.P.(1)...................... 3,930,217 68.1 2,990,901 70.3
FPC Investors, L.P.(1)......... 58,317 1.0 44,379 1.0
GS Mezzanine Partners, L.P. and
GS Mezzanine Partners
Offshore, L.P.(2)............ 394,968 6.1 273,379(3) 6.3
Kenneth W. Davidson............ 304,761(4) 5.2 226,607(5) 5.2
Peter M. Graham................ 162,598(6) 2.8 120,901(7) 2.8
David L. Lamont................ 128,043(8) 2.2 95,207(9) 2.2
Henry T. DeHart................ 79,091(10) 1.4 58,809(11) 1.4
Jack F. Cahill................. 83,392(12) 1.4 62,007(13) 1.4
Alan S. Blazei................. 108,972(14) 1.9 81,027(15) 1.9
Joseph D. Dailey............... 47,776(16) 0.8 35,524(17) 0.8
Suzanne R. Garon............... 9,636(18) 0.2 7,164(19) 0.2
Ernest J. Henley, Ph.D......... 143,385 2.5 106,615 2.5
Davis C. Henley................ 86,031 1.5 63,969 1.5
Saul A. Fox(1)................. 58,317 1.0 44,379 1.0
W. Dexter Paine, III(1)........ 58,317 1.0 44,379 1.0
Jason B. Hurwitz(1)............ -- -- -- --
All directors and executive
officers as a group (12
Persons)(20)................. 1,125,970 18.1 838,241 17.8
</TABLE>
A person is deemed to be a beneficial owner of any securities of which that
person has a right to acquire beneficial ownership within 60 days. Under the
beneficial ownership rules, more than one person may be deemed a beneficial
owner of the same securities and a person may be deemed to be beneficial owner
of securities as to which such person has no economic interest. The address of
Fox Paine Capital, LLC, Fox Paine Capital Fund, L.P., FPC Investors, L.P. and
Messrs. Paine, Fox and Hurwitz is 950 Tower Lane, Suite 1150, Foster City, CA
94404. The addresses of Dr. Henley, Messrs. Davidson, Graham, Lamont, DeHart,
Cahill, Blazei, Dailey and Henley and Ms. Garon is 10300 49th Street North,
Clearwater, Florida 33762.
- -------------------------
(1) Fox Paine Capital, LLC is (a) General Partner of (1) Fox Paine Capital
Fund, L.P. and (2) FPC Investors, L.P. and (b) the sole manager of (1)
Maxxim Coinvestment Fund I, LLC, Maxxim Coinvestment Fund II, LLC, Maxxim
Coinvestment Fund III, LLC, Maxxim Coinvestment Fund IV, LLC and Maxxim
101
<PAGE> 110
Coinvestment Fund V, LLC (only one of which funds owns in excess of 5% of
the outstanding shares of Holdings common stock) and (2) Circon
Coinvestment Fund I, LLC, Circon Coinvestment Fund II, LLC, Circon
Coinvestment Fund III, LLC, Circon Coinvestment Fund IV, LLC and Circon
Coinvestment Fund V, LLC (only one of which funds owns in excess of 5% of
the outstanding shares of Circon Holdings common stock), and possesses
voting and investment power over all shares held by each of such entities.
Fox Paine Capital, LLC is not the record owner of any shares of Holdings
common stock or Circon Holdings common stock. Messrs. Fox and Paine are the
Members of Fox Paine Capital, LLC and share voting power of Fox Paine
Capital, LLC. None of the shares shown as beneficially owned by any of
Messrs. Fox, Paine and Hurwitz are owned of record by such individuals.
Each of such individuals disclaims beneficial ownership of such shares
except to the extent of his indirect pecuniary interest therein.
(2) The general partner of each of GS Mezzanine Partners, L.P. and GS Mezzanine
Partners Offshore, L.P. is an indirect wholly-owned subsidiary of the
Goldman Sachs Group. Includes 218,407 shares held of record by GS Mezzanine
Partners, L.P. or its designee and 176,561 shares purchasable under
currently exercisable warrants. The address of GS Mezzanine Partners, L.P.
is 85 Broad Street, New York, New York 10004.
(3) Includes 166,208 shares held of record by GS Mezzanine Partners, L.P. or
its designee and 107,171 shares purchasable under currently exercisable
warrants.
(4) Includes 194,514 shares held of record by Mr. Davidson and 120,247 shares
purchasable under currently exercisable options.
(5) Includes 102,934 shares held of record by Mr. Davidson and 123,673 shares
purchasable under currently exercisable options.
(6) Includes 75,364 shares held of record by Mr. Graham and 87,234 shares
purchasable under currently exercisable options.
(7) Includes 30,065 shares held of record by Mr. Graham and 90,836 shares
purchasable under currently exercisable options.
(8) Includes 59,917 shares held of record by Mr. Lamont and 68,126 shares
purchasable under currently exercisable options.
(9) Includes 24,415 shares held of record by Mr. Lamont and 70,792 shares
purchasable under currently exercisable options.
(10) Includes 36,737 shares held of record by Mr. DeHart and 42,354 shares
purchasable under currently exercisable options.
(11) Includes 17,016 shares held of record by Mr. DeHart and 41,793 shares
purchasable under currently exercisable options.
(12) Includes 39,660 shares held of record by Mr. Cahill and 43,732 shares
purchasable under currently exercisable options.
(13) Includes 18,764 shares held of record by Mr. Cahill and 43,243 shares
purchasable under currently exercisable options.
102
<PAGE> 111
(14) Includes 46,520 shares held of record by Mr. Blazei and 62,452 shares
purchasable under currently exercisable options.
(15) Includes 16,632 shares held of record by Mr. Blazei and 64,395 shares
purchasable under currently exercisable options.
(16) Includes 24,321 shares held of record held by Mr. Dailey and 23,455 shares
purchasable under currently exercisable options.
(17) Includes 12,069 shares held of record by Mr. Dailey and 23,455 shares
purchasable under currently exercisable options.
(18) Includes 5,024 shares held of record by Ms. Garon and 4,612 shares
purchasable under currently exercisable options.
(19) Includes 2,985 shares held of record by Ms. Garon and 4,179 shares
purchasable under currently exercisable options.
(20) Includes shares deemed to be beneficially owned by Messrs. Fox and Paine as
a result of their relationships with and to Fox Paine. Excluding such
shares, all directors and executive officers as a group beneficially own
1,067,655 Holdings shares and 793,863 Circon Holdings shares representing
17.2% and 16.8% of the common stock of Holdings and Circon Holdings,
respectively.
103
<PAGE> 112
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
THE INVESTOR PARTICIPATION AGREEMENT
In connection with the merger agreement, Fox Paine Medic Acquisition
Corporation also entered into an investor participation agreement, dated as of
June 13, 1999, as amended, with the Continuing Shareholders pursuant to which
Fox Paine Medic Acquisition Corporation and each Continuing Shareholder agreed
to be bound by all the terms and conditions set forth in a term sheet relating
to the retention by the Continuing Shareholders of an equity interest in
Holdings, the purchase by the Continuing Shareholders of an equity interests in
Circon Holdings at the time of the Circon Sale and the terms for employment,
compensation and equity incentive compensation for the Management Investors. The
key provisions of the investor participation agreement are described in the next
few sections.
TREATMENT OF CONTINUING SHARES AND OPTIONS
STOCK ROLLOVER. Immediately prior to the merger, the Continuing
Shareholders collectively owned 1,125,402 shares of Holdings common stock. In
the merger, these shares of Holdings common stock were treated as follows:
-- 198,084 shares of Holdings common stock (all but 2,150 of which are
owned by Dr. Henley or Mr. Henley) were converted into $26.00 per share
in cash;
-- 531,854 shares of Holdings common stock were retained by the Continuing
Shareholders in the merger (and not converted into cash) and continue to
represent an ownership interest in Holdings; and
-- 395,464 shares of Holdings common stock were converted into $26.00 per
share in cash, with the gross proceeds (approximately $10.3 million)
immediately being reinvested in shares of Circon Holdings common stock.
See "Security Ownership of Certain Beneficial Owners and Management."
The Continuing Shareholders and Holdings entered into agreements requiring
Holdings to make loans to the Continuing Shareholders in an amount sufficient to
cover the taxes due on the cash received from the conversion of the 395,464
shares of Holdings common stock used to purchase shares of Circon Holdings
common stock. There will be no cash interest payments on these tax loans.
Instead, interest will be imputed and the Management Investors will receive
gross-up payments from Circon Holdings in respect of the taxes due on that
imputed interest. These tax loans will be mandatorily repayable from the
after-tax proceeds of future sales of shares of Circon Holdings common stock.
In May 1997, Holdings issued 400,000 shares of Holdings common stock at a
price of $13.00 per share to members of Holdings' senior management, including
the Management Investors, under the Stock Purchase Plan. These shares were
issued in exchange for non-interest bearing, full recourse promissory notes due
May 23, 2000. The aggregate outstanding principal amount owed by the Management
Investors under these promissory notes was approximately $4,498,000 at November
12, 1999. The amounts due under the promissory notes were divided on a pro rata
basis between Holdings and Circon Holdings, with notes for an aggregate amount
of $1,918,215 being transferred to Circon Holdings, to reflect the fact that
some of each Management Investor's shares of Holdings common stock that were
subject to the promissory notes were exchanged for shares of Circon
104
<PAGE> 113
Holdings common stock in the recapitalization. Pursuant to the terms of the
investor participation agreement, the promissory notes were amended to extend
the due date until the tenth anniversary of the completion of the Transactions.
The Management Investors are required to prepay the promissory notes with the
after-tax proceeds of any sales of shares of Holdings or Circon Holdings common
stock or options to purchase Holdings common stock or Circon Holdings common
stock made after the completion of the Transactions. A Management Investor's
promissory notes will not accelerate upon the termination of his or her
employment. In addition, the Stock Purchase Plan was amended to remove the
provision that required the holder to forfeit to Holdings 50% of the profit from
the sale of shares of Holdings common stock that are subject to the promissory
notes.
OPTION ROLLOVER. Immediately prior to the merger, the Management Investors
collectively owned options to acquire 1,084,200 shares of Holdings common stock
at a weighted average exercise price of $13.97 per share. Upon the completion of
the Transactions, vested or unvested options on 621,832 shares of Holdings
common stock were canceled in exchange for a cash payment equal to the
difference between the $26.00 merger price and the exercise price per share
under the relevant option. The Management Investors used the after-tax proceeds
of this cash-out to purchase 169,619 new shares of Holdings common stock at
$26.00 per share, and were granted 452,213 new options to acquire shares of
Holdings common stock, which equals the number of shares of Holdings common
stock subject to the cashed-out options (621,832) minus the number of newly
issued shares of Holdings common stock (169,619). The new options have an
exercise price of $26.00 per share. The remaining 462,368 options held by the
Management Investors were canceled, and the Management Investors received new
options to acquire 462,368 shares of Circon Holdings common stock at a price of
$26.00 per share. These options are fully vested, permit cashless exercise with
previously owned shares and have no built-in gain.
The following table indicates, for each Management Investor, the number of
Holdings options (which will have a $26.00 exercise price) currently held and
the number of Circon Holdings options (which will have a $26.00 exercise price)
currently held:
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF FOX
HOLDINGS PAINE CIRCON
OPTIONS OPTIONS
NAME CURRENTLY HELD CURRENTLY HELD
- ---- --------------- --------------
<S> <C> <C>
Kenneth W. Davidson................... 120,247 123,673
Peter M. Graham....................... 87,234 90,836
David L. Lamont....................... 68,126 70,792
Henry T. DeHart III................... 42,354 41,793
Jack F. Cahill........................ 43,732 43,243
Alan S. Blazei........................ 62,452 64,395
Joseph D. Dailey...................... 23,455 23,455
Suzanne R. Garon...................... 4,612 4,179
</TABLE>
105
<PAGE> 114
NEW MANAGEMENT EQUITY INCENTIVE PLANS
In connection with the Transactions, Holdings and Circon Holdings each
adopted a new management equity incentive plan that grants the Management
Investors options to purchase up to a total of 10% of the common equity on a
fully-diluted basis of each of Holdings and Circon Holdings at an exercise price
of $26.00 per share. The new incentive plans generally provide for a ten-year
option term, and allow cashless exercise of the options (payment of exercise
price with previously owned shares). The options are split evenly into two
pools:
-- a pool of options that will vest on the ninth anniversary of the date of
grant, and vesting may be earlier accelerated (1) to the first through
fifth anniversaries of the date of grant if certain corporate financial
goals established under the new incentive plans are achieved (or if not
achieved during the specified year, in the next fiscal year in which
such financial goals are achieved) or (2) upon Fox Paine's realization
of an internal rate of return of at least 30% on its investment in
Holdings or Circon Holdings, as the case may be; and
-- a pool of options that vest in 20% increments on each of the first
through fifth anniversaries of the merger, or earlier, upon Fox Paine's
realization of an internal rate of return of at least 30% on its
investment in Holdings or Circon Holdings, as the case may be.
Any options granted under the new incentive plans that remain unvested as
of the date of a Management Investor's termination of employment with Holdings
or Circon Holdings for any reason will be forfeited on the date of termination.
However, any options that are vested at the time of termination may be exercised
for one year following the termination of employment, after which they will be
forfeited.
Options granted under the new equity incentive plans were granted to
individual Management Investors and other members of Holdings or Circon
management based upon the recommendation of Mr. Davidson to the board of
directors.
SPECIAL BONUS PROGRAMS
In connection with the Transactions, Holdings established a key executive
special bonus program, valued at approximately $3.7 million, for the benefit of
the Management Investors. The bonus payments for all the participants, other
than Mr. Graham and Mr. Blazei, became payable upon completion of the
Transactions. A portion of Mr. Graham's and Mr. Blazei's bonus became payable
upon completion of the Transactions, with the remaining portion to be paid
subsequently (part of which will be based on the achievement of performance
goals).
In addition, the special bonus program provides that the unpaid portion of
Mr. Graham's and Mr. Blazei's respective bonuses will be forfeited if their
employment is terminated either by Holdings for cause or by Messrs. Graham or
Blazei without good reason. If, however, Mr. Graham's or Mr. Blazei's employment
is terminated by Holdings without cause or by Messrs. Graham or Blazei for good
reason, or upon their disability or death, the unpaid portion of their
respective bonuses will become payable in accordance with an agreed upon
schedule and conditions.
106
<PAGE> 115
In addition, Circon Holdings established a bonus pool of approximately $5.6
million in the aggregate for the benefit of the Management Investors. Bonuses
will be paid upon the occurrence of certain events and will be related to the
value of the Circon Holdings equity.
EMPLOYMENT AGREEMENTS
Effective upon the completion of the Transactions, each Management Investor
(including Mr. Davidson, whose prior employment agreement was terminated)
entered into a new employment agreement with Holdings and the executive
continuity agreements between the Management Investors and Holdings were
terminated without any termination benefits being paid under them. The following
is a summary of the material terms of such new employment agreements.
The employment period under the new employment agreements commenced upon
completion of the Transactions and will terminate on the fifth anniversary of
the merger, with automatic one-year renewals (unless previously terminated).
Pursuant to the new employment agreements, each executive will continue in the
position and with the duties and responsibilities as in effect prior to the
completion of the Transactions, subject to reassignment from time to time by Mr.
Davidson, in the case of all executives other than Mr. Davidson. The new
employment agreements provide that each executive will receive an annual base
salary equal to his or her annual base salary prior to the merger and an annual
performance bonus opportunity equal to a percentage of his or her annual base
salary. The annual base salary and bonus opportunity percentage for Mr. Davidson
are $350,000 and 90%, respectively, and are less for the other executives. In
addition, during the employment period, each executive is entitled to
participate in compensation and benefit plans on terms and conditions no less
favorable in the aggregate than those in effect prior to the Transactions.
Pursuant to the new employment agreements, upon the termination of an
executive's employment by Holdings other than for cause, or by the executive for
good reason, the executive will be entitled to a cash payment equal to a
multiple of the sum of the executive's annual base salary and the most recent
annual bonus earned by the executive, as well as continued participation in
Holdings' benefit plans for a number of years equal to that executive's
multiple. Mr. Davidson's multiple is three, so that he is entitled to receive a
payment of three times the sum of his annual base salary and most recent annual
bonus, as well as continued participation in Holdings' benefit plans for a
period of three years. The compensation, multiple and length of continuing
participation are less for the other executives.
Under the new employment agreements, Holdings is required to provide term
life insurance with death benefits equal to two times the sum of the executive's
then-current base salary and annual bonus opportunity. Should the executive
become disabled, Holdings is required to pay the executive's then-current base
salary and bonus opportunity for a period of 24 months.
The new employment agreements provide that if any amounts payable to the
executive in connection with a change in control (other than the Transactions)
would be subject to excise tax under Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), an additional payment will be made so that
after the payment of all income and excise taxes the executive will be in the
same after-tax position as if no excise tax under Section 4999 of the Code had
been imposed. In addition, the new employment agreements with Messrs. Davidson,
Graham and Blazei provide for a similar
107
<PAGE> 116
additional payment in the event any amounts payable to these individuals in
connection with the Transactions would be subject to excise tax under Section
4999 of the U.S. tax code.
Pursuant to the new employment agreements, each executive also has agreed
to non-competition and non-solicitation restrictions during the employment
period and thereafter for the number of years equal to the executive's multiple.
SHAREHOLDERS AGREEMENT
As a result of the Transactions, the Continuing Shareholders, together with
the Investors, own all of the equity of Holdings. The Continuing Shareholders
and the Investors entered into a shareholders agreement that permits the
Investors and the Continuing Shareholders to transfer or sell their shares in
some circumstances, and anyone who becomes a shareholder of Holdings as a result
of a permitted transfer or sale will be required to sign the shareholders
agreement and be bound in the same way as the person who transferred or sold the
shares to the new shareholder. Unless otherwise indicated, the following items
apply equally to the Investors' and the Continuing Shareholders' participation
in Holdings, as well as the participation in Holdings by any person who obtains
shares of Holdings common stock upon the exercise of the warrants issued with
the old notes or the Holdings Notes. The following is a summary of the material
terms of the shareholders agreement, a copy of which has been filed as an
exhibit to the registration statement of which this prospectus is a part.
TAG-ALONG RIGHTS. If, at any time before an initial public offering of
stock, a shareholder accepts an offer from a third party to sell any or all of
its shares, each of the other shareholders will be able to participate in the
offer on a proportionate basis, at the same price and on the same terms.
DRAG-ALONG RIGHTS. If, at any time before an initial public offering of
stock, Fox Paine sells at least 50% of its shares in a bona fide arm's-length
transaction or series of related transactions, Fox Paine may require the other
shareholders to sell a proportionate number of their shares and, at the election
of Fox Paine, options or warrants (in each case whether vested or unvested) in
the same transaction at the same price and on the same terms (with appropriate
adjustments for warrants or options).
REGISTRATION RIGHTS. After an initial public offering of stock, the
Continuing Shareholders will collectively have the right, which can only be used
twice, to demand that Holdings register their Holdings' shares for sale under
the Securities Act. The Investors (excluding the Holdco Note Purchaser) will
have the same right, which they will be permitted to use as a group up to five
times. The Holdco Note Purchaser will also have the same right, which it will be
permitted to use once. The purchasers of the Holdings common stock obtained upon
exercise of the warrants sold with the old notes will have a similar one-time
right, which they will be permitted to use as a group. In addition, the
Continuing Shareholders, the Investors and the holders of the Holdings common
stock obtained upon exercise of the warrants sold with the old notes will all
have customary and full "piggyback" registration rights on registrations
initiated by the other shareholders. If the underwriters request a reduction in
the number of shares to be sold in any registered offering, the number of shares
offered by any participating shareholders will be cut back proportionally based
on the number of shares owned by each person, regardless of who initiated the
registration. Expenses related to all demand registrations and piggyback
registrations will be borne by Holdings. Other customary registration rights
provisions will
108
<PAGE> 117
apply, including holdbacks, indemnification, and contribution provisions. If the
Investors are permitted to include any of their shares in an initial public
offering, the other shareholders will be entitled to participate proportionately
as well.
RIGHT OF FIRST OFFER. Before an initial public offering of stock, if any
shareholder proposes to sell or transfer any of its shares, it will first be
required to offer to sell the shares to the other shareholders at a minimum
price suggested by the selling shareholder. If the other shareholders elect not
to purchase all of the offered shares, the selling shareholder will have the
right to sell the shares to any other party as long as the sale price is equal
to or above the minimum price offered to the other shareholders. These right of
first offer provisions do not apply to transfers to customary permitted
transferees (such as affiliates of the Investors or family members of the
Continuing Shareholders). These right of first offer provisions also do not
apply to certain transfers to related parties or otherwise by the purchasers of
the Holdings common stock obtained upon exercise of the warrants sold with the
old notes and the Holdco Note Purchaser.
LIQUIDITY UPON DEATH OR DISABILITY AND SOME TERMINATIONS. The Management
Investors have the right to sell any shares of Holdings common stock that are
acquired upon the exercise of stock options (provided that the shares have been
held for at least six months) back to Holdings at fair market value, upon death
or disability or termination of employment by the Management Investors for good
reason or by Holdings without cause. The Management Investors' liquidity rights
described above will end upon completion of an initial public offering of
Holdings shares of common stock and, in any event, are subject to Holdings'
available cash flow, debt restrictions and any legal restrictions on
distributions of cash. If payments related to these rights are not made
immediately, the payments will remain a continuing obligation of Holdings and
will be made, with interest, before the payment of any dividends or
distributions to other shareholders.
BOARD OF DIRECTORS. Pursuant to the terms of the shareholders agreement,
the Continuing Shareholders have the right to appoint three members of the board
of directors, and Fox Paine has the right to appoint at least four members. So
long as Mr. Davidson is the Chief Executive Officer or Chairman of the Board of
Directors, Mr. Davidson will have the right to designate all three
representatives of the Continuing Shareholders. Thereafter, the representatives
of the Continuing Shareholders will be elected by plurality vote of shares held
by the Continuing Shareholders. The Holdco Note Purchaser has the right to
appoint one observer to the board of directors. Fox Paine's and the Continuing
Shareholders' right to designate directors will terminate upon an initial public
offering of stock or a significant reduction in ownership percentage by either
group. See "Management -- Executive Officers and Directors."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to the merger agreement, the indemnification and exculpation
provisions of Holdings' articles of incorporation and bylaws as in effect at the
time of the completion of the merger will, to the extent they relate to matters
arising before the completion of the merger, remain in force after the merger.
In addition, for a period of six years after the completion of the merger,
Holdings will maintain in effect the current policies of directors' and
officers' liability insurance maintained by Holdings with respect to matters
arising on or before the completion of the merger. Holdings will obtain only as
much comparable insurance as is available at an annual premium of 150% of
Holdings' annual premium prior to the merger. In addition, pursuant to the
investor participation agreement, Holdings has
109
<PAGE> 118
adopted customary mandatory indemnification and expense advancement policies for
its respective officers.
MANAGEMENT AND ADVISORY SERVICES PROVIDED BY FOX PAINE
In connection with the Transactions, Holdings and the Issuer entered into a
management services agreement with an affiliate of Fox Paine pursuant to which
such affiliate will provide certain financial and strategic consulting and
advisory services to Holdings and the Issuer. In exchange for these services,
the Fox Paine affiliate will receive a fee based on the services provided, with
an initial annual retainer of $763,000. Thereafter such fee shall be equal to 1%
of the annual adjusted EBITDA of the Company for the prior fiscal year. In
addition, upon the completion of the Transactions, Holdings paid to such
affiliate aggregate transaction fees of approximately $8,814,000, plus
reimbursement of its expenses.
SERVICES AGREEMENT
Holdings, the Issuer, Circon Holdings and Circon have entered into a
services agreement (the "Services Agreement") that provides for Holdings and the
Issuer to provide services to Circon Holdings and Circon, including services and
advice provided by management employees as well as general corporate overhead
services. In exchange for these services, Circon Holdings and Circon will
reimburse Holdings and the Issuer for all direct expenses or out of pocket fees
directly attributable to the services provided to Circon Holdings and Circon.
For services without expenses or fees directly attributable to Circon Holdings
and Circon, the actual cost of such services will be allocated to Holdings and
Circon pro rata based on net sales.
110
<PAGE> 119
DESCRIPTION OF NEW CREDIT FACILITIES AND OTHER INDEBTEDNESS
NEW CREDIT FACILITIES
The Issuer has entered into a credit agreement with The Chase Manhattan
Bank, as Administrative Agent and Collateral Agent, Bankers Trust Company and
Merrill Lynch Capital Corporation, as Co-Syndication Agents, Canadian Imperial
Bank of Commerce and Credit Suisse First Boston, as Co-Documentation Agents, and
certain other lenders that governs the new credit facilities. Chase Securities
Inc. acted as advisor, lead arranger and book manager in connection with the new
credit facilities. The following is a summary of the principal terms of the new
credit facilities, and is subject to and qualified in its entirety by reference
to the credit agreement, a copy of which has been filed as an exhibit to the
registration statement of which this prospectus is a part.
STRUCTURE. The new credit facilities consist of:
- an $80.0 million Tranche A term loan (the "Term Loan A facility");
- a $90.0 million Tranche B term loan (the "Term Loan B facility");
- a $90.0 million Tranche C term loan (the "Term Loan C facility" and,
together with the Term Loan A facility and the Term Loan B facility, the
"Term Loan facilities"); and
- a $50.0 million revolving credit facility (which will be available, in
part, for up to $25.0 million in letters of credit and up to $10.0
million in the form of swingline loans).
SECURITY; GUARANTEES. The Issuer's obligations under the new credit
facilities, any hedging arrangements entered into with a lender in relation to
the new credit facilities and all obligations relating to any overdrafts and
related liabilities owed to Chase or any of its affiliates arising from
treasury, cash management or depository services or in connection with certain
automated transfers of funds are unconditionally and irrevocably guaranteed,
jointly and severally, by Holdings and by each of the Issuer's existing and
subsequently acquired or organized U.S. subsidiaries and may, in certain
circumstances, become guaranteed by certain non-U.S. subsidiaries. In addition,
the new credit facilities and the guarantees thereunder are secured by
substantially all of the assets of the Issuer and the guarantors of the new
credit facilities (collectively, the "Collateral"), including, but not limited
to, (1) a perfected first priority pledge (a) by Holdings of all of the Issuer's
capital stock and (b) to the extent not prohibited by law or any existing
contract, by the Issuer (i) of the capital stock of companies in which the
Issuer holds a minority stake and (ii) of all the capital stock held by the
Issuer, or any of its U.S. subsidiaries (and, in certain circumstances, by
certain of the Issuer's non-U.S. subsidiaries), in any existing and subsequently
acquired or organized subsidiary (which pledge, in the case of the pledge of
stock of any non-U.S. subsidiary is limited, except under certain circumstances,
to 65% of the capital stock of such non-U.S. subsidiary), and (2) a perfected
first priority security interest in, and mortgage on, substantially all of the
tangible and intangible assets of the Issuer and each guarantor of the new
credit facilities (including, but not limited to, accounts receivable,
documents, inventory, equipment, intellectual property, investment property,
general intangibles, real property, cash and cash accounts and proceeds of the
foregoing), in each case, subject to certain limited exceptions. The credit
agreement and
111
<PAGE> 120
related guarantee and security agreements provide for the release of guarantees
and of Collateral under certain limited circumstances.
AVAILABILITY. Amounts repaid or prepaid under the Term Loan facilities may
not be reborrowed. Amounts repaid under the revolving credit facility will be
available for reborrowing on a revolving basis, subject to the terms of the
revolving credit facility.
AMORTIZATION; INTEREST. The Term Loan A facility is repayable in 6
principal payments over 6 years of $10.0 million, $12.0 million, $12.0 million,
$14.0 million and $16.0 million on October 31, 2000, 2001, 2002, 2003 and 2004,
respectively, with the balance of the Term Loan A facility ($16,000,000) payable
at maturity on the sixth anniversary of the closing date for the new credit
facilities. The Term Loan A facility bears interest at a rate per annum equal
(at the Company's option) to: (1) an adjusted London interbank offered rate
("Adjusted LIBOR") plus 2.75% or (2) a rate equal to the greater of the
administrative agent's prime rate, a certificate of deposit rate plus 1% and the
Federal Funds effective rate plus 1/2 of 1% (the "Alternate Base Rate") plus
1.75%, in each case, subject to certain adjustments based on the Company's
leverage.
The Term Loan B facility is repayable in 8 principal payments over 7 1/2
years, consisting of 6 payments of $250,000 on October 31, 2000, 2001, 2002,
2003, 2004, 2005, a payment of $40.0 million on October 31, 2006 with the
balance of the Term Loan B facility ($48,500,000) payable at maturity on the
seven-and-one-half year anniversary of the closing date for the new credit
facilities. The Term Loan B facility bears interest at a rate per annum equal
(at the Company's option) to: (1) Adjusted LIBOR plus 3.25% or (2) the Alternate
Base Rate plus 2.25%.
The Term Loan C facility is repayable in 9 principal payments over 8 1/2
years, consisting of 7 payments of $250,000 on October 31, 2000, 2001, 2002,
2003, 2004, 2005, 2006, a payment of $30.0 million on October 31, 2007, with the
balance of the Term Loan C facility ($58,250,000) payable at maturity on the
eight-and-one-half year anniversary of the closing date for the new credit
facilities. The Term Loan C facility bears interest at a rate per annum equal
(at the Company's option) to: (1) Adjusted LIBOR plus 3.50% or (2) the Alternate
Base Rate plus 2.50%.
The revolving credit facility is a six-year facility, and outstanding
balances thereunder bear interest at a rate per annum equal (at the Company's
option) to: (1) Adjusted LIBOR plus 2.75% or (2) the Alternate Base Rate plus
1.75%, in each case, subject to certain adjustments based on the Company's
leverage. All outstanding loans under the revolving credit facility will be
payable at maturity.
Amounts under the new credit facilities not paid when due bear interest at
a default rate equal to 2.0% above the otherwise applicable rate.
PREPAYMENTS. The new credit facilities permit the Issuer to prepay loans
and to permanently reduce revolving credit commitments, in whole or in part, at
any time. In addition, the Company is required to make mandatory prepayments of
the Term Loan facilities, subject to certain exceptions, in amounts equal to (1)
50% of excess cash flow for each fiscal year (as specified in the credit
agreement), (2) 100% of the net cash proceeds of certain dispositions of assets
of Holdings or any of its subsidiaries and (3) 100% of certain issuances of debt
obligations of Holdings or any of its subsidiaries. Mandatory and optional
prepayments will be allocated pro rata among the Term Loan A facility, the Term
Loan B facility and the Term Loan C facility, and, within each Term Loan
facility, applied pro rata to the remaining amortization payments under such
Term
112
<PAGE> 121
Loan, except that the lenders participating in the Term Loan B facility and the
Term Loan C facility, as applicable, will have the right to refuse mandatory
prepayments, in which case such prepayments will be applied to the Term Loan A
facility, or, if no portion of the Term Loan A facility remains outstanding, the
Issuer may retain the prepayments. Any prepayment of Adjusted LIBOR loans other
than at the end of an interest period will be subject to reimbursement of
breakage costs as described in the credit agreement.
FEES. The Issuer is required to pay to the lenders, on a quarterly basis,
a commitment fee equal to 1/2 of 1% per annum on the unused commitments under
the revolving credit facility, subject to adjustments based upon the Company's
financial performance. The Issuer also is required to pay (1) on a quarterly
basis, a commission on the face amount of all outstanding letters of credit
equal to the applicable margin then in effect for Adjusted LIBOR loans under the
revolving credit facility, (2) on a quarterly basis, a fronting fee to the
issuing bank in the amount of 0.25% per annum on each letter of credit, (3)
standard fees of the issuing bank with respect to issuance, amendment, renewal
or extension of any letters of credit and (4) fees payable to the administrative
agent.
COVENANTS, EVENTS OF DEFAULT. The credit agreement contains covenants
that, among other things, restrict the ability of Holdings, the ability of the
Issuer and the ability of the Issuer's subsidiaries to dispose of assets, incur
additional indebtedness, incur guarantee obligations, prepay other indebtedness
or amend other debt instruments, pay dividends, create liens on assets, enter
into sale and leaseback transactions, make investments, loans or advances, make
acquisitions, engage in mergers or consolidations, change the Issuer's business,
make capital expenditures, or engage in certain transactions with affiliates and
otherwise restrict certain corporate activities. In addition, under the new
credit facilities, the Issuer is required to comply with specified financial
ratios, including minimum interest coverage ratios and maximum total and senior
leverage ratios.
The credit agreement obligates Holdings and the Issuer to maintain separate
books and records and separate financial statements for Holdings and the Issuer,
on the one hand, and Circon Holdings and Circon, on the other, to not comingle
financial assets or certain other assets, to have certain affiliate transactions
specifically approved by the board of directors or determined to be fair by an
independent expert, and to observe a number of other formalities intended to
ensure that Holdings and the Issuer, on the one hand, and Circon Holdings and
Circon, on the other, are managed as separate companies. The credit agreement
also contains provisions that prohibits any modification of the indenture as
well as representations and warranties, affirmative covenants and events of
default, including cross default, material judgments and change in control.
HOLDINGS NOTES
As part of the Transactions, Holdings issued $98.5 million principal amount
at maturity of senior unsecured discount notes. The Holdings Notes were sold at
a discount from their face value, resulting in accreted interest accruing on the
then accreted value at a semi-annual rate of 7.0% until November 15, 2004. The
Holdings Notes will mature 11 years from the date of issuance and, beginning
November 15, 2004, will pay interest in cash at a rate of 14.0% per year on the
accreted value of the Holdings Notes on the issue date, payable semi-annually.
For the first five years from the date the Holdings Notes are issued, interest
that becomes payable will be added to the then outstanding principal amount of
the Holdings Notes, and will not be payable in cash. After five years from the
113
<PAGE> 122
issuance date, cash interest will be payable in cash unless cash interest cannot
be paid without violating certain terms of the Issuer's senior or senior
subordinated debt, in which case Holdings may issue additional Holdings Notes in
payment of such interest. The Holdings Notes were not registered for sale under
the Securities Act and are not eligible for offer or sale in the United States
absent registration or an exemption from the registration process. In addition,
the Holdco Note Purchaser received warrants to purchase 107,171 shares of
Holdings common stock at a purchase price of $0.01 per share in connection with
its purchase of the Holdings Notes. The Holdco Note Purchaser signed and entered
into the Holdings shareholders agreement.
CAPITAL LEASES, INDUSTRIAL REVENUE BONDS AND OTHER LONG-TERM OBLIGATIONS
CAPITAL LEASES. We lease our Clarksburg, West Virginia production facility
as well as certain equipment at the facility under long-term leases and have the
option to purchase the assets for a nominal cost at the termination of the
leases. Obligations under the Clarksburg Capital Lease totaled $4.6 million as
of August 1, 1999.
INDUSTRIAL REVENUE BONDS. In 1991, the Bucks County, Pennsylvania
Industrial Development Authority issued industrial revenue bonds to finance the
purchase of land and facilities in Bucks County, Pennsylvania. Our obligations
under these industrial revenue bonds totaled $2.8 million as of August 1, 1999.
OTHER LONG-TERM OBLIGATIONS. We have various other long-term obligations,
which totaled $1.3 million as of August 1, 1999.
114
<PAGE> 123
DESCRIPTION OF THE EXCHANGE NOTES
Definitions of certain terms used in this Description of the Exchange Notes
may be found under the caption "-- Certain Definitions." The "Issuer' refers
only to Maxxim Medical Group, Inc., a Delaware corporation, and "Holdings"
refers only to Maxxim Medical, Inc., a Texas corporation and the parent of the
Issuer, and not any of their respective Subsidiaries. Holdings and certain
Subsidiaries of the Issuer will guarantee the exchange notes and the old notes
and, therefore, together with the other Restricted Subsidiaries, will be subject
to many of the provisions contained in this Description of the Exchange Notes.
Each company that guarantees the exchange notes and the old notes is referred to
as a "Guarantor," and each guarantee of the obligations with respect to the
exchange notes issued by a Guarantor is termed a "Guarantee."
GENERAL
The Issuer will issue the exchange notes under the same indenture, dated as
of November 12, 1999 among the Issuer, the Guarantors and The Bank of New York,
as trustee, that governs the old notes. The indenture contains provisions that
define your rights under the exchange notes. In addition, the indenture governs
the obligations of the Issuer and of each Guarantor under the exchange notes and
the old notes. The terms of the exchange notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939. For all purposes under the indenture, the exchange notes
and the old notes are treated as one class and references to the exchange notes
in this "Description of the Exchange Notes" refers to both old notes and
exchange notes, unless stated otherwise.
The following description is meant to be only a summary of certain
provisions of the indenture. It does not restate the terms of the indenture in
their entirety. We urge that you carefully read the indenture as it, and not
this description, governs your rights as a holder. The indenture has been filed
as an exhibit to the registration statement of which this prospectus is a part.
OVERVIEW OF THE EXCHANGE NOTES AND THE GUARANTEES
The exchange notes:
- will be general unsecured obligations of the Issuer;
- will be subordinated in right of payment to all existing and future
Senior Indebtedness of the Issuer;
- will rank pari passu in right of payment with all existing and future
Senior Subordinated Indebtedness of the Issuer;
- will be senior in right of payment to all existing and future
Subordinated Obligations of the Issuer;
- will be effectively subordinated to all Secured Indebtedness of the
Issuer and its Subsidiaries to the extent of the value of the assets
securing such Indebtedness; and
- will be effectively subordinated to all liabilities (including Trade
Payables) and Preferred Stock of each Subsidiary of the Issuer that is
not a Guarantor.
115
<PAGE> 124
The Guarantors:
- Initially, the exchange notes will be guaranteed by (1) Holdings and (2)
each of the Domestic Subsidiaries.
- The exchange notes will not initially be guaranteed by the Foreign
Subsidiaries.
- After the issuance of the exchange notes, (1) each Domestic Subsidiary
acquired or formed after the Closing Date and (2) each Foreign Subsidiary
(whether previously existing or newly acquired or formed) that Guarantees
any Indebtedness of the Issuer (other than the outstanding $5,000 of
10 1/2% Senior Subordinated Notes due 2006) or a Domestic Subsidiary
after the Closing Date, will, in each case, also guarantee the exchange
notes.
The Guarantee of each Guarantor:
- will be a general unsecured obligation of such Guarantor;
- will be subordinated in right of payment to all existing and future
Senior Indebtedness of such Guarantor;
- will rank pari passu in right of payment with all existing and future
Senior Subordinated Indebtedness of such Guarantor;
- will be senior in right of payment to all existing and future
Subordinated Obligations of such Guarantor;
- will be effectively subordinated to all Secured Indebtedness of such
Guarantor and its Subsidiaries to the extent of the value of the assets
securing such Indebtedness; and
- will be effectively subordinated to all liabilities (including Trade
Payables) and Preferred Stock of each Subsidiary of such Guarantor that
is not also a Guarantor.
PRINCIPAL, MATURITY AND INTEREST
The Issuer will issue exchange notes in exchange for old notes in an
aggregate principal amount at maturity of up to $144,552,000. The exchange notes
will mature on November 15, 2009. The exchange notes but not the old notes will
initially be represented by one or more permanent global notes in definitive,
fully registered book-entry form, without interest coupons that will be
deposited with, or on behalf of, DTC and registered in the name of Cede and Co.,
as nominee of DTC, on behalf of the acquirors of exchange notes for credit to
the accounts of the acquirors or to other accounts as they may direct at DTC, or
Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System, or Cedel Bank, societe anonyme.
Each exchange note the Issuer issues will bear cash interest at a rate of
11% per annum on the initial accreted value of such exchange note ($761) on the
Issue Date (and not as of any later date). Beginning on May 15, 2000, the Issuer
will pay semiannually cash interest equal to $41.86 per $1,000 in principal
amount at maturity to holders of record at the close of business on the May 1 or
November 1 immediately preceding the interest payment date on May 15 and
November 15 of each year. In addition, until November 15, 2009 (the "Full
Accretion Date"), the accreted value will accrete between November 12, 1999 and
the Full Accretion Date, on a semi-annual bond equivalent basis
116
<PAGE> 125
using a 360-day year comprised of twelve 30-day months such that the accreted
value shall be equal to the full principal amount at maturity of the exchange
notes on the Full Accretion Date. The Issuer will pay interest on overdue
principal at 12% per annum and the Issuer will pay interest on overdue
installments of interest at such higher rate to the extent lawful.
The Issuer will also pay Additional Amounts to holders of the exchange
notes if the Issuer and the Guarantors fail to consummate this exchange offer
within 180 days after the issue date of the old notes or if certain other
conditions are not satisfied. These provisions relating to Additional Amounts
are more fully explained under the caption "Exchange and Registration Rights
Agreement."
PAYING AGENT AND REGISTRAR
The Issuer will pay the principal of, interest on, and Additional Amounts,
if any, in respect of, the exchange notes at any office of the Issuer or any
agency designated by the Issuer which is located in the Borough of Manhattan,
The City of New York. The Issuer has initially designated the corporate trust
office of the trustee to act as the paying agent of the Issuer in such matters.
The location of the corporate trust office of the trustee is 101 Barclay Street,
New York, NY 10268 attention of: Trust Department. The Issuer reserves the
right, however, to pay interest and Additional Amounts, if any, to holders by
check mailed directly to holders at their registered addresses.
Holders may exchange or transfer their exchange notes at the location given
in the preceding paragraph. No service charge will be made for any registration
of transfer or exchange of exchange notes. The Issuer may, however, require
holders to pay any transfer tax or other similar governmental charge payable in
connection with such transfer or exchange.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Issuer may not redeem
the exchange notes at its option prior to November 15, 2004. After this date,
the Issuer may redeem the exchange notes in whole or in part, on not less than
30 nor more than 60 days' prior notice, at the following redemption prices
(expressed as percentages of accreted value), plus accrued and unpaid interest
thereon and Additional Amounts, if any, in respect thereof to the redemption
date (subject to the right of holders of record on the relevant record date to
receive interest and Additional Amounts, if any, due on the relevant interest
payment date), if redeemed during the twelve-month period commencing on November
15 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2004........................................................ 106.875%
2005........................................................ 104.583
2006........................................................ 102.292
2007 and thereafter......................................... 100.000
</TABLE>
117
<PAGE> 126
Prior to November 15, 2002, the Issuer may, at its option, on one or more
occasions, also redeem exchange notes representing up to a maximum of 35% of the
original aggregate principal amount at maturity of the old notes with the Net
Cash Proceeds of one or more Equity Offerings (1) by the Issuer or (2) by
Holdings to the extent the Net Cash Proceeds thereof are contributed to the
Issuer or used to purchase Capital Stock (other than Disqualified Stock) of the
Issuer from the Issuer, at a redemption price equal to 113 3/4% of the accreted
value thereof, plus accrued and unpaid interest thereon and Additional Amounts,
if any, in respect thereof to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest and Additional
Amounts, if any, due on the relevant interest payment date); provided, however,
that after giving effect to any such redemption:
(1) at least 65% of the original aggregate principal amount at
maturity of the old notes remains outstanding; and
(2) any such redemption by the Issuer must be made within 90 days of
such related Equity Offering by the Issuer or Holdings, as the case may be,
and must be made upon not less than 30 nor more than 60 days' notice mailed
to each holder of exchange notes being redeemed and otherwise in accordance
with certain procedures set forth in the indenture.
SELECTION
If the Issuer partially redeems the exchange notes, the trustee will select
the exchange notes to be redeemed on a pro rata basis, by lot or by such other
method as the trustee shall deem to be fair and appropriate (and in such manner
as complies with applicable legal requirements); provided, however, that no
exchange note of $1,000 in principal amount at maturity or less will be redeemed
in part. If the Issuer redeems any exchange note in part only, the notice of
redemption relating to such exchange note shall state the portion of the
principal amount at maturity of such exchange note to be redeemed. A new
exchange note in principal amount at maturity equal to the unredeemed portion of
such exchange note will be issued in the name of the holder upon cancellation of
the original exchange note. On and after the redemption date the accreted value
of exchange notes or portion thereof called for redemption shall cease to
accrete and interest will cease to accrue on exchange notes or portions of
exchange notes called for redemption so long as the Issuer has deposited with
the paying agent funds sufficient to pay the principal of, plus accrued and
unpaid interest on, and Additional Amounts, if any, in respect of, the exchange
notes to be redeemed.
RANKING
The debt evidenced by the exchange notes (and any Additional Amounts) will
be unsecured Senior Subordinated Indebtedness of the Issuer, will be
subordinated in right of payment, as set forth in the indenture, to all existing
and future Senior Indebtedness of the Issuer, will rank pari passu in right of
payment with all existing and future other Senior Subordinated Indebtedness of
the Issuer and will be senior in right of payment to all existing and future
Subordinated Obligations of the Issuer. The exchange notes will also be
effectively subordinated to any Secured Indebtedness of the Issuer and its
Subsidiaries to the extent of the value of the assets securing such
Indebtedness. However, payment from the money or the proceeds of U.S. Government
Obligations held in any defeasance trust
118
<PAGE> 127
described below under the caption "-- Defeasance" will not be subordinated to
any Senior Indebtedness of the Issuer or subject to the restrictions described
herein.
The Guarantee of each Guarantor will be unsecured Senior Subordinated
Indebtedness of such Guarantor, will be subordinated in right of payment, as set
forth in the indenture, to all existing and future Senior Indebtedness of such
Guarantor, will rank pari passu in right of payment with all existing and future
other Senior Subordinated Indebtedness of such Guarantor and will be senior in
right of payment to all existing and future Subordinated Obligations of such
Guarantor. The Guarantee of each Guarantor will also be effectively subordinated
to any Secured Indebtedness of such Guarantor and its Subsidiaries to the extent
of the value of the assets securing such Secured Indebtedness.
The Issuer currently conducts all its operations through its Subsidiaries.
To the extent such Subsidiaries are not Guarantors, creditors, including trade
creditors, and preferred stockholders, if any, of such Subsidiaries generally
will have priority with respect to the assets and earnings of such Subsidiaries
over the claims of creditors of the Issuer, including the holders of the
exchange notes. The exchange notes, therefore, will be effectively subordinated
to the interests of creditors, including trade creditors, and preferred
stockholders, if any, of Subsidiaries of the Issuer that are not Guarantors. The
Foreign Subsidiaries will not initially guarantee the exchange notes. As of
August 1, 1999, on a pro forma basis, the Foreign Subsidiaries would have had
total liabilities, including Trade Payables, of approximately $30.1 million and
no outstanding Preferred Stock.
As of August 1, 1999, on a pro forma basis, there would have been
outstanding:
- $261.6 million of Senior Indebtedness of the Issuer (exclusive of unused
commitments under the credit agreement), all of which would have been
Secured Indebtedness;
- $50.0 million of Senior Indebtedness of Holdings (one of the Guarantors)
(including the Holdings Notes, but excluding Holdings' Guarantee of
Indebtedness under the credit agreement), none of which would have been
Secured Indebtedness;
- $8.7 million of Senior Indebtedness of the Subsidiaries of the Issuer
that are Guarantors (exclusive of Guarantees of Indebtedness under the
credit agreement), $7.4 million of which would have been Secured
Indebtedness;
- no Senior Subordinated Indebtedness of the Issuer (other than the old
notes and the remaining $5,000 of 10 1/2% Senior Subordinated Notes due
2006) or the Guarantors (other than the Guarantees and their guarantees
of the remaining $5,000 of 10 1/2% Senior Subordinated Notes due 2006);
and
- no Subordinated Obligations of the Issuer or the Guarantors.
Although the indenture will limit the Incurrence of Indebtedness by the
Issuer and the Restricted Subsidiaries and the issuance of Preferred Stock by
the Restricted Subsidiaries, such limitations are subject to a number of
significant qualifications. The Issuer and its Subsidiaries may be able to Incur
substantial amounts of Indebtedness in certain circumstances. Such Indebtedness
may be Senior Indebtedness. In addition, the indenture will not limit the
Incurrence of Indebtedness by Holdings. See "-- Restrictive
Covenants -- Limitation on Indebtedness."
119
<PAGE> 128
"Senior Indebtedness" of the Issuer or any Guarantor means the principal
of, premium, if any, and accrued and unpaid interest on (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization of the Issuer or such Guarantor, as applicable, regardless of
whether or not a claim for post-filing interest is allowed in such proceedings),
and fees and other amounts (including expenses, reimbursement obligations under
letters of credit and indemnities) owing in respect of, Bank Indebtedness and
guarantees thereof and all other Indebtedness of the Issuer or such Guarantor,
as applicable, whether outstanding on the Closing Date or thereafter Incurred,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is provided that such obligations are not superior in
right of payment to the exchange notes or such Guarantor's Guarantee, as
applicable; provided, however, that Senior Indebtedness of the Issuer or any
Guarantor shall not include:
(1)(x) in the case of the Issuer, any obligation of the Issuer to
Holdings or any Subsidiary of the Issuer or (y) in the case of such
Guarantor, any obligation of such Guarantor to the Issuer, Holdings or any
Subsidiary of the Issuer;
(2) any liability for federal, state, local or other taxes owed or
owing by the Issuer or such Guarantor, as applicable;
(3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business of the Issuer or such Guarantor, as
applicable (including guarantees thereof or instruments evidencing such
liabilities);
(4) any Indebtedness or obligation of the Issuer or such Guarantor, as
applicable (and any accrued and unpaid interest in respect thereof), that
is subordinate or junior in any respect to any other Indebtedness or
obligation of the Issuer or such Guarantor, as applicable, including any
Senior Subordinated Indebtedness of the Issuer or such Guarantor, as
applicable, and any Subordinated Obligations of the Issuer or such
Guarantor, as applicable;
(5) any obligations of the Issuer or such Guarantor, as applicable,
with respect to any Capital Stock; or
(6) any Indebtedness of the Issuer or such Guarantor, as applicable,
Incurred in violation of the indenture.
If any Senior Indebtedness is disallowed, avoided or subordinated pursuant
to the provisions of Section 548 of Title 11 of the United States Bankruptcy
Code or any applicable state fraudulent conveyance law, such Senior Indebtedness
nevertheless will constitute Senior Indebtedness.
Only Indebtedness of the Issuer or a Guarantor that is Senior Indebtedness
of the Issuer or such Guarantor, as applicable, will rank senior to the exchange
notes or such Guarantor's Guarantee, respectively, in accordance with the
provisions of the indenture. The exchange notes and such Guarantor's Guarantee
will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Issuer and such Guarantor, respectively. The Issuer has
agreed in the indenture that neither it nor its Restricted Subsidiaries will
Incur, directly or indirectly, any Indebtedness that is subordinate or junior in
ranking in any respect to Senior Indebtedness, unless such Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not
deemed to be subordinate or junior to Secured Indebtedness merely because it is
unsecured.
120
<PAGE> 129
The Issuer may not pay the principal of, interest on or Additional Amounts
in respect of, the exchange notes, or make any deposit pursuant to the
provisions described under the caption "-- Defeasance," and may not otherwise
purchase, repurchase, redeem, retire, defease or otherwise acquire for value any
exchange notes (collectively, "pay the exchange notes") if:
(1) a default in the payment of the principal of, premium, if any, or
interest on any Designated Senior Indebtedness occurs and is continuing or
any other amount owing in respect of any Designated Senior Indebtedness is
not paid when due; or
(2) any other default on Designated Senior Indebtedness occurs and the
maturity of such Designated Senior Indebtedness is accelerated in
accordance with its terms,
unless, in either case,
(a) the default has been cured or waived and any such acceleration has
been rescinded; or
(b) such Designated Senior Indebtedness has been paid in full in cash
or cash equivalents;
provided, however, that the Issuer may pay the exchange notes without regard to
the foregoing if the Issuer and the trustee receive written notice approving
such payment from the Representative of the Designated Senior Indebtedness with
respect to which either of the events set forth in clause (1) or (2) above has
occurred and is continuing.
During the continuance of any default (other than a default described in
clause (1) or (2) of the preceding paragraph) with respect to any Designated
Senior Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without (x) further notice (except such notice as may be required to
effect such acceleration) or (y) the expiration of any applicable grace periods,
the Issuer may not pay the exchange notes for a period (a "Payment Blockage
Period") commencing upon the receipt by the trustee (with a copy to the Issuer)
of written notice (a "Blockage Notice") of such default from the Representative
of such Designated Senior Indebtedness specifying an election to effect a
Payment Blockage Period and ending 179 days thereafter (or earlier if such
Payment Blockage Period is terminated:
(1) by written notice to the trustee and the Issuer from the Person or
Persons who gave such Blockage Notice;
(2) because such Designated Senior Indebtedness has been repaid in
full in cash or cash equivalents; or
(3) because the default giving rise to such Blockage Notice is no
longer continuing).
Notwithstanding the provisions described in the immediately preceding
paragraph (but subject to the provisions contained in the second preceding
paragraph and in the immediately succeeding paragraph), unless the holders of
such Designated Senior Indebtedness or the Representative of such holders have
accelerated the maturity of such Designated Senior Indebtedness, the Issuer may
resume payments on the exchange notes after the end of such Payment Blockage
Period.
121
<PAGE> 130
Not more than one Blockage Notice may be given in any period of 360
consecutive days, irrespective of the number of defaults with respect to
Designated Senior Indebtedness during such period. However, if any Blockage
Notice within such 360-day period is given by or on behalf of any holders of
Designated Senior Indebtedness other than the Bank Indebtedness, the
Representative of the Bank Indebtedness may give another Blockage Notice within
such period. In no event, however, may the total number of days during which any
Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate
during any period of 360 consecutive days. For purposes of this paragraph, no
default or event of default that existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period shall be, or be
made, the basis of the commencement of a subsequent Payment Blockage Period by
the Representative of such Designated Senior Indebtedness, whether or not within
a period of 360 consecutive days, unless such default or event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
Upon any payment or distribution of the assets of the Issuer upon a total
or partial liquidation or a total or partial dissolution of the Issuer or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Issuer or its properties:
(1) the holders of Senior Indebtedness of the Issuer will be entitled
to receive payment in full in cash or cash equivalents of such Senior
Indebtedness (including interest accruing after, or that would accrue but
for, the commencement of such proceeding at the rate specified in the
applicable Senior Indebtedness, whether or not such claim for such interest
would be allowed) before the holders of the exchange notes are entitled to
receive any payment; and
(2) until such Senior Indebtedness is paid in full in cash or cash
equivalents, any payment or distribution to which holders of the exchange
notes would be entitled but for the subordination provisions of the
indenture will be made to holders of such Senior Indebtedness as their
interests may appear, except that holders of the exchange notes may receive
and retain:
(A) Permitted Junior Securities; and
(B) payments made from the defeasance trust described under the
caption "-- Defeasance," so long as, on the date or dates the respective
amounts were paid into the defeasance trust, such payments were made
with respect to the exchange notes without violating the subordination
provisions described herein.
If a payment or distribution is made to holders of the exchange notes that,
due to the subordination provisions of the indenture, should not have been made
to them, such holders will be required to hold the distribution in trust for the
holders of Senior Indebtedness of the Issuer and pay it over to them as their
interests may appear.
If payment of the exchange notes is accelerated because of an Event of
Default, the Issuer or the trustee shall promptly notify the holders of the
Designated Senior Indebtedness (or their Representative) of the acceleration. If
any Designated Senior Indebtedness of the Issuer is outstanding, the Issuer may
not pay the exchange notes until five Business Days after the holders or the
Representative of such Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the exchange notes only if the
subordination provisions of the indenture otherwise permit payment at that time.
122
<PAGE> 131
By reason of the subordination provisions of the indenture, in the event of
insolvency, creditors of the Issuer who are holders of Senior Indebtedness of
the Issuer may recover more, ratably, than the holders of the exchange notes and
creditors of the Issuer who are not holders of Senior Indebtedness of the Issuer
or of Senior Subordinated Indebtedness of the Issuer may recover less, ratably,
than holders of Senior Indebtedness of the Issuer and may recover more, ratably,
than the holders of Senior Subordinated Indebtedness (including the exchange
notes) of the Issuer.
The indenture will contain substantially identical subordination provisions
relating to each Guarantor's obligations under its Guarantee.
GUARANTEES
Holdings, each Domestic Subsidiary existing on the Closing Date and, in the
future, certain other Subsidiaries of the Issuer (as described below)
(collectively reffered to as the "Guarantors"), as primary obligors and not
merely as sureties, will jointly and severally irrevocably and unconditionally
guarantee on an unsecured senior subordinated basis the performance and full and
punctual payment when due, whether at Stated Maturity, by acceleration, by
redemption or otherwise, of all obligations of the Issuer under the indenture
(including obligations to the trustee) and the exchange notes, whether for
payment of principal of, interest on, or Additional Amounts in respect of, the
exchange notes, expenses, indemnification or otherwise (all such obligations
guaranteed by such Guarantors, the "Guaranteed Obligations"). Such Guarantors
will agree to pay, in addition to the amount stated above, any and all costs and
expenses (including reasonable counsel fees and expenses) incurred by the
trustee or the holders of the exchange notes in enforcing any rights under the
Guarantees. Each Guarantee will be limited in amount to an amount not to exceed
the maximum amount that can be guaranteed by the applicable Guarantor without
rendering the Guarantee, as it relates to such Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. After the Closing
Date, subject to the provisions of the last paragraph of this section, the
Issuer will cause (1) each Domestic Subsidiary acquired or formed after the
Closing Date, and (2) each Foreign Subsidiary (whether previously existing or
newly acquired or formed) that guarantees any Indebtedness of the Issuer (other
than the outstanding 10 1/2% Senior Subordinated Notes due 2006) or a Domestic
Subsidiary after the Closing Date, to execute and deliver to the trustee a
supplemental indenture pursuant to which such Subsidiary will guarantee payment
of the exchange notes. See "-- Restrictive Covenants -- Future Guarantors."
The obligations of a Guarantor under its Guarantee are Senior Subordinated
Indebtedness of such Guarantor. As such, the rights of holders of the exchange
notes to receive payment by a Guarantor pursuant to its Guarantee will be
subordinated in right of payment to the rights of holders of Senior Indebtedness
of such Guarantor. The terms of the subordination provisions described above
with respect to the Issuer's obligations under the exchange notes apply equally
to a Guarantor and the obligations of such Guarantor under its Guarantee.
Each Guarantee is a continuing Guarantee and shall, except as described in
the immediately succeeding paragraph:
(1) remain in full force and effect until payment in full of all the
Guaranteed Obligations;
123
<PAGE> 132
(2) be binding upon each Guarantor and its successors; and
(3) inure to the benefit of, and be enforceable by, the trustee, the
holders of the exchange notes and their successors, transferees and
assigns.
Any Guarantee by a Subsidiary of the Issuer will be automatically released
upon:
(1) the sale or other disposition (including through merger or
consolidation) of the Capital Stock, or all or substantially all the
assets, of the applicable Subsidiary if such sale or other disposition is
made in compliance with the covenant described under the caption
"-- Restrictive Covenants -- Limitation on Sales of Assets and Subsidiary
Stock;" or
(2) the applicable Subsidiary ceasing to be a Subsidiary of the Issuer
as a result of any foreclosure of any pledge or security interest securing
Bank Indebtedness or other exercise of remedies in respect thereof if such
Subsidiary is released from its guarantees of, and all pledges and security
interests granted in connection with, such Bank Indebtedness.
In addition, if any Subsidiary is released from its guarantee of, and all
pledges and security interests granted in connection with, or is not required to
guarantee or provide security in respect of, any Indebtedness of the Issuer or
any Subsidiary (or in the case of a Foreign Subsidiary, the Issuer or any
Domestic Subsidiary) of the Issuer, then such Guarantor's Guarantee will also be
automatically released, or not required, for so long as such Guarantor does not
guarantee, or provide security interests in respect of, any Indebtedness of the
Issuer or any Subsidiary (or in the case of a Foreign Subsidiary, the Issuer or
any Domestic Subsidiary) of the Issuer; provided, however, that if such
Subsidiary is a Domestic Subsidiary, such Subsidiary's Guarantee shall only be
so released or not required if, after giving effect to such release or lack of
Guarantee, such Subsidiary and all other Domestic Subsidiaries that are not
Guarantors (1) would have generated 10% or less of the EBITDA of the Issuer and
its Domestic Subsidiaries on a consolidated basis for the period of the most
recent four consecutive fiscal quarters ending at the end of the most recent
fiscal quarter for which financial statements are publicly available and (2)
would have had assets that represented 10% or less of the Consolidated Net
Tangible Assets of the Issuer and its Domestic Subsidiaries on a consolidated
basis as of the end of the most recent fiscal quarter for which financial
statements are publicly available; provided, further, however, that once a
Subsidiary Guarantee is released or not required as contemplated above, the
applicable Subsidiary of the Issuer will not be required to give a Guarantee
unless it guarantees, or provides security interests in respect of, any
Indebtedness of the Issuer or any Subsidiary (or in the case of a Foreign
Subsidiary, the Issuer or any Domestic Subsidiary) of the Issuer.
124
<PAGE> 133
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder of the exchange notes will have the right to require the
Issuer to repurchase all or any part of such holder's exchange notes at a
purchase price in cash equal to 101% of the accreted value thereof, plus accrued
and unpaid interest thereon and Additional Amounts, if any, in respect thereof
to the date of repurchase (subject to the right of holders of record on the
relevant record date to receive interest and Additional Amounts, if any, due on
the relevant interest payment date); provided, however, that notwithstanding the
occurrence of a Change of Control, the Issuer shall not be obligated to
repurchase the exchange notes pursuant to this section in the event that it has
exercised its right to redeem all the exchange notes under the terms described
under the caption "-- Optional Redemption":
(1) prior to the earlier to occur of (a) the first public offering of
common stock of Holdings or (b) the first public offering of common stock
of the Issuer, the Permitted Holders, taken together, cease to be the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of a majority in the aggregate of the total
voting power of the Voting Stock of Holdings or the Issuer, whether as a
result of the issuance of securities of Holdings or the Issuer, any merger,
consolidation, liquidation or dissolution of Holdings or the Issuer, any
direct or indirect transfer of securities by any Permitted Holder or
otherwise (for purposes of this clause (1) and clause (2) below, the
Permitted Holders shall be deemed to beneficially own any Voting Stock of
an entity (the "specified entity") held by any other entity (the "parent
entity") so long as the Permitted Holders beneficially own, directly or
indirectly, in the aggregate a majority of the voting power of the Voting
Stock of the parent entity);
(2) (a) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in clause (1) above, except that
for purposes of this clause (2) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of Holdings or the Issuer and (b) the
Permitted Holders beneficially own (as defined in clause (1) above),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of Holdings or the Issuer than such other
person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of Holdings or the Issuer, as the case may be (for the purposes
of this clause (2), such other person shall be deemed to beneficially own
any Voting Stock of a specified entity held by a parent entity, if such
other person is the beneficial owner (as defined in this clause (2)),
directly or indirectly, of more than 35% of the voting power of the Voting
Stock of such parent entity and the Permitted Holders beneficially own (as
defined in clause (1) above), directly or indirectly, in the aggregate a
lesser percentage of the voting power of the Voting Stock of such parent
entity and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the board of
directors of such parent entity);
(3) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Issuer
or Holdings, as the
125
<PAGE> 134
case may be (together with any new directors (a) whose election by such
Board of Directors of Holdings or the Issuer, as the case may be, or whose
nomination for election by the shareholders of Holdings or the Issuer, as
the case may be, was approved by a majority vote of the directors of
Holdings or the Issuer, as the case may be, then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved or (b) who are designees
of the Permitted Holders or were nominated by the Permitted Holders) cease
for any reason to constitute a majority of the Board of Directors of the
Issuer or Holdings, as the case may be, then in office;
(4) the adoption of a plan relating to the liquidation or dissolution
of Holdings or the Issuer; or
(5) the merger or consolidation of Holdings or the Issuer with or into
another Person or the merger of another Person with or into Holdings or the
Issuer, or the sale of all or substantially all the assets of Holdings or
the Issuer to another Person (other than a Person that is controlled by the
Permitted Holders), and, in the case of any such merger or consolidation,
the securities of Holdings or the Issuer that are outstanding immediately
prior to such transaction and that represent 100% of the aggregate voting
power of the Voting Stock of Holdings or the Issuer are changed into or
exchanged for cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged for, in addition
to any other consideration, securities of the surviving Person or
transferee that represent immediately after such transaction, at least a
majority of the aggregate voting power of the Voting Stock of the surviving
Person or transferee.
In the event that at the time of such Change of Control the terms of the
Bank Indebtedness restrict or prohibit the repurchase of exchange notes pursuant
to this covenant, then prior to the mailing of the notice to holders provided
for in the immediately succeeding paragraph, but in any event within 30 days
following any Change of Control, the Issuer shall:
(1) repay in full all Bank Indebtedness or, if doing so will allow the
repurchase of exchange notes, offer to repay in full all Bank Indebtedness
and repay the Bank Indebtedness of each lender who has accepted such offer;
or
(2) obtain the requisite consent under the agreements governing the
Bank Indebtedness to permit the repurchase of the exchange notes as
provided for in the immediately succeeding paragraph.
Within 30 days following any Change of Control, the Issuer shall mail a
notice to each holder of exchange notes with a copy to the trustee (the "Change
of Control Offer") stating:
(1) that a Change of Control has occurred and that such holder has the
right to require the Issuer to purchase all or a portion of such holder's
exchange notes at a purchase price in cash equal to 101% of the accreted
value thereof, plus accrued and unpaid interest thereon and Additional
Amounts in respect thereof, if any, to the date of purchase (subject to the
right of holders of record on the relevant record date to receive interest
on the relevant interest payment date);
(2) the circumstances and relevant facts and financial information
regarding such Change of Control;
126
<PAGE> 135
(3) the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Issuer, consistent with this
covenant, that a holder must follow in order to have its exchange notes
purchased.
In the event that holders of not less than 98% of the principal amount of
the outstanding exchange notes accept a Change of Control Offer and the Issuer
purchases all of the exchange notes held by such holders, the Issuer will have
the right, on not less than 30 nor more than 60 days' prior notice, given not
more than 30 days following the purchase pursuant to the Change of Control Offer
described above, to redeem all the exchange notes that remain outstanding
following such purchase at the purchase price specified in the Change of Control
Offer plus, to the extent not included in the purchase price specified in the
Change of Control Offer, accrued and unpaid interest thereon and Additional
Amounts in respect thereof, if any, to the date of redemption (subject to the
right of holders of record on the relevant record date to receive interest on
the relevant interest payment date).
The Issuer will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture applicable to a Change of Control Offer made by the Issuer and
purchases all exchange notes validly tendered and not withdrawn under such
Change of Control Offer.
The Issuer will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the purchase of exchange notes pursuant to this covenant. To
the extent that the provisions of any securities laws or regulations conflict
with provisions of this covenant, the Issuer will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this covenant by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Issuer and the initial purchasers of the old notes. Management has no
present intention to engage in a transaction involving a Change of Control,
although it is possible that Holdings or the Issuer would decide to do so in the
future. Subject to the limitations discussed below, the Issuer could, in the
future, enter into certain transactions, including acquisitions, refinancings or
recapitalizations, that would not constitute a Change of Control under the
indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect the Issuer's capital structure or credit ratings.
Restrictions on the ability of the Issuer and the Restricted Subsidiaries to
Incur additional Indebtedness are contained in the covenant described under the
caption "-- Restrictive Covenants -- Limitation on Indebtedness." Such
restrictions can only be waived with the consent of the holders of a majority in
principal amount of the exchange notes then outstanding. Except for the
limitations contained in such covenants, however, the indenture will not contain
any covenants or provisions that may afford holders of exchange notes protection
in the event of a highly leveraged transaction.
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the credit agreement. Future Senior
Indebtedness of the Issuer may contain prohibitions of certain events that would
constitute a Change of Control or require such Senior Indebtedness to be
repurchased or repaid upon a Change of Control. Moreover, the exercise by the
holders of exchange notes of their right to require
127
<PAGE> 136
the Issuer to repurchase the exchange notes could cause a default under such
Senior Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Issuer. Finally, the Issuer's ability
to pay cash to the holders of exchange notes upon a repurchase may be limited by
the Issuer's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases. The provisions under the indenture relative to the Issuer's
obligation to make an offer to repurchase the exchange notes as a result of a
Change of Control may be waived or modified with the written consent of the
holders of a majority in principal amount of the exchange notes.
RESTRICTIVE COVENANTS
The indenture will contain covenants including, among others, the
following:
Limitation on Indebtedness. (1) The Issuer will not, and will not
permit any Restricted Subsidiary to, Incur any Indebtedness; provided,
however, that the Issuer or any Restricted Subsidiary (other than any
Foreign Subsidiary that is not a Guarantor) may Incur Indebtedness if on
the date of such Incurrence and after giving effect thereto the
Consolidated Coverage Ratio would be greater than 2:1 if such Indebtedness
is Incurred on or prior to November 12, 2002, and 2.25:1 if such
Indebtedness is Incurred thereafter.
(2) Notwithstanding the foregoing paragraph (1), the Issuer and the
Restricted Subsidiaries may Incur the following Indebtedness:
(a) Bank Indebtedness of the Issuer in an aggregate principal
amount not to exceed $310.0 million less the aggregate amount of all
prepayments of principal of such Indebtedness pursuant to the covenant
described under "-- Limitation on Sales of Assets and Subsidiary Stock;"
(b) Indebtedness of the Issuer owed to and held by any Wholly Owned
Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held
by the Issuer or any Wholly Owned Subsidiary; provided, however, that
(i) any subsequent issuance or transfer of any Capital Stock or any
other event that results in any such Wholly Owned Subsidiary ceasing to
be a Wholly Owned Subsidiary or any subsequent transfer of any such
Indebtedness (except to the Issuer or a Wholly Owned Subsidiary) shall
be deemed, in each case, to constitute the Incurrence of such
Indebtedness by the issuer thereof, (ii) if the Issuer is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash or cash equivalents of all obligations
with respect to the exchange notes and (iii) if a Restricted Subsidiary
that is a Guarantor is the obligor on such Indebtedness and such
Indebtedness is owed to and held by a Wholly Owned Subsidiary that is
not a Guarantor, such Indebtedness is expressly subordinated to the
prior payment in full in cash or cash equivalents of all obligations of
such Restricted Subsidiary with respect to its Guarantee;
(c) Indebtedness (i) represented by the exchange notes and the
Guarantees, (ii) outstanding on the Closing Date (other than the
Indebtedness described in clauses (a) and (b) above), (iii) consisting
of Refinancing Indebtedness Incurred in respect of any Indebtedness
described in this clause (c) (including Indebtedness that is Refinancing
Indebtedness) or the foregoing paragraph (1)
128
<PAGE> 137
or (iv) consisting of guarantees of any Indebtedness otherwise permitted
under the indenture (other than guarantees of Indebtedness of
Subsidiaries that are not Guarantors);
(d) (i) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted Subsidiary
was acquired by the Issuer (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became
a Subsidiary of, or was otherwise acquired by, the Issuer); provided,
however, that, if $10 million in the aggregate of Indebtedness Incurred
by Restricted Subsidiaries and/or other Persons pursuant to this clause
(d)(i) and clause (h)(i) of this paragraph (2) remains outstanding,
Indebtedness may be Incurred under this clause (d)(i) only if, on the
date that such Restricted Subsidiary is acquired by the Issuer, the
Issuer would have been able to Incur $1.00 of additional Indebtedness
pursuant to the foregoing paragraph (1) after giving effect to the
Incurrence of such Indebtedness pursuant to this clause (d)(i) and (ii)
Refinancing Indebtedness Incurred by the Issuer or a Restricted
Subsidiary in respect of Indebtedness Incurred pursuant to subclause (i)
of this clause (d);
(e) Indebtedness in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by
the Issuer and the Restricted Subsidiaries in the ordinary course of
their business;
(f) Indebtedness (including Capitalized Lease Obligations and
Attributable Debt) Incurred by the Company or any Restricted Subsidiary
to finance the purchase, lease or improvement of property (real or
personal) or equipment (whether through the direct purchase of assets or
Capital Stock of any Person owning such assets that becomes a Wholly
Owned Subsidiary) in an aggregate principal amount, which when
aggregated with the principal amount of all other Indebtedness then
outstanding and Incurred pursuant to this clause (f), does not exceed
$20.0 million;
(g) Hedging Obligations of the Issuer or any Guarantor entered into
in the ordinary course of business for the purpose of fixing or hedging
interest rate risk or currency fluctuations;
(h) (i) Indebtedness of another Person Incurred and outstanding on
or prior to the date on which such Person consolidates with or merges
with or into the Issuer (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Person consolidates with or
merges with or into the Issuer); provided, however, that (A) such
transaction complies with the covenant described under the caption
"-- Merger and Consolidation," and (B) if $10 million in the aggregate
of Indebtedness Incurred by any Persons and/or Restricted Subsidiaries
pursuant to this clause (h)(i) and clause (d)(i) of this paragraph (2)
remains outstanding, Indebtedness may be Incurred under this clause
(h)(i) only if, on the date that such transaction is consummated, the
Issuer would have been able to Incur $1.00 of additional Indebtedness
pursuant to the foregoing paragraph (1) after giving effect to the
Incurrence of such Indebtedness pursuant to this clause (h)(i) and (ii)
129
<PAGE> 138
Refinancing Indebtedness Incurred by the Issuer or the Successor Company
(as defined) in respect of Indebtedness Incurred pursuant to subclause
(i) of this clause (h);
(i)(i) Indebtedness of a Foreign Subsidiary that is not a
Guarantor; provided, however, that, on the date that such Foreign
Subsidiary Incurs such Indebtedness, (A) the Issuer would have been able
to Incur $1.00 of additional Indebtedness pursuant to the foregoing
paragraph (1) after giving effect to the Incurrence of such Indebtedness
pursuant to this clause (i)(i), and (B) the Foreign Coverage Ratio would
be greater than 2.5:1.0 after giving effect to the Incurrence of such
Indebtedness pursuant to this clause (i)(i), and (ii) Refinancing
Indebtedness Incurred by such Foreign Subsidiary in respect of
Indebtedness Incurred pursuant to subclause (i)of this clause (i); or
(j) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to the foregoing paragraph (1) or any other clause of this
paragraph (2)) in an aggregate principal amount on the date of
Incurrence that, when added to all other Indebtedness Incurred pursuant
to this clause (j) and then outstanding, shall not exceed $10.0 million.
(3) Notwithstanding the foregoing, a Domestic Subsidiary that is not a
Guarantor may not Incur any Indebtedness pursuant to paragraph (1) or (2)
(except pursuant to clauses (b) and (c) of paragraph (2)) above if such
Subsidiary, together with all other Domestic Subsidiaries that are not
Guarantors, (x) generated in excess of 10% of the EBITDA of the Issuer and
its Domestic Subsidiaries on a consolidated basis for the period of the
most recent four consecutive fiscal quarters ending at the end of the most
recent fiscal quarter for which financial statements are publicly available
or (y) had assets representing more than 10% of the Consolidated Net
Tangible Assets of the Issuer and its Domestic Subsidiaries on a
consolidated basis as of the end of the fiscal quarter for which financial
statements are publicly available.
(4) Notwithstanding the foregoing, the Issuer may not Incur any
Indebtedness pursuant to paragraph (2) above if the proceeds thereof are
used, directly or indirectly, to repay, prepay, redeem, defease, retire,
refund or refinance any Subordinated Obligations, unless such Indebtedness
will be subordinated to the exchange notes to at least the same extent as
such Subordinated Obligations. The Issuer may not Incur any Indebtedness if
such Indebtedness is subordinate or junior in ranking in any respect to any
Senior Indebtedness unless such Indebtedness is Senior Subordinated
Indebtedness or is expressly subordinated in right of payment to Senior
Subordinated Indebtedness. In addition, the Issuer may not Incur any
Secured Indebtedness that is not Senior Indebtedness unless
contemporaneously therewith effective provision is made to secure the
exchange notes equally and ratably with (or on a senior basis to, in the
case of Indebtedness subordinated in right of payment to the exchange
notes) such Secured Indebtedness for so long as such Secured Indebtedness
is secured by a Lien. A Guarantor may not Incur any Indebtedness if such
Indebtedness is by its terms expressly subordinate or junior in ranking in
any respect to any Senior Indebtedness of such Guarantor unless such
Indebtedness is Senior Subordinated Indebtedness of such Guarantor or is
expressly subordinated in right of payment to Senior Subordinated
Indebtedness of such Guarantor. In addition, a Guarantor may not Incur any
Secured Indebtedness that is not Senior Indebtedness of such Guarantor
unless contemporaneously therewith effective provision is made to secure
the Guarantee of such Guarantor equally and ratably with (or on a senior
basis
130
<PAGE> 139
to, in the case of Indebtedness subordinated in right of payment to such
Guarantee) such Secured Indebtedness for as long as such Secured
Indebtedness is secured by a Lien.
(5) Notwithstanding any other provision of this covenant, an increase
in the dollar amount of Indebtedness of the Issuer or any Restricted
Subsidiary that comes about solely as a result of fluctuations in the
exchange rates of currencies shall not be deemed to be the Incurrence by
the Issuer or such Restricted Subsidiary of additional Indebtedness.
(6) For purposes of determining the outstanding principal amount of
any particular Indebtedness Incurred pursuant to this covenant:
(a) Indebtedness Incurred pursuant to the credit agreement prior to
or on the Closing Date shall be treated as Incurred pursuant to clause
(a) of paragraph (2) above;
(b) Indebtedness permitted by this covenant need not be permitted
solely by reference to one provision permitting such Indebtedness but
may be permitted in part by one such provision and in part by one or
more other provisions of this covenant permitting such Indebtedness; and
(c) in the event that Indebtedness meets the criteria of more than
one of the types of Indebtedness described in this covenant, the Issuer,
in its sole discretion, shall classify such Indebtedness and only be
required to include the amount of such Indebtedness in one of such
clauses.
Limitation on Restricted Payments. (1) The Issuer will not, and will
not permit any Restricted Subsidiary, directly or indirectly, to:
(a) declare or pay any dividend, make any distribution on or in
respect of its Capital Stock or make any similar payment (including any
payment in connection with any merger or consolidation involving the
Issuer) to the holders of its Capital Stock, except (i) dividends or
distributions payable solely in its Capital Stock (other than
Disqualified Stock) and (ii) dividends or distributions payable to the
Issuer or another Restricted Subsidiary (and, if such Restricted
Subsidiary has shareholders other than the Issuer or other Restricted
Subsidiaries, to its other shareholders on a pro rata basis);
(b) purchase, repurchase, redeem or otherwise acquire or retire for
value any Capital Stock of Holdings, the Issuer or any Restricted
Subsidiary held by Persons other than the Issuer or another Restricted
Subsidiary;
(c) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment any Subordinated Obligations (other than
the purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case, due within one year of the
date of acquisition or payment); or
(d) make any Investment (other than a Permitted Investment) in any
Person (any such dividend, distribution, purchase, repurchase,
redemption, defeasance, retirement, other acquisition or Investment
referred to in clauses
131
<PAGE> 140
(a) through (d) of this paragraph (1) being herein referred to as a
"Restricted Payment"),
if at the time the Issuer or such Restricted Subsidiary makes such
Restricted Payment:
(i) a Default will have occurred and be continuing (or would result
therefrom);
(ii) the Issuer could not Incur at least $1.00 of additional
Indebtedness under paragraph (1) of the covenant described under the
caption "-- Limitation on Indebtedness;" or
(iii) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors of the Issuer, whose
determination will be conclusive and evidenced by a resolution of the Board
of Directors of the Issuer) declared or made subsequent to the Closing Date
would exceed the sum, without duplication, of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which the
Closing Date occurs to the end of the most recent fiscal quarter for
which financial statements are publicly available (or, in case such
Consolidated Net Income will be a deficit, minus 100% of such deficit);
plus
(B) the aggregate Net Cash Proceeds received by the Issuer from the
issue or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Closing Date (other than (x) an issuance or sale to a
Subsidiary of the Issuer, (y) an issuance or sale to an employee stock
ownership plan or other trust established by the Issuer or any of its
Subsidiaries or (z) to the extent used in accordance with clause (e)(ii)
or (f)(iii)(B) of paragraph (2) below); plus
(C) the aggregate Net Cash Proceeds received by the Issuer or a
Restricted Subsidiary from the sale or other disposition (other than to
(x) the Issuer or a Subsidiary of the Issuer or (y) an employee stock
ownership plan or other trust established by the Issuer or any of its
Subsidiaries) of any Investments previously made by the Issuer or a
Restricted Subsidiary and treated as a Restricted Payment; provided that
the amount added pursuant to this clause (C) shall not (x) exceed the
amount of such Investments previously made by the Issuer or any
Restricted Subsidiary, which amount was included in the calculation of
the amount of Restricted Payments and (y) include any amounts from such
sale or disposition previously included in clause (iii) of this
paragraph (1); plus
(D) the amount by which Indebtedness of the Issuer or the
Restricted Subsidiaries is reduced on the Issuer's balance sheet upon
the conversion or exchange (other than by a Subsidiary of the Issuer)
subsequent to the Closing Date of any Indebtedness of the Issuer or the
Restricted Subsidiaries issued after the Closing Date that is
convertible or exchangeable for Capital Stock (other than Disqualified
Stock) of the Issuer (less the amount of any cash or the fair market
value of other property distributed by the Issuer or any Restricted
Subsidiary upon such conversion or exchange); plus
(E) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) payments of dividends,
repayments of the principal
132
<PAGE> 141
of loans or advances or other transfers of assets to the Issuer or any
Restricted Subsidiary from Unrestricted Subsidiaries or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued, in each case, as provided in the definition of "Investment")
not to exceed, in the case of any Unrestricted Subsidiary, the amount of
Investments previously made by the Issuer or any Restricted Subsidiary
in such Unrestricted Subsidiary, which amount was included in the
calculation of the amount of Restricted Payments; plus
(F) $5.0 million.
(2) The provisions of the foregoing paragraph (1) will not prohibit:
(a) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Capital Stock or Subordinated
Obligations of the Issuer made by exchange for, or out of the proceeds
of the substantially concurrent sale of, Capital Stock of the Issuer
(other than Disqualified Stock and other than Capital Stock issued or
sold to a Subsidiary of the Issuer or an employee stock ownership plan
or other trust established by the Issuer or any of its Subsidiaries);
provided, however,that:
(i) such purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value will be excluded in the
calculation of the amount of Restricted Payments; and
(ii) the Net Cash Proceeds from such sale applied in the
manner set forth in this clause (a) will be excluded from the
calculation of amounts under clause (iii)(B) of paragraph (1)
above;
(b) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of
the Issuer made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Indebtedness of the Issuer that
is permitted to be Incurred pursuant to paragraph (2) of the
covenant described under the caption "-- Limitation on
Indebtedness"; provided, however, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value
will be excluded in the calculation of the amount of Restricted
Payments;
(c) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of
the Issuer or any Guarantor (other than Holdings) from Net
Available Cash to the extent permitted by the covenant described
under the caption "-- Limitation on Sales of Assets and Subsidiary
Stock"; provided, however, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value
will be excluded in the calculation of the amount of Restricted
Payments;
(d) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividends
would have complied with this covenant; provided, however, that
such dividends will be included in the calculation of the amount of
Restricted Payments;
(e) any purchase, repurchase, redemption or other acquisition
or retirement for value of shares of, or options to purchase shares
of, common
133
<PAGE> 142
stock of the Issuer or any of its Subsidiaries from employees,
former employees, consultants, former consultants, directors or
former directors of the Issuer or any of its Subsidiaries (or
permitted transferees of such employees, former employees,
consultants, former consultants, directors or former directors),
pursuant to the terms of agreements (including employment
agreements) or plans (or amendments thereto) approved by the Board
of Directors of the Issuer under which such individuals purchase or
sell, or are granted the option to purchase or sell, such shares of
common stock or such options; provided, however, that the aggregate
amount of such purchases, repurchases, redemptions and other
acquisitions or retirements for value, together with any amounts or
other distributions to Holdings under paragraph (f)(iii) below,
shall not exceed in any calendar year the sum of (i) $5.0 million
plus (ii) the Net Cash Proceeds (A) received since the Closing Date
by the Issuer or received by Holdings and contributed to the Issuer
from the sale of Capital Stock to employees, consultants and
directors of Holdings or the Issuer and (B) not previously credited
to any purchase, repurchase, redemption or retirement for value or
other acquisition of such shares or options to purchase shares of
common stock pursuant to this clause (e)(ii) or clause (f)(iii)(B)
below; provided, further, however, that such purchase, repurchase,
redemption or other acquisition or retirement for value shall be
included in the calculation of the amount of Restricted Payments
(unless made with Net Cash Proceeds excluded pursuant to clause
(d)(iii)(B)(z) above);
(f) any payment of dividends, other distributions or other
amounts by the Issuer solely for the purposes set forth in clauses
(i) through (iv) below; provided, however, that any such dividend,
distribution or other amount set forth in clauses (i), (iii)
(unless made with Net Cash Proceeds excluded pursuant to clause
(d)(iii)(B)(z) above) and (iv) (but not clause (ii)) shall be
included in the calculation of the amount of Restricted Payments:
(i) to Holdings to provide for operating costs in an
aggregate amount not to exceed $1.0 million per fiscal year;
(ii) to Holdings in amounts equal to amounts required for
Holdings to pay U.S. federal, state and local or foreign
income taxes to the extent such income taxes are attributable
to the income of the Issuer and the Restricted Subsidiaries
(and, to the extent of amounts actually received from its
Unrestricted Subsidiaries, in amounts required to pay such
taxes to the extent attributable to the income of such
Unrestricted Subsidiaries);
(iii) to Holdings in amounts equal to amounts expended by
Holdings to purchase, repurchase, redeem or otherwise acquire
or retire for value shares of, or options to purchase shares
of, common stock of Holdings from employees, former employees,
consultants, former consultants, directors or former directors
of Holdings, the Issuer or any of the Issuer's Subsidiaries
(or permitted transferees of such employees, former employees,
consultants, former consultants, directors or former
directors), pursuant to the terms of agreements (including
employment agreements) or plans (or amendments thereto)
approved by the Board of Directors of Holdings under which
such individuals purchase or sell,
134
<PAGE> 143
or are granted the option to purchase or sell, such shares of
common stock of Holdings or such options; provided, however,
that the aggregate amount paid, loaned or advanced to Holdings
pursuant to this clause (iii), together with the amounts of
any repurchases or other acquisitions under clause (e) above,
shall not exceed in any calendar year the sum of (A) $5.0
million plus (B) the Net Cash Proceeds (1) received since the
Closing Date by the Issuer or received by Holdings and
contributed to the Issuer from the sale of Capital Stock to
employees, consultants and directors of Holdings or the Issuer
and (2) not previously credited to any purchase, repurchase,
redemption or other acquisition or retirement for value of
such shares or options to purchase shares of common stock
pursuant to this clause (f)(iii)(B) or clause (e)(ii) above;
and
(iv) to Holdings in amounts equal to amounts necessary
for Holdings to make loans or advances to employees in the
ordinary course of business in accordance with past practices
of the Issuer, but in any event not to exceed, when aggregated
with amounts loaned or advanced under clause (6) of the
definition of "Permitted Investments," $5.0 million in the
aggregate outstanding at any one time; and
(g) any payment of dividends from the Issuer to Holdings on or
prior to the Closing Date in order to consummate the Transactions,
provided, however, that any such dividend shall be excluded in the
calculation of the amount of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Issuer will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to the Issuer or
any of the Restricted Subsidiaries;
(2) make any loans or advances to the Issuer or any of the
Restricted Subsidiaries; or
(3) transfer any of its property or assets to the Issuer or any of
the Restricted Subsidiaries, except:
(a) any encumbrance or restriction pursuant to applicable law or an
agreement in effect at or entered into on the Closing Date;
(b) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness
Incurred by such Restricted Subsidiary prior to the date on which such
Restricted Subsidiary was acquired by the Issuer (other than
Indebtedness Incurred as consideration in, in contemplation of, or to
provide all or any portion of the funds or credit support utilized to
consummate the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted Subsidiary or was
otherwise acquired by the Issuer) and outstanding on such date;
135
<PAGE> 144
(c) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (a) or (b) above or this clause (c) or
contained in any amendment to an agreement referred to in clause (a) or
(b) above or this clause (c); provided, however, that the encumbrances
and restrictions contained in any such Refinancing agreement or
amendment are no less favorable to the holders of the exchange notes
than the encumbrances and restrictions contained in such predecessor
agreements;
(d)in the case of clause (3), any encumbrance or restriction:
(i) that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that is subject to
a lease, license or similar contract; or
(ii) contained in security agreements securing Indebtedness of
a Restricted Subsidiary to the extent such encumbrance or
restriction restricts the transfer of the property subject to such
security agreements;
(e) with respect to a Restricted Subsidiary, any restriction
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary pending the closing of such sale or
disposition;
(f) any encumbrance or restriction relating to Purchase Money
Indebtedness or Capitalized Lease Obligations for property acquired in
the ordinary course of business that imposes restrictions on the ability
of the Issuer or a Restricted Subsidiary to sell, lease or transfer the
acquired property to the Issuer or its Restricted Subsidiaries;
(g) restrictions on cash or other deposits imposed by customers
under contracts entered into in the ordinary course of business; and
(h) any encumbrance or restriction contained in joint venture
agreements and other similar agreements entered into in the ordinary
course of business and customary for such types of agreements.
Limitation on Sales of Assets and Subsidiary Stock. (1) The Issuer will
not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless:
(a) the Issuer or such Restricted Subsidiary receives consideration
(including by way of relief from, or by any other Person assuming sole
responsibility for, any liabilities, contingent or otherwise) at the
time of such Asset Disposition at least equal to the Fair Market Value
of the shares and assets subject to such Asset Disposition;
(b) at least 75% of the consideration therefor received by the
Issuer or such Restricted Subsidiary is in the form of cash; provided
that the following shall be deemed to be cash for purposes of this
clause (b) (but not for purposes of the definition of Net Available
Cash): (i) the amount of any liabilities (as shown on the Issuer's or
such Restricted Subsidiary's most recent balance sheet or in the notes
thereto) of the Issuer or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the exchange notes
or the Guarantees) that are assumed by the transferee of any such
assets, (ii) the amount of any
136
<PAGE> 145
securities received by the Issuer or such Restricted Subsidiary from
such transferee that are converted or scheduled to be converted by the
Issuer or such Restricted Subsidiary into cash (to the extent of the
cash received or scheduled to be received) within 90 days following the
closing of such Asset Disposition, (iii) the Fair Market Value of any
Related Assets received by the Issuer or such Restricted Subsidiary in
such Asset Disposition and (iv) any Designated Noncash Consideration
received by the Issuer or such Restricted Subsidiary in such Asset
Disposition having an aggregate Fair Market Value, taken together with
all other Designated Noncash Consideration received pursuant to this
clause (iv) that has not been converted into cash or cash equivalents,
not to exceed 10% of Consolidated Net Tangible Assets as of the end of
the most recent fiscal quarter for which financial statements are
publicly available at the time such Designated Noncash Consideration is
received (with the Fair Market Value of each item of Designated Noncash
Consideration being measured at the time received and without giving
effect to subsequent changes in value); and
(c) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Issuer (or such Restricted
Subsidiary, as the case may be):
(i) first, to the extent the Issuer elects (or is required by
the terms of any Indebtedness), to prepay, repay, redeem, purchase,
repurchase, defease or otherwise acquire or retire for value Senior
Indebtedness of the Issuer or Indebtedness (other than obligations
in respect of any Preferred Stock) of a Wholly Owned Subsidiary (in
each case, other than Indebtedness owed to the Issuer or an
Affiliate of the Issuer and other than obligations in respect of
Disqualified Stock) within 360 days of the later of the date of
such Asset Disposition or the receipt of such Net Available Cash;
(ii) second, to the extent of the balance of Net Available
Cash after application in accordance with clause (i) above, to the
extent the Issuer or such Restricted Subsidiary elects to, or
enters into a binding agreement to, reinvest in Additional Assets
(including by means of an Investment in Additional Assets by a
Restricted Subsidiary with cash in an amount equal to the amount of
Net Available Cash received by, or to be received by, the Issuer or
another Restricted Subsidiary) within 360 days of the later of such
Asset Disposition or the receipt of such Net Available Cash; and
(iii) third, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (i) and
(ii) above, to make an Offer to purchase exchange notes pursuant to
and subject to the conditions set forth in paragraph (2) below;
provided, however, that, if the Issuer elects (or is required by
the terms of any other Senior Subordinated Indebtedness), such
Offer may be made ratably to purchase the exchange notes and other
Senior Subordinated Indebtedness of the Issuer;
provided, however that, in connection with any prepayment, repayment
purchase, repurchase, defeasance or other acquisition or retirement for
value of Indebtedness pursuant to clause (i) or (iii) above, the Issuer
or such Restricted Subsidiary will retire such Indebtedness and will
cause the related loan commitment (if any) to be permanently reduced in
an amount equal to the
137
<PAGE> 146
principal amount so prepaid, repaid, purchased, repurchased, defeased or
otherwise acquired or retired for value.
Upon completion of any Offer, the amount of Net Available Cash shall
be reset at zero and the Issuer shall be entitled to use any remaining
proceeds for any corporate purposes to the extent permitted under the
indenture.
Notwithstanding the foregoing provisions of this covenant, the Issuer
and the Restricted Subsidiaries will not be required to apply any Net
Available Cash in accordance with this covenant except to the extent that
the aggregate Net Available Cash from all Asset Dispositions that is not
applied in accordance with this covenant exceeds $10.0 million.
(2) In the event of an Asset Disposition that requires the purchase of
exchange notes pursuant to clause (c)(iii) above, the Issuer will be
required to offer to purchase exchange notes tendered pursuant to an offer
by the Issuer for the exchange notes (an "Offer") at a purchase price of
100% of their accreted value amount plus accrued and unpaid interest
thereon, and Additional Amounts in respect thereof, if any, to the date of
purchase in accordance (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest
payment date) with the procedures (including prorating in the event of
oversubscription) set forth in the indenture and to purchase other Senior
Subordinated Indebtedness on the terms and to the extent contemplated
thereby. The Issuer will not be required to make an Offer for exchange
notes pursuant to this covenant if the Net Available Cash available
therefor (after application of the proceeds as provided in clauses (c)(i)
and (c)(ii) above) is less than $10.0 million for any particular Asset
Disposition (which lesser amount will be carried forward for purposes of
determining whether an Offer is required with respect to the Net Available
Cash from any subsequent Asset Disposition).
(3) The Issuer will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of exchange notes
pursuant to this covenant. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this covenant,
the Issuer will comply with the applicable securities laws and regulations
and will not be deemed to have breached its obligations under this covenant
by virtue thereof.
Limitation on Transactions with Affiliates. (1) The Issuer will not,
and will not permit any Restricted Subsidiary to, directly or indirectly,
enter into or conduct any transaction or series of related transactions
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of the Issuer (an "Affiliate
Transaction") unless such Affiliate Transaction is on terms:
(a) that are no less favorable to the Issuer or such Restricted
Subsidiary, as the case may be, than those that could be obtained at the
time of such transaction in arm's-length dealings with a Person who is
not such an Affiliate;
138
<PAGE> 147
(b) that, in the event such Affiliate Transaction involves an
aggregate amount in excess of $10.0 million:
(i) are set forth in writing; and
(ii) have been approved by a majority of the members of the
Board of Directors of the Issuer having no personal stake, other
than as a holder of Capital Stock of Holdings, the Issuer or such
Restricted Subsidiary, in such Affiliate Transaction; and
(c) that, in the event such Affiliate Transaction involves an
amount in excess of $25.0 million or does not comply with clause (b)
above, have been determined by a nationally recognized appraisal,
accounting or investment banking firm to be fair, from a financial
standpoint, to the Issuer and the Restricted Subsidiaries.
(2) The provisions of paragraph (1) above will not prohibit:
(a) any Restricted Payment permitted pursuant to the covenant
described under the caption "-- Restrictive Covenants -- Limitation on
Restricted Payments;"
(b) any issuance of securities, or other payments, awards or grants
in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans
approved by the Board of Directors of the Issuer;
(c) the grant of stock options or similar rights to employees,
consultants and directors of the Issuer, Holdings or the Subsidiaries of
the Issuer pursuant to plans approved by the Board of Directors of the
Issuer or Holdings;
(d)(x) extensions and refinancings of loans or advances existing on
the Closing Date that were made to employees or consultants and (y)
loans or advances to employees in the ordinary course of business in
accordance with past practices of Holdings, but in any event in the case
of this clause (y) not to exceed $10.0 million in the aggregate
outstanding at any one time;
(e) the payment of reasonable fees to directors of Holdings, the
Issuer and the Subsidiaries of the Issuer who are not employees of
Holdings, the Issuer or such Subsidiaries;
(f) any transaction between the Issuer and a Restricted Subsidiary
or between Restricted Subsidiaries;
(g) customary indemnification and insurance arrangements in favor
of officers, directors, employees and consultants of Holdings, the
Issuer or any of the Restricted Subsidiaries;
(h) the purchase and sale of inventory in the ordinary course of
business on an arm's-length basis consistent with customary market
pricing;
(i) marketing and/or distribution arrangements on arm's-length
terms;
(j) payments by the Issuer or any of the Restricted Subsidiaries to
Fox Paine and its Affiliates for any financial advisory, management,
financing,
139
<PAGE> 148
underwriting or other placement services or in respect of other
investment banking activities, including, without limitation, in
connection with acquisitions or divestitures which payments are approved
by a majority of the members of the Board of Directors of the Issuer
referred to in clause (b)(ii) of paragraph (1) above in good faith;
(k) the existence of, or the performance by the Issuer or any
Restricted Subsidiary of the obligations under the terms of, any
stockholders' agreements (including any registration rights agreement or
purchase agreement related thereto) to which any of them is a party as
of the Closing Date, as such agreements may be amended from time to time
pursuant to the terms thereof; provided, however, that the terms of any
such amendment are no less favorable to the holders of the exchange
notes than the terms of any such agreements in effect as of the Closing
Date;
(l) the issuance of Capital Stock (other than Disqualified Stock)
of the Issuer for cash to any Permitted Holder;
(m) any transaction between Circon and the Issuer or a Restricted
Subsidiary in respect of the Circon Note in connection with the
Transactions; and
(n) the performance of the Services Agreement as in effect on the
Closing Date (or any addition or deletion of services thereunder on
substantially similar terms) or any other amendment or modification
thereto or replacement thereof so long as any such other amendment,
modification or replacement agreement is not materially more
disadvantageous to the holders of the exchange notes than the original
agreement as in effect on the Closing Date.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Issuer will not sell or otherwise dispose of any shares
of Capital Stock of a Restricted Subsidiary, and will not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell or
otherwise dispose of any shares of its Capital Stock except:
(1) to the Issuer or a Wholly Owned Subsidiary;
(2) if, immediately after giving effect to such issuance, sale or
other disposition, neither the Issuer nor any of its Subsidiaries owns
any Capital Stock of such Restricted Subsidiary; or
(3) if, immediately after giving effect to such issuance or sale,
such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and any Investment in such Person remaining after giving
effect thereto would have been permitted to be made under the covenant
described under the caption "--Restrictive Covenants -- Limitation on
Restricted Payments" if made on the date of such issuance, sale or other
disposition.
The cash proceeds of any sale of such Capital Stock permitted hereby
will be treated as cash proceeds from an Asset Disposition and must be
applied in accordance with the terms of the covenant described under the
caption "-- Restrictive Covenants -- Limitation on Sales of Assets and
Subsidiary Stock."
SEC Reports. Notwithstanding that the Issuer may not be subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Issuer will
140
<PAGE> 149
file with the SEC and provide the trustee and holders and prospective
holders of the exchange notes (upon request) within 15 days after it files
them with the SEC, copies of its annual report and the information,
documents and other reports that are specified in Sections 13 and 15(d) of
the Exchange Act. In the event that the rules and regulations promulgated
under the Exchange Act or the interpretations of the SEC thereof would
permit the Issuer, if it were subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, to cease to file separate reports
pursuant thereto based on the inclusion of financial or other information
with respect to the Company in the reports and other financial information
filed with the SEC or otherwise, Holdings may file with the SEC copies of
its annual report and the information, documents and other reports that are
specified in Section 13 and 15(d) of the Exchange Act (including such
information as would be required to so permit the Issuer to cease to file
separate reports) and provide them to the trustee and holders and
prospective holders of the exchange notes (upon request) within 15 days
after it files them with the SEC, in which case the Issuer will be relieved
of its obligations under the previous sentence. In addition, following a
Public Equity Offering, the Issuer shall furnish to the trustee and
holders, promptly upon their becoming available, copies of the annual
report to shareholders and any other information provided by the Issuer or
Holdings to its public shareholders generally. The Issuer also will comply
with the other provisions of Section 314(a) of the TIA.
Future Guarantors. Subject to the last paragraph under "Guarantees",
the Issuer will cause (1) each Domestic Subsidiary that is acquired or
formed after the Closing Date, and (2) each Foreign Subsidiary (whether
previously existing or newly acquired or formed) that guarantees any
Indebtedness of the Issuer (other than the remaining 10 1/2% Senior
Subordinated Notes due 2006) or a Domestic Subsidiary after the Closing
Date, to become a Guarantor, and, if applicable, execute and deliver to the
trustee a supplemental indenture in the form set forth in the indenture
pursuant to which such Subsidiary will guarantee payment of the exchange
notes. Each Guarantee will be limited to an amount not to exceed the
maximum amount that can be guaranteed by that Subsidiary without rendering
the Guarantee, as it relates to such Subsidiary, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar
laws affecting the rights of creditors generally.
Limitation on Lines of Business. The Issuer will not, and will not
permit any Restricted Subsidiary to, engage in any business, other than a
Permitted Business.
MERGER AND CONSOLIDATION
The Issuer will not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, unless:
(1) the resulting, surviving or transferee Person (the "Successor
Company") will be a corporation organized and existing under the laws of
the United States of America, any state thereof or the District of
Columbia, and the Successor Company (if not the Issuer) will expressly
assume, by a supplemental indenture, executed and delivered to the trustee,
in form satisfactory to the trustee, all the obligations of the Issuer
under the exchange notes and the indenture;
(2) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or
any Restricted Subsidiary as a result of such transaction as having been
Incurred by the
141
<PAGE> 150
Successor Company or such Restricted Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction, the Successor
Company would be able to Incur an additional $1.00 of Indebtedness under
paragraph (1) of the covenant described under the caption "-- Restrictive
Covenants -- Limitation on Indebtedness";
(4) the Issuer shall have delivered to the trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the indenture; and
(5) the Issuer shall have delivered to the trustee an Opinion of
Counsel to the effect that the holders of the exchange notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such transaction 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 transaction had not occurred.
Notwithstanding the foregoing clause (2) or (3), the Issuer may merge with
an Affiliate incorporated or formed solely for the purpose of reincorporating
the Issuer in another jurisdiction.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under the indenture, but the
Issuer, in the case of a conveyance, transfer or lease of all or substantially
all its assets, will not be released from the obligation to pay the principal of
and interest on the exchange notes.
In addition, the Issuer will not permit any Guarantor to consolidate with
or merge with or into, or convey, transfer or lease all or substantially all of
its assets to any Person unless:
(1) the resulting, surviving or transferee Person (the "Successor
Guarantor") will be a corporation organized and existing under the laws of
the United States of America, any state thereof or the District of
Columbia, and such Successor Guarantor (if not such Guarantor) will
expressly assume, by a supplemental indenture, executed and delivered to
the trustee, in form satisfactory to the trustee, all the obligations of
such Guarantor under its Guarantee;
(2) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Guarantor or
any Restricted Subsidiary as a result of such transaction as having been
Incurred by such Successor Guarantor or such Restricted Subsidiary at the
time of such transaction), no Default shall have occurred and be
continuing; and
(3) the Issuer will have delivered to the trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the indenture.
Notwithstanding clauses (2) and (3)of the fourth preceding paragraph and
clause (2) of the immediately preceding paragraph, any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to the Issuer or another Restricted Subsidiary. In addition, the
foregoing will not apply to any such consolidation with, merger with or into, or
conveyance, transfer or lease to, any Person if the resulting, surviving or
transferee Person will not be a Subsidiary of the Issuer and the other terms of
142
<PAGE> 151
the indenture, including the covenant described under "-- Restrictive
Covenants -- Limitation on Sales of Assets and Subsidiary Stock," are complied
with.
DEFAULTS
Each of the following is an "Event of Default":
(1) a default in any payment of interest on, or Additional Amounts in
respect of, any exchange note when due and payable, whether or not
prohibited by the provisions described under the caption "-- Ranking,"
continued for 30 days;
(2) a default in the payment of principal of any exchange note when
due and payable at its Stated Maturity, upon required redemption or
repurchase, upon declaration or otherwise, whether or not such payment is
prohibited by the provisions described under the caption "-- Ranking";
(3) the failure by the Issuer to comply with its obligations under the
covenant described under the caption "-- Merger and Consolidation";
(4) the failure by the Issuer to comply for 30 days after notice to
the Issuer and the trustee with any of its obligations under the covenants
described under the captions "-- Change of Control" or "-- Restrictive
Covenants" (in each case, other than a failure to purchase exchange notes);
(5) the failure by the Issuer or any Guarantor to comply for 60 days
after notice with its other agreements contained in the exchange notes or
the indenture;
(6) the failure by the Issuer or any Subsidiary of the Issuer to pay
any Indebtedness (other than Indebtedness owing to the Issuer or a
Subsidiary of the Issuer) within any applicable grace period after final
maturity or the acceleration of any such Indebtedness by the holders
thereof because of a default if the total amount of such Indebtedness
unpaid or accelerated exceeds $5.0 million or its foreign currency
equivalent (the "cross acceleration provision") and such failure continues
for 10 days after receipt of the notice to the Issuer and the trustee;
(7) certain events of bankruptcy, insolvency or reorganization of the
Issuer or a Significant Subsidiary (the "bankruptcy provisions"); or
(8) the rendering of any judgment or decree for the payment of money
in excess of $5.0 million or its foreign currency equivalent against the
Issuer or a Restricted Subsidiary, to the extent such judgment or decree is
not covered by insurance or is in excess of insurance coverage, if such
judgment or decree remains outstanding for a period of 60 days following
such judgment and is not discharged, waived or stayed (the "judgment
default provision"); or
(9) any Guarantee ceases to be in full force and effect (except as
contemplated by the terms thereof) or any Guarantor, or Person acting by or
on behalf of such Guarantor, denies or disaffirms such Guarantor's
obligations under the indenture or any Guarantee and such Default continues
for 10 days after receipt of the notice specified in the indenture.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of
143
<PAGE> 152
law or pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body.
However, a default under clause (4), (5) or (6) above will not constitute
an Event of Default until the trustee or the holders of at least 25% in
aggregate principal amount of the outstanding exchange notes notify the Issuer
and the trustee of the default and the Issuer or the Guarantor, as applicable,
does not cure such default within the time specified in clauses (4), (5) or (6)
above after receipt of such notice.
If an Event of Default (other than an Event of Default under the bankruptcy
provisions) occurs and is continuing, the trustee or the holders of at least 25%
in aggregate principal amount of the outstanding exchange notes by notice to the
Issuer and the trustee may declare the principal of and accrued but unpaid
interest on all the exchange notes to be due and payable. Upon such a
declaration, such principal and interest will be due and payable immediately. If
an Event of Default under the bankruptcy provisions occurs, the principal of and
interest on all the exchange notes will become immediately due and payable
without any declaration or other act on the part of the trustee or any holders.
Under certain circumstances, the holders of a majority in principal amount of
the outstanding exchange notes may rescind any such acceleration with respect to
the exchange notes and its consequences.
Subject to the provisions of the indenture relating to the duties of the
trustee, in case an Event of Default occurs and is continuing, the trustee will
be under no obligation to exercise any of the rights or powers under the
indenture at the request or direction of any of the holders of exchange notes,
unless such holders have offered to the trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal or interest when due on the exchange notes, no holder may
pursue any remedy with respect to the indenture or the exchange notes unless:
(1) such holder has previously given the trustee notice that an Event
of Default is continuing;
(2) holders of at least 25% in aggregate principal amount of the
outstanding exchange notes have requested the trustee in writing to pursue
the remedy;
(3) such holders have offered the trustee security or indemnity
reasonably acceptable to the trustee against any loss, liability, fees or
expenses including reasonable fees and expenses of legal counsel;
(4) the trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or indemnity;
and
(5) the holders of a majority in aggregate principal amount of the
outstanding exchange notes have not given the trustee a direction
inconsistent with such request within such 60-day period.
Subject to certain restrictions, the holders of a majority in aggregate
principal amount of the outstanding exchange notes will be given the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or of exercising any trust or power conferred on the
trustee. The trustee, however, may refuse to follow any direction that conflicts
with law or the indenture or that the trustee determines is unduly prejudicial
to the rights of any other holder or that would involve the trustee in personal
liability. Prior to taking any action under the indenture, the trustee will be
entitled to
144
<PAGE> 153
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
If a Default occurs and is continuing and is known to a Trust Officer, the
trustee must mail to each holder notice of the Default within the earlier of 90
days after it occurs or 30 days after it is known to a Trust Officer or written
notice of it is received by a Trust Officer. Except in the case of a Default in
the payment of principal of or interest on any exchange note (including payments
pursuant to the redemption provisions of such exchange note, if any), the
trustee may withhold notice if and so long as a committee of its Trust Officers
in good faith determines that withholding notice is in the interests of the
holders. The trustee shall not be deemed to have notice of a Default unless a
Trust Officer shall have actual knowledge thereof or shall have received written
notice thereof from any holder. In addition, the Issuer will be required to
deliver to the trustee, within 120 days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any Default that
occurred during the previous year. The Issuer will also be required to deliver
to the trustee, within 30 days after the occurrence thereof, written notice of
any event that would constitute certain Events of Default, its status and what
action the Issuer is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the indenture or the exchange notes may be
amended with the written consent of the holders of a majority in aggregate
principal amount of the exchange notes then outstanding and any past default or
compliance with any provisions may be waived with the consent of the holders of
a majority in principal amount of the exchange notes then outstanding. However,
without the consent of each holder of an outstanding exchange note affected, no
amendment may, among other things:
(1) reduce the amount of exchange notes whose holders must consent to
an amendment;
(2) reduce the rate of or extend the time for payment of interest or
any Additional Amounts on any exchange note;
(3) reduce the principal of or extend the Stated Maturity of any
exchange note;
(4) reduce the premium payable upon the redemption of any exchange
note or change the time at which any exchange note may be redeemed as
described under the caption "-- Optional Redemption";
(5) make any exchange note payable in money other than that stated in
the exchange note;
(6) make any change to the subordination provisions of the indenture
that adversely affects the rights of any holder of an exchange note;
(7) impair the right of any holder of an exchange note to receive
payment of principal of and interest or any Additional Amounts on, such
holder's exchange notes on or after the due dates therefor or to institute
suit for the enforcement of any payment on or with respect to such holder's
exchange notes;
(8) make any change in the amendment provisions which require each
exchange note holder's consent or in the waiver provisions; or
145
<PAGE> 154
(9) modify the Guarantees in any manner adverse to the holders of the
exchange notes.
Without the consent of any holder of the exchange notes, the Issuer and
trustee may amend the indenture to:
(1) cure any ambiguity, omission, defect or inconsistency;
(2) provide for the assumption by a successor corporation of the
obligations of the Issuer under the indenture;
(3) provide for uncertificated exchange notes in addition to or in
place of certificated exchange notes (provided that the uncertificated
exchange notes are issued in registered form for purposes of Section 163(f)
of the Code, or in a manner such that the uncertificated exchange notes are
described in Section 163(f)(2)(B) of the Code);
(4) make any change in the subordination provisions of the indenture
that would limit or terminate the benefits available to any holder of
Senior Indebtedness of the Issuer (or any representative thereof) under
such subordination provisions;
(5) add additional Guarantees with respect to the exchange notes;
(6) secure the exchange notes;
(7) add to the covenants of the Issuer for the benefit of the holders
of the exchange notes or to surrender any right or power conferred upon the
Issuer;
(8) make any change that does not adversely affect the rights of any
holder, subject to the provisions of the indenture;
(9) provide for the issuance of the exchange notes;
(10) comply with any requirement of the SEC in connection with the
qualification of the indenture under the TIA; or
(11) to change the name or title of the exchange notes and make any
conforming changes related thereto.
However, no amendment may be made to the subordination provisions of the
indenture that adversely affects the rights of any holder of Senior Indebtedness
of the Issuer then outstanding, unless the holders of such Senior Indebtedness
(or any group or Representative thereof authorized to give a consent) consent to
such change.
The consent of the holders of the exchange notes will not be necessary to
approve the particular form of any proposed amendment. It will be sufficient if
such consent approves the substance of the proposed amendment.
After an amendment becomes effective, the Issuer will be required to mail
to holders of the exchange notes a notice briefly describing such amendment.
However, the failure to give such notice to all holders, or any defect therein,
will not impair or affect the validity of the amendment.
146
<PAGE> 155
TRANSFER AND EXCHANGE
A holder of exchange notes will be able to transfer or exchange its
exchange notes. Upon any transfer or exchange, the registrar and the trustee may
require a holder, among other things, to furnish appropriate endorsements and
transfer documents and the Issuer may require a holder to pay any taxes required
by law or permitted by the indenture. The Issuer will not be required to
transfer or exchange any exchange note selected for redemption or to transfer or
exchange any exchange note for a period of 15 days prior to a selection of
exchange notes to be redeemed.
DEFEASANCE
The Issuer may at any time terminate all its obligations under the exchange
notes and the indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the exchange notes, to replace mutilated, destroyed,
lost or stolen exchange notes and to maintain a registrar and paying agent in
respect of the exchange notes.
In addition, the Issuer may at any time terminate:
(1) its obligations under the covenants described under
"-- Restrictive Covenants" or
(2) the operation of the cross acceleration provision, the bankruptcy
provisions with respect to Significant Subsidiaries, the judgment default
provision described under "-- Defaults" and the limitations contained in
clause (3) under the first paragraph under "-- Merger and Consolidation"
(this clause, together with clause (1) above, "covenant defeasance").
In the event that the Issuer exercises its legal defeasance option or its
covenant defeasance option, each Guarantor will be released from all of its
obligations with respect to its Guarantee.
The Issuer may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Issuer exercises its
legal defeasance option, payment of the exchange notes may not be accelerated
because of an Event of Default with respect thereto.
If the Issuer exercises its covenant defeasance option, payment of the
exchange notes may not be accelerated because of an Event of Default specified
in clause (4), (6), (7) (with respect only to Significant Subsidiaries), (8)
(with respect only to Significant Subsidiaries) or (9) under "-- Defaults" or
because of the failure of the Issuer to comply with clause (3) under the first
paragraph under "-- Merger and Consolidation."
In order to exercise either defeasance option, the Issuer must irrevocably
deposit in trust (the "defeasance trust") with the trustee money, in an amount
sufficient, or U.S. Government Obligations, the principal of and interest on
which will be sufficient, or a combination thereof sufficient, to pay the
principal of and interest on, and Additional Amounts, if any, in respect of, the
outstanding exchange notes to redemption or maturity, as the case may be, and
must comply with certain other conditions, including delivery to the trustee of
an Opinion of Counsel to the effect that holders of exchange notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and defeasance and will be subject to federal income tax on the
same amounts and in the
147
<PAGE> 156
same manner and at the same times as would have been the case if such deposit
and defeasance had not occurred (and, in the case of legal defeasance only, such
Opinion of Counsel must be based on a ruling of the Internal Revenue Service or
other change in applicable federal income tax law).
CONCERNING THE TRUSTEE
The Bank of New York is to be the trustee under the indenture and has been
appointed by the Issuer as registrar and paying agent with regard to the
exchange notes.
GOVERNING LAW
The indenture and the exchange notes will be governed by, and construed in
accordance with, the laws of the State of New York 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.
CERTAIN DEFINITIONS
"accreted value" means, as of any date (the "Specified Date"), the amount
provided below for each $1,000 principal amount at maturity of exchange notes:
(1) if the Specified Date occurs on one of the following dates (each,
a "Semi-Annual Accrual Date"), the accreted value will equal the amount set
forth below under the "Accreted Value" column for such Semi-Annual Accrual
Date:
<TABLE>
<CAPTION>
ACCRETED VALUE
------------------------
SEMI-ANNUAL ACCRUAL DATE PER UNIT AGGREGATE
------------------------ ---------- -----------
<S> <C> <C>
Issue Date $ 761.000 110,004,072
May 15, 2000........................... 771.464 111,516,602
November 15, 2000 782.071 113,049,929
May 15, 2001........................... 792.824 114,604,339
November 15, 2001 803.725 116,180,122
May 15, 2002........................... 814.776 117,777,572
November 15, 2002 825.979 119,396,986
May 15, 2003........................... 837.337 121,038,666
November 15, 2003 848.850 122,702,920
May 15, 2004........................... 860.521 124,390,056
November 15, 2004 872.353 126,100,391
May 15, 2005........................... 884.348 127,834,242
November 15, 2005 896.507 129,591,933
May 15, 2006........................... 908.834 131,373,791
November 15, 2006 921.330 133,180,150
May 15, 2007........................... 933.998 135,011,346
November 15, 2007 946.841 136,867,721
May 15, 2008........................... 959.860 138,749,620
November 15, 2008 973.057 140,657,395
May 15, 2009........................... 986.437 142,591,401
November 15, 2009...................... 1,000.000 144,552,000
</TABLE>
; or
148
<PAGE> 157
(2) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the accreted value will equal the sum of (a) the accreted value for
the Semi-Annual Accrual Date immediately preceding such Specified Date and
(b) an amount equal to the product of (i) the accreted value for the
immediately following Semi-Annual Accrual Date less the accreted value for
the immediately preceding Semi-Annual Accrual Date multiplied by (ii) a
fraction, the numerator of which is the number of days elapsed from the
immediately preceding Semi-Annual Accrual Date to the Specified Date, using
a 360-day year of twelve 30-day months, and the denominator of which is 180
(or, if the Semi-Annual Accrual Date immediately preceding the Specified
Date is the Issue Date, the denominator of which is 182). In the event the
trustee is required to take any action which requires the calculation
described in the preceding sentence, upon request by the trustee the Issuer
will calculate such accreted value and set forth such in an officers'
certificate.
"Additional Amounts" means any liquidated damages payable pursuant to any
exchange agreement, registration rights agreement or similar agreement entered
into in connection with the indenture.
"Additional Assets" means:
(1) any property or assets (other than Indebtedness and Capital Stock)
to be used by the Issuer or a Restricted Subsidiary in a Permitted
Business;
(2) the Capital Stock of a Person that becomes a Restricted Subsidiary
as a result of the acquisition of such Capital Stock by the Issuer or
another Restricted Subsidiary; or
(3) Capital Stock constituting a minority interest in any Person that
at such time is a Restricted Subsidiary;
provided, however, that any such Restricted Subsidiary described in clauses (2)
or (3) above is primarily engaged in a Permitted Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under the captions "-- Restrictive
Covenants -- Limitation on Transactions with Affiliates" and "-- Restrictive
Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only,
"Affiliate" shall also mean any beneficial owner of shares representing 10% or
more of the total voting power of the Voting Stock (on a fully diluted basis) of
Holdings or the Issuer or of rights or warrants to purchase such Voting Stock
(whether or not currently exercisable) and any Person who would be an Affiliate
of any such beneficial owner pursuant to the first sentence hereof.
149
<PAGE> 158
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Issuer or
any Restricted Subsidiary, including any disposition by means of a merger,
consolidation, or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of:
(1) any shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares or shares required by applicable law to be
held by a Person other than the Issuer or a Restricted Subsidiary);
(2) all or substantially all the assets of any division or line of
business of the Issuer or any Restricted Subsidiary; or
(3) any other assets of the Issuer or any Restricted Subsidiary
outside of the ordinary course of business of the Issuer or such Restricted
Subsidiary;
other than, in the case of (1), (2) and (3) above:
(a) a disposition by a Restricted Subsidiary to the Issuer or by the
Issuer or a Restricted Subsidiary to a Wholly Owned Subsidiary;
(b) for purposes of the provisions described under the caption
"-- Restrictive Covenants -- Limitation on Sales of Assets and Subsidiary
Stock" only, a disposition subject to the covenant described under the
caption "-- Restrictive Covenants -- Limitation on Restricted Payments;"
(c) a disposition of assets with a Fair Market Value of less than
$100,000;
(d) a disposition of Temporary Cash Investments or obsolete equipment
or other obsolete assets in the course of business consistent with past
practices of the Issuer; and
(e) the disposition of all or substantially all of the assets of the
Issuer in a manner permitted under the covenant described under the caption
"-- Merger and Consolidation" or any disposition that constitutes a Change
of Control under the indenture; provided that, the covenant described under
the caption "-- Merger and Consolidation" or "-- Change of Control," as the
case may be, is complied with.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at 13.64%, compounded
annually) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback Transaction
(including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing:
(1) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment
of such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by
(2) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect
of the credit agreement and the collateral documents relating thereto and any
Refinancing
150
<PAGE> 159
Indebtedness with respect thereto, as amended from time to time, including
principal, premium, if any, interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Issuer whether or not a claim for post-filing interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations and all other
amounts payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Issuer or
Holdings, as applicable, or any committee thereof duly authorized to act on
behalf of the Board of Directors of the Issuer or Holdings, as applicable.
"Business Day" means each day that is not a Legal Holiday.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be prepaid by the lessee without payment of a
penalty.
"Circon Note" means a promissory note that may be issued in connection
with, or prior to consummation of, the Transactions by Circon to the Issuer or a
Restricted Subsidiary as a dividend payment.
"Closing Date" means the original date of the indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" means, as of any date of determination, the
ratio of:
(1) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at the end of the most recent
fiscal quarter for which financial statements are publicly available, to
(2) Consolidated Interest Expense for such four fiscal quarters;
provided, however, that:
(a) if the Issuer or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding on
such date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness,
EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as
if such Indebtedness had been Incurred on the first day of such period and
the discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period;
(b) if the Issuer or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any
151
<PAGE> 160
Indebtedness is to be repaid, repurchased, defeased or otherwise discharged
on the date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for
such period shall be calculated on a pro forma basis as if such discharge
had occurred on the first day of such period and as if the Issuer or such
Restricted Subsidiary has not earned the interest income actually earned
during such period in respect of cash or Temporary Cash Investments used to
repay, repurchase, defease or otherwise discharge such Indebtedness;
(c) if since the beginning of such period the Issuer or any Restricted
Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets that are the subject of such Asset
Disposition for such period or increased by an amount equal to the EBITDA
(if negative) directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Issuer or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Issuer
and its continuing Restricted Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to
the extent the Issuer and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale);
(d) if since the beginning of such period the Issuer or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person that subsequently became a Restricted
Subsidiary or was merged with or into the Issuer or any Restricted
Subsidiary since the beginning of such period) or an acquisition of assets
(including by acquisition of the Capital Stock of an entity that becomes a
Restricted Subsidiary), including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a
business or a product line or a line of business, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto (including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such period; and
(e) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Issuer or any Restricted Subsidiary since the beginning of such period)
shall have made any Asset Disposition or any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (c) or (d)
above if made by the Issuer or a Restricted Subsidiary during such period,
EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition of assets occurred on the first day
of such period.
For purposes of this definition, whenever pro forma effect is to be given
to an Investment, acquisition of assets or Capital Stock or Asset Disposition
under clauses (c), (d) or (e) above, the pro forma calculations shall be
determined in good faith by a responsible financial or accounting Officer of the
Issuer and shall include those adjustments permitted in accordance with GAAP
and/or Article XI of Regulation S-X (or any successor thereto) promulgated by
the SEC. Notwithstanding the foregoing, with respect to any Investment or
acquisition of assets or Capital Stock (in each case, by
152
<PAGE> 161
merger or otherwise), any such pro forma calculations may include the annualized
amount of operating expense reductions (net of any annualized expenses
(including interest expense) incurred to achieve such operating expense
reductions) for such period resulting from the acquisition or other transaction
which is being given pro forma effect that have been realized or for which the
steps necessary for realization have been taken or are reasonably expected to be
taken within six months following any such acquisition or other transaction,
including but not limited to, the execution or termination of any contracts, the
termination of any personnel or the closing (or approval by the Board of
Directors of the Issuer of the closing) of any facility, as applicable. In
addition, and notwithstanding the foregoing, for purposes of calculating the
Consolidated Coverage Ratio, as of any date of determination, pro forma effect
may be given to the annualized amount of operating expense reductions (net of
any annualized expenses (including interest expense) incurred to achieve such
operating expense reductions) resulting from any acquisitions or other
transactions occurring in either of the two fiscal quarters prior to the four
quarter reference period for which the Consolidated Coverage Ratio is being
calculated, provided that (A) such acquisition or other transaction would have
been given pro forma effect under clause (d) or (e) above had it occurred in the
four quarter reference period for which the Consolidated Coverage Ratio is being
calculated and (B) such operating expense reductions have been realized, or the
steps necessary for realization have been taken or are reasonably expected to be
taken within six months following any such acquisition or other transaction,
including the steps described in the immediately preceding sentence. In
connection with any pro forma adjustment or adjustments made pursuant to either
of the two immediately preceding sentences, such adjustment or adjustments shall
be set forth in an Officers' Certificate signed by the Issuer's Chief Financial
Officer and another Officer which states (x) the amount of such adjustment or
adjustments, (y) that such adjustment or adjustments are based on the reasonable
good faith beliefs of the Officers executing such Officers' Certificate at the
time of such execution and (z) that any related Incurrence of Indebtedness is
permitted pursuant to the indenture.
If any Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest expense on such Indebtedness shall be calculated
as if the rate in effect on the date of determination had been the applicable
rate for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term as at the date of determination in excess of 12 months). In addition, for
purposes of the computations referred to in clause (a) and (b) above, interest
expense on any Indebtedness under any revolving credit facility shall be
computed based upon the average daily balance of such Indebtedness during the
applicable period.
"Consolidated Current Liabilities" as of any date of determination means
the aggregate amount of liabilities of the Issuer and its Consolidated
Restricted Subsidiaries which may properly be classified as current liabilities
(including taxes accrued as estimated), on a Consolidated basis, after
eliminating:
(1) all intercompany items between the Issuer and any Restricted
Subsidiary; and
(2) all current maturities of long-term Indebtedness, all as
determined in accordance with GAAP consistently applied.
153
<PAGE> 162
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Issuer and its Consolidated Restricted Subsidiaries, to the
extent such interest expense was deducted in computing Consolidated Net Income
plus, to the extent Incurred by the Issuer and its Consolidated Restricted
Subsidiaries in such period but not included in such interest expense:
(1) interest expense attributable to Capitalized Lease Obligations and
interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction;
(2) amortization of debt discount and debt issuance costs (other than
(a) debt issuance costs incurred in connection with the Transactions and
(b) any other debt issuance costs incurred in amounts, and on terms, that
are customary and reasonable in light of then prevailing market
conditions);
(3) capitalized interest;
(4) non-cash interest expense;
(5) amortization of, or other charges for, commissions, discounts and
other fees and charges attributable to letters of credit and bankers'
acceptance financing;
(6) interest accruing on any Indebtedness of any other Person to the
extent such Indebtedness is guaranteed by the Issuer or any Restricted
Subsidiary;
(7) amortization of net costs associated with Hedging Obligations
(including amortization of fees);
(8) dividends in respect of all Disqualified Stock of the Issuer and
all Preferred Stock of any of the Subsidiaries of the Issuer, to the extent
held by Persons other than the Issuer or a Wholly Owned Subsidiary;
(9) interest Incurred in connection with investments in discontinued
operations; and
(10) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than the Issuer) in
connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of the
Issuer and its Consolidated Subsidiaries for such period; provided, however,that
there shall not be included in such Consolidated Net Income:
(1) any net income of any Person (other than the Issuer) if such
Person is not a Restricted Subsidiary, except that:
(a) subject to the limitations contained in clause (4) below, the
Issuer's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash or the Fair Market Value of other assets actually
distributed by such Person during such period to the Issuer or a
Restricted Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution made to a Restricted
Subsidiary, to the limitations contained in clause (3) below); and
154
<PAGE> 163
(b) the Issuer's equity in a net loss of any such Person for such
period shall be included in determining such Consolidated Net Income
(but only to the extent (cumulative of such losses) of the Issuer's
Investment in such Person);
(2) any net income (or loss) of any Person acquired by the Issuer or a
Subsidiary of the Issuer in a pooling of interests transaction for any
period prior to the date of such acquisition;
(3) any net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of its net income is not, at the date of
determination, permitted without any prior governmental approval (which has
not been obtained) or, directly or indirectly, by the operation of the
terms of its charter, or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, unless such restrictions with
respect to the payment of dividends or similar distributions have been
legally waived, except that the net loss of any such Restricted Subsidiary
for such period shall be included in determining such Consolidated Net
Income;
(4) any gain (but not loss) realized upon the sale or other
disposition of any asset of the Issuer or its Consolidated Subsidiaries
(including pursuant to any Sale/Leaseback Transaction) that is not sold or
otherwise disposed of in the ordinary course of business and any gain (but
not loss) realized upon the sale or other disposition of any Capital Stock
of any Person;
(5) any extraordinary or otherwise nonrecurring gain or loss; and
(6) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purpose of the covenant described
under the caption " -- Restrictive Covenants -- Limitation on Restricted
Payments" only, there shall be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to the Issuer or a Restricted Subsidiary to the extent
such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under such covenant pursuant to clause (d)(iii)(E)(i) of
paragraph (1) thereof.
"Consolidated Net Tangible Assets" as of any date of determination, means
the total amount of assets (less accumulated depreciation and amortization,
allowances for doubtful receivables, other applicable reserves and other
properly deductible items) which would appear on a consolidated balance sheet of
the Issuer and its Consolidated Restricted Subsidiaries, determined on a
Consolidated basis in accordance with GAAP, and after giving effect to purchase
accounting and after deducting therefrom Consolidated Current Liabilities and,
to the extent otherwise included, the amounts of:
(1) minority interests in Consolidated Subsidiaries held by Persons
other than the Issuer or a Restricted Subsidiary;
(2) excess of cost over fair value of assets of businesses acquired,
as determined in good faith by the Board of Directors of the Issuer;
(3) any revaluation or other write-up in book value of assets
subsequent to the date of the indenture as a result of a change in the
method of valuation in accordance with GAAP consistently applied;
155
<PAGE> 164
(4) unamortized debt discount and expenses and other unamortized
deferred charges, goodwill, patents, trademarks, service marks, trade
names, copyrights, licenses, organization or developmental expenses and
other intangible items;
(5) treasury stock;
(6) cash set apart and held in a sinking or other analogous fund
established for the purpose of redemption or other retirement of Capital
Stock to the extent such obligation is not reflected in Consolidated
Current Liabilities; and
(7) Investments in and assets of Unrestricted Subsidiaries.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of the Issuer in accordance with GAAP
consistently applied; provided, however, that "Consolidation" will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Issuer or any Restricted Subsidiary in an Unrestricted Subsidiary will be
accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"credit agreement" means the credit agreement dated as of November 12,
1999, among the Issuer, Holdings, The Chase Manhattan Bank, as administrative
agent and collateral agent, Bankers Trust Company, as co-syndication agent,
Merrill Lynch Capital Corporation, as co-syndication agent, Credit Suisse First
Boston, as co-documentation agent, and the lenders party thereto, as amended,
waived or otherwise modified from time to time (except to the extent that any
such amendment, waiver or other modification thereto would be prohibited by the
terms of the indenture, unless otherwise agreed to by the holders of at least a
majority in aggregate principal amount at maturity of exchange notes at the time
outstanding).
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement to which such Person is a party or of which it is a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Noncash Consideration" means noncash consideration received by
the Issuer or a Restricted Subsidiary in connection with an Asset Disposition
that is so designated as Designated Noncash Consideration pursuant to an
Officers' Certificate that sets forth the basis for valuing such Designated
Noncash Consideration.
"Designated Senior Indebtedness" of the Issuer or a Guarantor means:
(1) Bank Indebtedness or a guarantee thereof of the Issuer or such
Guarantor, as applicable; and
(2) any other Senior Indebtedness of the Issuer or such Guarantor
that, at the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to at least $15.0 million and is
specifically designated by the Issuer or such Guarantor in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the indenture.
156
<PAGE> 165
"Disqualified Stock" means, with respect to any Person, any Capital Stock
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable) or upon the happening of any
event:
(1) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
(2) is convertible or exchangeable for Indebtedness or Disqualified
Stock (excluding Capital Stock convertible or exchangeable solely at the
option of the Issuer or a Restricted Subsidiary provided, that any such
conversion or exchange shall be deemed an issuance of Indebtedness or
Disqualified Stock, as applicable); or
(3) is redeemable at the option of the holder thereof, in whole or in
part;
in the case of each of clauses (1), (2) and (3) on or prior to the first
anniversary of the Stated Maturity of the exchange notes; provided, however,
that any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the first anniversary of the Stated
Maturity of the exchange notes shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are not more favorable to the holders of such Capital Stock than the provisions
of the covenants described under the captions "Change of Control" and
"-- Restrictive Covenants -- Limitation on Sale of Assets and Subsidiary Stock."
"Domestic Subsidiary" means any Restricted Subsidiary of the Issuer other
than a Foreign Subsidiary.
"EBITDA" for any period means the Consolidated Net Income for such period,
plus, without duplication, the following to the extent deducted in calculating
such Consolidated Net Income:
(1) income tax expense of the Issuer and its Consolidated Restricted
Subsidiaries;
(2) Consolidated Interest Expense;
(3) depreciation expense of the Issuer and its Consolidated Restricted
Subsidiaries;
(4) amortization expense of the Issuer and its Consolidated Restricted
Subsidiaries (excluding amortization expense attributable to a prepaid cash
item that was paid in a prior period); and
(5) all other non-cash charges of the Issuer and its Consolidated
Restricted Subsidiaries (excluding any such non-cash charge to the extent
it represents an accrual of or reserve for cash expenditures in any future
period, but that will not be expensed in such future periods) less all
non-cash items of income of the Issuer and its Consolidated Restricted
Subsidiaries (other than non-cash items representing an accrual or reserve
for cash to be received in any future period but that will not be treated
as income in such future periods), in each case for such period.
Notwithstanding the foregoing, the provision for taxes based on the income
or profits of, and the depreciation and amortization and non-cash charges less
all non-cash items of income of, a Restricted Subsidiary of the Issuer shall be
added to Consolidated Net
157
<PAGE> 166
Income to compute EBITDA only to the extent (and in the same proportion) that
the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Issuer by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Equity Offering" means any public or private sale of Capital Stock (other
than Disqualified Stock) of the Issuer or Holdings, other than offerings of the
Issuer or Holdings of the type that can be registered on Form S-8 (or any
successor form) pursuant to the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length 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. Except as required by the
next sentence, Fair Market Value will be determined in good faith by the Board
of Directors of the Issuer, whose determination will be conclusive and evidenced
by a resolution of the Board of Directors of the Issuer. For purposes of the
definition of "Consolidated Net Income" and the covenant described under
"Limitation on Sales of Assets and Subsidiary Stock", the Fair Market Value of
assets or property, other than cash, which involves an aggregate amount in
excess of $10.0 million, shall have been determined in writing by a nationally
recognized appraisal, accounting or investment banking firm.
"Foreign Coverage Ratio" has the same meaning as Consolidated Coverage
Ratio except that all references (in the definition of Consolidated Coverage
Ratio and in the definitions used therein) to (1) the "Issuer" shall be deemed
to be references to the Foreign Subsidiaries and (2) "Restricted Subsidiaries"
shall be deemed to be references only to the Foreign Subsidiaries.
"Foreign Subsidiary" means any Restricted Subsidiary of the Issuer that is
not organized under the laws of the United States of America or any state
thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in:
(1) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants;
(2) statements and pronouncements of the Financial Accounting
Standards Board;
(3) such other statements by such other entities as approved by a
significant segment of the accounting profession; and
(4) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
158
<PAGE> 167
All ratios and computations based on GAAP contained in the indenture shall
be computed in conformity with GAAP, except as specifically provided herein.
"guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
any Person:
(1) 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
(2) 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);
provided, however, that the term "guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "guarantee"
used as a verb has a corresponding meaning. The term "guarantor" shall mean any
Person guaranteeing any obligation.
"Guarantee" means each guarantee of the obligations with respect to the
exchange notes issued by a Guarantor pursuant to the terms of the indenture.
"Guarantor" means Holdings and any Subsidiary of the Issuer that has
provided a guarantee of the obligations with respect to the exchange notes.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "holder" means the Person in whose name an exchange note is
registered on the registrar's books.
"Holdings" means Maxxim Medical, Inc., a Texas corporation, and parent of
the Issuer, until a successor replaces it and thereafter, means the successor.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person is merged or consolidated with another Person
or becomes a Subsidiary (whether by merger, consolidation, acquisition or
otherwise) shall be deemed to be Incurred by such Person at the time of such
merger or consolidation or at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. The accretion
of principal of a non-interest bearing or other discount security or addition of
interest to principal on a pay-in-kind security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(1) the principal of and premium (if any) in respect of indebtedness
of such Person for borrowed money;
(2) the principal of and premium (if any) in respect of obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments;
159
<PAGE> 168
(3) all obligations of such Person in respect of letters of credit or
other similar instruments (including reimbursement obligations with respect
thereto);
(4) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables and
contingent obligations to pay earn-outs), which purchase price is due more
than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services;
(5) all Capitalized Lease Obligations and all Attributable Debt of
such Person;
(6) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends);
(7) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of Indebtedness of such Person shall be
the lesser of:
(A) the Fair Market Value of such asset at such date of
determination and
(B) the amount of such Indebtedness of such other Persons;
(8) to the extent not otherwise included in this definition, Hedging
Obligations of such Person; and
(9) all obligations of the type referred to in clauses (1) through (8)
above of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
guarantee.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and
except as provided above the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at such
date.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
160
<PAGE> 169
"Investment" in any Person means any, direct or indirect, advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extension of credit (including by way of guarantee or similar arrangement) 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 of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and the covenant described under the caption
"-- Restrictive Covenants -- Limitation on Restricted Payments:"
(1) "Investment" shall include the portion (proportionate to the
Issuer's equity interest in such Subsidiary) of the Fair Market Value of
the net assets of any Subsidiary of the Issuer at the time that such
Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that, upon a redesignation of such Subsidiary as a Restricted Subsidiary,
the Issuer shall be deemed to continue to have a permanent "Investment" in
an Unrestricted Subsidiary in an amount (if positive) equal to:
(a) the Issuer's "Investment" in such Subsidiary at the time of
such redesignation less
(b) the portion (proportionate to the Issuer's equity interest in
such Subsidiary) of the Fair Market Value of the net assets of such
Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its Fair Market Value.
"Issuer" means Maxxim Medical Group, Inc., a Delaware corporation, until a
successor replaces it and, thereafter, means the successor.
"Legal Holiday" means a Saturday, Sunday or other day on which banking
institutions in the State of New York are authorized or required by law to
close.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Group" means the group consisting of current and former
directors and executive officers of the Issuer and Holdings.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise and proceeds from the
sale or other disposition of any securities received as consideration, but only
as and when received, but excluding any other consideration received in the form
of assumption by the acquiring Person of Indebtedness or other obligations
relating to the properties or assets that are the subject of such Asset
Disposition or received in any other non-cash form) therefrom, in each case net
of:
(1) all legal fees and expenses, title and recording tax expenses,
commissions and other fees and expenses incurred (including any
out-of-pocket expenses relating to the relocation of assets or personnel,
any severance or other personnel costs, and any other out-of-pocket
expenses of a similar nature, in each case incurred within twelve months of
such Asset Disposition), and all federal, state, provincial, foreign and
local
161
<PAGE> 170
taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition;
(2) all payments, including any prepayment premiums or penalties, made
on any Indebtedness that is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other
security agreement of any kind with respect to such assets, or which must
by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law be repaid out of the proceeds from such
Asset Disposition;
(3) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of
such Asset Disposition; and
(4) appropriate amounts to be provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the property
or other assets disposed of in such Asset Disposition and retained by the
Issuer or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees and expenses actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the
Chief Financial Officer, the President, any Vice President, the Treasurer or the
Secretary of the Issuer. "Officer" of a Guarantor has a correlative meaning.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel. The
counsel may be an employee of or counsel to the Issuer or a Guarantor.
"Permitted Business" means any business engaged in by the Issuer or any
Restricted Subsidiary on the Closing Date and any Related Business.
"Permitted Holders" means:
(1) Fox Paine Capital Fund, L.P. and its Affiliates, FPC Investors,
L.P., Maxxim Coinvestment Fund I, LLC, Maxxim Coinvestment Fund II, LLC,
Maxxim Coinvestment Fund III, LLC, Maxxim Coinvestment Fund IV, LLC, Maxxim
Coinvestment Fund V, LLC and the Management Group; and
(2) any Person acting in the capacity of an underwriter in connection
with a public or private offering of Holdings' or the Issuer's Capital
Stock.
"Permitted Investment" means an Investment by the Issuer or any Restricted
Subsidiary in:
(1) the Issuer, a Restricted Subsidiary or a Person that will, upon
the making of such Investment (including the purchase of its Capital
Stock), become a Restricted Subsidiary; provided, however, that the primary
business of such Restricted Subsidiary is a Permitted Business;
162
<PAGE> 171
(2) another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Issuer or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Permitted
Business;
(3) Temporary Cash Investments;
(4) receivables owing to the Issuer or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as the
Issuer or any such Restricted Subsidiary deems reasonable under the
circumstances;
(5) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of
business;
(6) any loans or advances to employees made in the ordinary course of
business consistent with past practices of the Issuer or such Restricted
Subsidiary and not exceeding, when aggregated with amounts loaned or
advanced under clause (f)(iv) of paragraph (2) of the caption
"-- Restrictive Covenants -- Limitation on Restricted Payments," $5.0
million in the aggregate outstanding at any one time;
(7) stock, obligations or securities received in settlement of (or
foreclosure with respect to) debts created in the ordinary course of
business and owing to the Issuer or any Restricted Subsidiary or in
satisfaction of judgments;
(8) any Person to the extent such Investment represents the non-cash
or deemed cash portion of the consideration received for an Asset
Disposition that was made pursuant to and in compliance with the covenant
described under the caption "-- Restrictive Covenants -- Limitation on
Sales of Assets and Subsidiary Stock;"
(9) (x) any Investment existing on the Closing Date and (y) in the
case of loans and advances made to employees and existing on the Closing
Date, such loans and advances and any extensions or refinancings thereof;
(10) Hedging Obligations permitted under clause (g) of paragraph (2)
of the covenant described under the caption "-- Restrictive
Covenants -- Limitation on Indebtedness;"
(11) guarantees of Indebtedness permitted under the covenant described
under the caption "-- Restrictive Covenants -- Limitation on Indebtedness;"
(12) the Circon Note;
(13) Investments which are made exclusively with Capital Stock of
Holdings or the Issuer (other than Disqualified Stock); and
(14) additional Investments having an aggregate Fair Market Value,
taken together with all other Investments made pursuant to this clause (14)
that are at the time outstanding, not to exceed $10.0 million at the time
of such Investment (with the Fair Market Value of each Investment being
measured at the time made and without giving effect to subsequent changes
in value).
163
<PAGE> 172
"Permitted Junior Securities" means debt or equity securities of the Issuer
or any successor corporation issued pursuant to a plan of reorganization or
readjustment of the Issuer that are subordinated to the payment of all
then-outstanding Senior Indebtedness of the Issuer at least to the same extent
that the exchange notes are subordinated to the payment of all Senior
Indebtedness of the Issuer on the Closing Date, so long as to the extent that
any Senior Indebtedness of the Issuer outstanding on the date of consummation of
any such plan of reorganization or readjustment is not paid in full in cash or
cash equivalents on such date, the holders of any such Senior Indebtedness not
so paid in full in cash or cash equivalents have consented to the terms of such
plan of reorganization or readjustment.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock," as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"principal" of an exchange note means the accreted value of the exchange
note plus the premium, if any, payable on the exchange note which is due or
overdue or is to become due at the relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Issuer pursuant to an effective registration statement under
the Securities Act.
"Purchase Money Indebtedness" means Indebtedness:
(1) consisting of the deferred purchase price of an asset or Capital
Stock, conditional sale obligations, obligations under any title retention
agreement and other purchase money obligations, in each case where the
maturity of such Indebtedness does not exceed the anticipated useful life
of the asset being financed; and
(2) incurred to finance the acquisition by the Issuer or a Restricted
Subsidiary of such asset or Capital Stock, including additions and
improvements; provided, however, that such Indebtedness is incurred within
180 days before or after the acquisition by the Issuer or such Restricted
Subsidiary of such asset.
"Purchasers" means the Persons that purchased the old notes from the Issuer
in connection with the closing of the Transactions.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, replace, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
164
<PAGE> 173
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, repay, redeem, retire, renew, repay or extend (including
pursuant to any defeasance or discharge mechanism) any Indebtedness of the
Issuer or any Restricted Subsidiary existing on the Closing Date or Incurred in
compliance with the indenture (including Indebtedness of the Issuer that
Refinances Refinancing Indebtedness); provided, however, that:
(1) other than with respect to Senior Indebtedness, the Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of
the Indebtedness being Refinanced;
(2) other than with respect to Senior Indebtedness, the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness
is Incurred that is equal to or greater than the Average Life of the
Indebtedness being Refinanced;
(3) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount
(or if issued with original issue discount, the aggregate accreted value)
then outstanding of the Indebtedness being Refinanced (or, in the case of
Bank Indebtedness, in an aggregate principal amount of commitments or loans
thereunder of up to $310.0 million less the aggregate amount of prepayments
of Bank Indebtedness pursuant to the covenant described under "Limitation
on Sales of Assets and Subsidiary Stock"); and
(4) if the Indebtedness being Refinanced is subordinated in right of
payment to the exchange notes, such Refinancing Indebtedness is
subordinated in right of payment to the exchange notes at least to the same
extent as the Indebtedness being Refinanced;
provided further, however, that Refinancing Indebtedness shall not include:
(a) Indebtedness of a Restricted Subsidiary that Refinances
Indebtedness of the Issuer; or
(b) Indebtedness of the Issuer or a Restricted Subsidiary that
Refinances Indebtedness of an Unrestricted Subsidiary.
"Related Assets" means (1) assets used or useful in a Permitted Business or
(2) equity interests representing a majority of the Voting Stock of Persons
engaged in a Permitted Business.
"Related Business" means any business related, ancillary or complementary
to the businesses of the Issuer and the Restricted Subsidiaries on the Closing
Date.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Issuer other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired by the Issuer or a Restricted Subsidiary whereby the
Issuer or a Restricted Subsidiary transfers such property to a Person and the
Issuer or such Restricted Subsidiary leases it from such Person, other than
leases between the Issuer and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries.
165
<PAGE> 174
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Issuer or any
Guarantor, as applicable, secured by a Lien.
"Senior Subordinated Indebtedness" of the Issuer or any Guarantor means the
exchange notes or such Guarantor's Guarantee, as applicable, and any other
Indebtedness of the Issuer, or such Guarantor, that specifically provides that
such Indebtedness is to rank pari passu with the exchange notes or such
Guarantor's Guarantee, as applicable, in right of payment and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Issuer or such Guarantor which is not Senior Indebtedness of
the Issuer or such Guarantor, as applicable.
"Services Agreement" means the Services Agreement to be entered into by
Circon Holdings Corporation, Circon, the Issuer and Holdings in connection with
the Transactions.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Issuer within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer thereof unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Issuer or any
Guarantor, as applicable (whether outstanding on the Closing Date or thereafter
Incurred) that is subordinate or junior in right of payment to the exchange
notes or such Guarantor's Guarantee, as applicable, pursuant to a written
agreement.
"Subsidiary" means, with respect to any Person (the "parent") at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other
entity:
(1) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in
the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held; or
(2) that is, as of such date, otherwise controlled by the parent or
one or more subsidiaries of the parent or by the parent and one or more
subsidiaries of the parent.
"Subsidiary Guarantors" means the Subsidiaries of the Issuer that are
Guarantors.
"Temporary Cash Investments" means any of the following:
(1) any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the United
States of America or any agency thereof;
166
<PAGE> 175
(2) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company that is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital, surplus and
undivided profits aggregating in excess of $250.0 million (or the foreign
currency equivalent thereof) and whose long-term debt is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the
Securities Act);
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2) above;
(4) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Issuer) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. ("Moody's") or "A-1" (or higher) according to Standard and
Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc.
("S&P"); and
(5) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by S&P or "A" by Moody's.
"TIA" means the Trust indenture Act of 1939 (15 U.S.C.
sec.sec. 77aaa-77bbbb) as in effect on the Closing Date.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Transactions" has the meaning set forth in this prospectus.
"Trustee" or "trustee" means the party named as such in the indenture until
a successor replaces it and, thereafter, means the successor.
"Trust Officer" means any vice president, any assistant vice president, any
secretary, any assistant treasurer or any other trust officer of the trustee
assigned by the trustee to administer its corporate trust matters.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of the Issuer that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of Directors in
the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
167
<PAGE> 176
The Board of Directors of the Issuer may designate any Subsidiary of the Issuer
(including any newly acquired or newly formed Subsidiary of the Issuer) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or owns or holds any Lien on any property
of, the Issuer or any other Subsidiary of the Issuer that is not a Subsidiary of
the Subsidiary to be so designated; provided, however, that either:
(1) the Subsidiary to be so designated has total Consolidated assets
of $1,000 or less; or
(2) if such Subsidiary has Consolidated assets greater than $1,000,
then such designation would be permitted under the caption "-- Restrictive
Covenants -- Limitation on Restricted Payments."
The Board of Directors of the Issuer may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided, however, that immediately after giving
effect to such designation:
(1) the Issuer could Incur $1.00 of additional Indebtedness under
paragraph (1) of the covenant described under the caption "-- Restrictive
Covenants -- Limitation on Indebtedness" and (2) no Default shall have
occurred and be continuing.
Any such designation of a Subsidiary as a Restricted Subsidiary or Unrestricted
Subsidiary by the Board of Directors of the Issuer shall be evidenced to the
trustee by promptly filing with the trustee a copy of the resolution of the
Board of Directors of the Issuer giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
that are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Issuer all
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Issuer or another Wholly Owned Subsidiary.
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
On November 12, 1999, the Issuer, the purchasers of the old notes and the
guarantors of the Issuer's obligations under the indenture and the old notes
entered into an exchange and registration rights agreement. Pursuant to the
exchange and registration rights agreement, the Issuer and the guarantors agreed
to (1) file with the SEC on or prior to 75 days after the issue date of the old
notes a registration statement on an appropriate form relating to a registered
exchange offer for the old notes under the Securities Act, and (2) use their
reasonable best efforts to cause the exchange offer registration statement to
168
<PAGE> 177
be declared effective under the Securities Act on or prior to 150 days after the
issue date. As soon as practicable after the effectiveness of the exchange offer
registration statement, the Issuer will promptly offer to the holders of
Transfer Restricted Securities (as defined below) who are not prohibited by any
law or policy of the SEC from participating in the exchange offer the
opportunity to exchange their Transfer Restricted Securities for an issue of
exchange notes that are identical in all material respects to the old notes
(except that the exchange notes will not contain terms with respect to transfer
restrictions and will be issued in fully registered form) and that would be
registered under the Securities Act. The Issuer and the guarantors will keep the
exchange offer open for not less than 30 days (or longer, if required by
applicable law) after the date on which notice of the exchange offer is mailed
to the holders of the old notes.
If (1) because of any change in law or applicable interpretations thereof
by the staff of the SEC, the Issuer is not permitted to effect the exchange
offer as contemplated by the exchange and registration rights agreement, (2) any
old notes validly tendered pursuant to the exchange offer are not exchanged for
exchange notes on or prior to 180 days after the issue date of the old notes,
(3) any purchaser of the old notes so requests on or prior to the 20th business
day following the date on which the exchange offer is consummated with respect
to old notes not eligible to be exchanged for exchange notes in the exchange
offer and held by it following the consummation of the exchange offer, (4) any
applicable law or interpretations do not permit any holder of old notes to
participate in the exchange offer, (5) any holder of old notes that participates
in the exchange offer does not receive freely transferable exchange notes in
exchange for tendered old notes so requests with respect to such old notes on or
prior to the 20(th) business day following the date on which the exchange offer
is consummated, or (6) the Issuer so elects, then the Issuer and the guarantors
shall use their reasonable best efforts to file as promptly as practicable (but
in the event more than 45 days after so required) with the SEC a shelf
registration statement to register resales of Transfer Restricted Securities by
such holders that satisfy certain conditions relating to the provision of
information in connection with the shelf registration statement. For purposes of
the foregoing, "Transfer Restricted Securities" means each old note until (1)
the date on which such old note is exchanged for a freely transferable exchange
note in the exchange offer, (2) the date on which such old note is effectively
registered under the Securities Act and disposed of in accordance with the shelf
registration statement or (3) the date on which such old note is distributed to
the public pursuant to Rule 144 under the Securities Act or becomes salable
pursuant to Rule 144(k) under the Securities Act.
The Issuer and the guarantors will use their reasonable best efforts to
have the exchange offer registration statement or, if applicable, the shelf
registration statement declared effective by the SEC as promptly as practicable
after the filing thereof. Unless the exchange offer would not be permitted by a
policy of the SEC, the Issuer will commence the exchange offer and will use its
reasonable best efforts to consummate the exchange offer as promptly as
practicable, but in any event prior to 180 days after the issue date of the old
notes. If applicable, the Issuer and the guarantors will use their reasonable
best efforts to keep the shelf registration statement effective until the second
anniversary of the Issue Date.
If (1) the applicable registration statement is not filed with the SEC on
or prior to 75 days after the issue date of the old notes; (2) the exchange
offer registration statement or the shelf registration statement, as the case
may be, is not declared effective on or prior to 150 days after the issue date
of the old notes (or, in the case of a shelf registration
169
<PAGE> 178
statement required to be filed in response to a change in law or applicable
interpretations thereof by the Staff of the SEC, if later, on or prior to 60
days after publication of the change in law or interpretation); (3) the exchange
offer is not consummated on or prior to 180 days after the issue date of the old
notes; or (4) the shelf registration statement is filed and declared effective
on or prior to 150 days after the issue date of the old notes (or, in the case
of a shelf registration statement required to be filed in response to a change
in law or applicable interpretations thereof by the Staff of the SEC, if later,
on or prior to 60 days after publication of the change in law or interpretation)
but shall thereafter cease to be effective (at any time that the Issuer and the
guarantors are obligated to maintain the effectiveness thereof) without being
succeeded within 45 days by an additional registration statement filed and
declared effective (each such event referred to in clauses (1) through (4)
above, a "registration default"), the Issuer and the guarantors will be jointly
and severally obligated to pay liquidated damages to each holder of Transfer
Restricted Securities, during the period of one or more such registration
defaults, in an amount equal to $0.192 per week per $1,000 of accreted value of
the old notes (as of the most recent interest payment date, or if no interest
has been paid, the issue date of the old notes), until the applicable
registration statement is filed, the exchange offer registration statement is
declared effective and the exchange offer is consummated, the shelf registration
statement is declared effective or the shelf registration statement again
becomes effective, as the case may be. All accrued liquidated damages shall be
paid to holders in the same manner as interest payments on the old notes on
semi-annual payment dates that correspond to interest payment dates for the old
notes. Following the cure of all registration defaults, the accrual of
liquidated damages will cease.
The exchange and registration rights agreement also provides that the
Issuer and the guarantors (1) shall make available, for a period of 90 days
after the consummation of the exchange offer, a prospectus meeting the
requirements of the Securities Act to any broker-dealer for use in connection
with any resale of any such exchange notes and (2) shall pay all expenses
incident to the exchange offer (including the expense of one counsel to the
holders of the old notes) and will jointly and severally indemnify certain
holders of the old notes (including any broker-dealer) against certain
liabilities, including liabilities under the Securities Act. A broker-dealer
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act and will be bound by the provisions of the exchange and
registration rights agreement (including certain indemnification rights and
obligations).
Each holder of old notes who wishes to exchange such old notes for exchange
notes in the exchange offer will be required to make certain representations,
including representations that (1) any exchange notes to be received by it will
be acquired in the ordinary course of its business, (2) it has no arrangement or
understanding with any person to participate in the distribution of the old
notes or the exchange notes and (3) it is not an "affiliate" (as defined in Rule
405 under the Securities Act) of the Issuer, or, if it is an affiliate, that it
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
If the holder is not a broker-dealer, it is required to represent that it
is not engaged in, and does not intend to engage in, the distribution of the
exchange notes. If the holder is a broker-dealer that will receive exchange
notes for its own account in exchange for old notes that were acquired as a
result of market-making activities or other trading activities, it is required
to deliver a prospectus in connection with any resale of such exchange notes.
170
<PAGE> 179
Holders of the old notes will be required to make certain representations
to the Issuer and the guarantors (as described above) in order to participate in
the exchange offer, and will be required to deliver information to be used in
connection with the shelf registration statement in order to have the resale of
their old notes registered under the shelf registration statement and benefit
from the provisions regarding liquidated damages set forth in the preceding
paragraphs. A holder who sells old notes pursuant to the shelf registration
statement generally (1) will be required to be named as a selling security
holder in the related prospectus and to deliver a prospectus to purchasers, (2)
will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales and (3) will be bound by the
provisions of the exchange and registration rights agreement that are applicable
to such a holder (including certain indemnification obligations).
For so long as any old notes or exchange notes are outstanding, the Issuer
will continue to provide to holders of the old notes and exchange notes the
information required by Rule 144A(d)(4) under the Securities Act.
The foregoing description of the exchange and registration rights agreement
is a summary only, does not purport to be complete and is qualified in its
entirety by reference to all provisions of the exchange and registration rights
agreement, a copy of which is filed as an exhibit to the registration statement
of which this prospectus is a part.
BOOK-ENTRY, DELIVERY AND FORM
The exchange notes will initially be represented by one or more permanent
global notes in definitive, fully registered book-entry form, without interest
coupons that will be deposited with, or on behalf of, DTC and registered in the
name of Cede and Co., as nominee of DTC, on behalf of the acquirors of exchange
notes for credit to the accounts of the acquirors or to other accounts as they
may direct at DTC, or Morgan Guaranty Trust Company of New York, Brussels
Office, as operator of the Euroclear System, or Cedel Bank, societe anonyme.
The global notes may be transferred, in whole and not in part, solely to
another nominee of DTC or to a successor of DTC or its nominee. Beneficial
interests in the global notes may not be exchanged for exchange notes in
physical, certificated form except in the limited circumstances described below.
All interests in the global notes, including those held through Euroclear
or Cedel, may be subject to the procedures and requirements of DTC. Those
interests held through Euroclear or Cedel may also be subject to the procedures
and requirements of those systems.
BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The descriptions of the operations and procedures of DTC, Euroclear and
Cedel set forth below are provided as a matter of convenience. These operations
and procedures are solely within the control of the settlement systems and are
subject to change by them from time to time. We take no responsibility for these
operations or procedures, and you are urged to contact the relevant system or
its participants directly to discuss these matters.
171
<PAGE> 180
DTC has advised us that it is:
- a limited purpose trust company organized under the laws of the State of
New York,
- a "banking organization" within the meaning of the New York Banking Law,
- a member of the Federal Reserve System,
- a "clearing corporation" within the meaning of the Uniform Commercial
Code, as amended, and
- a "clearing agency" registered pursuant to Section 17A of the Exchange
Act.
DTC was created to hold securities for its participants and facilitates the
clearance and settlement of securities transactions between participants through
electronic book-entry changes to the accounts of its participants, eliminating
the need for physical transfer and delivery of certificates. DTC's participants
include securities brokers and dealers, banks and trust companies, clearing
corporations and similar organizations. Indirect access to DTC's system is also
available to indirect participants, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Investors who are not participants
may beneficially own securities held by or on behalf of DTC only through
participants or indirect participants.
We expect that pursuant to procedures established by DTC, ownership of the
exchange notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC, with respect to the interests
of participants, and the records of participants and the indirect participants,
with respect to the interests of persons other than participants.
The laws of some jurisdictions may require that purchasers of securities
take physical delivery of purchased securities in definitive form. Accordingly,
the ability to transfer interests in the exchange notes represented by a global
note to those persons may be limited. In addition, because DTC can act only on
behalf of its participants, who in turn act on behalf of persons who hold
interests through participants, the ability of a person having an interest in
exchange notes represented by a global note to pledge or transfer that interest
to persons or entities that do not participate in DTC's system, or to otherwise
take actions in respect of that interest, may be affected by the lack of a
physical definitive security in respect of that interest.
So long as DTC or its nominee is the registered owner of a global note, DTC
or its nominee will be considered the sole owner or holder of the exchange notes
represented by the global note for all purposes under the indenture. Except as
provided below, owners of beneficial interests in a global note will not be
entitled to have exchange notes represented by that global note registered in
their names, will not receive or be entitled to receive physical delivery of
certificated exchange notes and will not be considered the owners or holders
thereof under the indenture for any purpose, including with respect to the
giving of any direction, instruction or approval to the trustee. Accordingly,
each holder owning a beneficial interest in a global note must rely on the
procedures of DTC and, if the holder is not a participant or an indirect
participant, on the procedures of the participant through which the holder owns
its interest, to exercise any rights of a holder of exchange notes under the
indenture or the global note. We understand that under existing industry
practice, in the event that we request any action of holders of exchange notes,
or a holder that is an owner of a beneficial interest in a global note desires
to take any action that
172
<PAGE> 181
DTC, as the holder of that global note, is entitled to take, DTC would authorize
the participants to take that action and the participants would authorize
holders owning through the participants to take that action or would otherwise
act upon the instruction of the holders. Neither we nor the trustee will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of exchange notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to exchange notes.
Payments with respect to the principal of, and premium, if any, liquidated
damages, if any, and interest on, any exchange notes represented by a global
note registered in the name of DTC or its nominee on the applicable record date
will be payable by the trustee to or at the direction of DTC or its nominee in
its capacity as the registered holder of the global note representing the
exchange notes under the indenture. Under the terms of that indenture, we and
the trustee may treat the persons in whose names the exchange notes, including
the global notes, are registered as the owners thereof for the purpose of
receiving payment thereon and for any and all other purposes whatsoever.
Accordingly, neither we nor the trustee has or will have any responsibility or
liability for the payment of these amounts to owners of beneficial interests in
a global note, including principal, premium, if any, liquidated damages, if any,
and interest. Payments by the participants and the indirect participants to the
owners of beneficial interests in a global note will be governed by standing
instructions and customary industry practice and will be the responsibility of
the participants or the indirect participants and DTC.
DTC management is aware that some computer applications, systems, and the
like for processing data that are dependent upon calendar dates, including dates
before, on, and after January 1, 2000, may encounter year 2000 problems. DTC has
informed its participants and other members of the financial community that it
has developed and is implementing a program so that its systems, as they relate
to the timely payment of distributions, including principal and income payments,
to security holders, book-entry deliveries, and settlement of trades within DTC,
continue to function appropriately. This program includes a technical assessment
and a remediation plan, each of which is complete. Additionally, DTC's plan
includes a testing phase, which is expected to be completed within appropriate
time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the industry that it is contacting and will
continue to contact third party vendors from whom DTC acquires services to:
- impress upon them the importance of their services being year 2000
compliant; and
- determine the extent of their efforts for year 2000 remediation and, as
appropriate, testing of their services.
In addition, DTC is in the process of developing the contingency plans that
it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
173
<PAGE> 182
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
exchange notes, cross-market transfers between the participants in DTC, on the
one hand, and Euroclear or Cedel participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
Cedel, as the case may be, by its respective depositary. However, these
cross-market transactions will require delivery of instructions to Euroclear or
Cedel by the counterparty in the appropriate system in accordance with the rules
and procedures and within the established deadlines, Brussels time, of the
appropriate system. Euroclear or Cedel will, if the transaction meets its
settlement requirements, deliver instructions to its respective depositary to
take action to effect final settlement on its behalf by delivering or receiving
interests in the relevant global notes in DTC and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Euroclear participants and Cedel participants may not deliver instructions
directly to the depositories for Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a global note from a participant in
DTC will be credited, and that crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day,
which must be a business day for Euroclear and Cedel, immediately following the
settlement date of DTC. Cash received in Euroclear or Cedel as a result of sales
of interest in a global note by or through a Euroclear or Cedel participant to a
participant in DTC will be received with value on the settlement date of DTC,
but will be available in the relevant Euroclear or Cedel cash account only as of
the business day for Euroclear or Cedel following DTC's settlement date.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures
to facilitate transfers of interests in the global notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to continue
to perform these procedures, and these procedures may be discontinued at any
time. Neither we nor the trustee will have any responsibility for the
performance by DTC, Euroclear or Cedel or their participants or indirect
participants of their obligations under the rules and procedures governing their
operations.
CERTIFICATED EXCHANGE NOTES
If:
- we notify the trustee in writing that DTC is no longer willing or able to
act as a depositary or DTC ceases to be registered as a clearing agency
under the Exchange Act and a successor depositary is not appointed within
90 days of that notice or cessation;
- we, at our option, notify the trustee in writing that we elect to cause
the issuance of exchange notes in definitive form under the indenture; or
- upon the occurrence of other events as provided in the indenture,
174
<PAGE> 183
then, upon surrender by DTC of the global notes, certificated exchange notes
will be issued to each person that DTC identifies as the beneficial owner of the
exchange notes represented by the global notes. Upon that issuance, the trustee
is required to register the certificated exchange notes in the name of that
person, or the nominee of any thereof, and cause the same to be delivered to
that person.
Neither we nor the trustee shall be liable for any delay by DTC or any
participant or indirect participant in identifying the beneficial owners of the
related exchange notes, and each beneficial owner of exchange debentures may
conclusively rely on, and shall be protected in relying on, instructions from
DTC for all purposes, including with respect to the registration and delivery,
and the respective principal amounts, of the exchange notes to be issued.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes some of the United States federal
income tax consequences of the exchange offer to holders of old notes. The
discussion is intended only as a summary and does not purport to be a complete
analysis or listing of all potential tax considerations that may be relevant to
holders of old notes. The discussion does not include special rules that may
apply to some holders (including insurance companies, tax-exempt organizations,
financial institutions or broker-dealers), and does not address the tax
consequences of the law of any state, locality or foreign jurisdiction. Except
where noted, this summary deals only with old notes held as capital assets by
U.S. holders. The discussion is based upon currently existing provisions of the
Internal Revenue Code of 1986 (the "Internal Revenue Code"), existing and
proposed Treasury regulations under the Internal Revenue Code and current
administrative rulings and court decisions. Everything listed in the previous
sentence may change and any change could affect the continuing validity of this
discussion.
As used in this prospectus, "U.S. holder" means a beneficial owner of the
old notes who or that (1) is a citizen or resident of the United States,
including an alien individual who is a lawful permanent resident of the United
States or meets the "substantial presence" test under Section 7701(b) of the
Internal Revenue Code, (2) is a corporation or other entity taxable as a
corporation created or organized in or under the laws of the United States or
political subdivision of the United States, (3) is an estate the income of which
is subject to U.S. federal income taxation regardless of its source, (4) is a
trust, if (A) a U.S. court is able to exercise primary supervision over the
administration of the trust and (B) one or more U.S. fiduciaries have authority
to control all substantial decisions of the trust, or if the trust was in
existence on August 20, 1996 and has elected to continue to be treated as a U.S.
person, or (5) is otherwise subject to U.S. federal income tax on a net income
basis in respect of the old notes. A "non-U.S. holder" is a beneficial owner of
old notes who or that is not a "U.S. holder."
If a partnership holds old notes, the tax treatment of a partner will
generally depend upon the status of the partner and upon the activities of the
partnership. Partners of partnerships should consult their own tax advisors.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. THE TAX TREATMENT
MAY VARY DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT
THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF
175
<PAGE> 184
EXCHANGING THEIR OLD NOTES FOR EXCHANGE NOTES, INCLUDING APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
THE EXCHANGE OFFER
The issuance of the exchange notes to U.S. holders or non-U.S. holders of
the old notes pursuant to the terms set forth in this prospectus will not
constitute an exchange for federal income tax purposes. Consequently, no gain or
loss will be recognized by U.S. holders or non-U.S. holders of the old notes
upon receipt of the exchange notes, and ownership of the exchange notes will be
considered a continuation of ownership of the old notes. For purposes of
determining gain or loss upon the subsequent sale or exchange of the exchange
notes, a holder's basis in the exchange notes should be the same as the holder's
basis in the old notes exchanged. A holder's holding period for the exchange
notes should include the holder's holding period for the old notes exchanged.
The issue price and other tax characteristics of the exchange notes should be
identical to the issue price and other tax characteristics of the old notes
exchanged.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of the exchange notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for old notes where the old
notes were acquired as a result of market-making activities or other trading
activities. We have agreed that, for at least 90 days after the exchange offer
is completed, we will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any resale of exchange
notes.
We will not receive any proceeds from any sales of the exchange notes by
broker-dealers. Exchange notes received by 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 market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of methods of
resale, at market prices prevailing at the time of resale, at prices related to
those prevailing market prices or at negotiated prices. Any resale may be made
directly to the purchaser or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from the broker-dealer
and/or the purchasers of the exchange notes. Any 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
the exchange notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any resale of exchange notes and any
commissions or concessions received by any of those 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 broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
We have agreed to pay the expenses incident to the exchange offer, other
than commission or concessions of any brokers or dealers and the fees of any
counsel or other
176
<PAGE> 185
advisors or experts retained by the holders of old notes, and will indemnify the
holders of the exchange notes (including any broker-dealers) against related
liabilities, including liabilities under the Securities Act.
AVAILABLE INFORMATION
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act for the registration of the exchange notes offered in this
prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the registration
statement, some of which is contained in exhibits and schedules to the
registration statement as permitted by the rules and regulations of the SEC. For
further information with respect to us or the exchange notes offered in this
prospectus, you should refer to the registration statement, including the
related exhibits and financial statements. With respect to each document filed
with the SEC as an exhibit to the registration statement, you should refer to
the exhibit for a more complete description of the matter involved, and each
discussion in this prospectus of any document filed as an exhibit to the
registration statement qualified in its entirety by reference to the relevant
exhibit.
In connection with the exchange offer, we will become subject to the
information requirements of the Exchange Act, and, in accordance therewith, will
file reports and other information with the SEC. The registration statement and
the reports and other information we file can be inspected and copied at the
Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549 and the regional offices of the SEC located at 7 World Trade Center, New
York, New York 10048 and 500 West Madison Street, 14th Floor, Chicago, Illinois
60661. Copies of these materials may be obtained from the Public Reference
Section of the SEC, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at its public reference facilities in New York, New York and Chicago,
Illinois at prescribed rates. Information on the operation of the Public
Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. We will
make our filings with the SEC electronically. The SEC maintains an internet site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically, which information can be
accessed at <http://www.sec.gov>.
As a result of the offering of the exchange notes, each of the guarantors
will become subject to the informational requirements of the Exchange Act. We
will fulfill our obligations with respect to these requirements by filing
periodic reports with the SEC on our own behalf or, in the case of the
guarantors, by including information regarding the guarantors in our periodic
reports. In addition, we will send to each holder of exchange notes copies of
annual reports and quarterly reports containing the information required to be
filed under the Exchange Act. So long as we are subject to the periodic
reporting requirements of the Exchange Act, we are required to furnish the
information required to be filed with the SEC to the trustee and the holders of
the old notes and the exchange notes. We have agreed that, even if we are not
required under the Exchange Act to furnish this information to the SEC, we will
nonetheless continue to furnish information that would be required to be
furnished by us by Section 13 of the Exchange Act to the trustee and the holders
of the old notes or exchange notes as if we were subject to these periodic
reporting requirements.
177
<PAGE> 186
EXPERTS
The consolidated balance sheets of Holdings as of November 1, 1998 and
November 2, 1997 and the related consolidated statements of operations,
shareholders' equity and comprehensive income and cash flows for each of the
three fiscal years in the period ended November 1, 1998, included elsewhere in
this prospectus, have been audited by KPMG LLP, independent certified public
accountants, to the extent and for the periods indicated in their report
thereon.
VALIDITY OF THE EXCHANGE NOTES
The validity of the exchange notes will be passed upon for us by
[ ].
178
<PAGE> 187
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of November 2, 1997,
November 1, 1998 and August 1, 1999 (unaudited)........... F-3
Consolidated Statements of Operations for Fiscal Years Ended
November 3, 1996, November 2, 1997 and November 1, 1998
and for the Nine Months Ended August 2, 1998 (unaudited)
and August 1, 1999 (unaudited)............................ F-4
Consolidated Statements of Shareholders' Equity and
Comprehensive Income for Fiscal Years Ended October 31,
1995, November 3, 1996, November 2, 1997 and November 1,
1998 and for the Nine Months Ended August 1, 1999
(unaudited)............................................... F-5
Consolidated Statements of Cash Flows for Fiscal Years Ended
November 3, 1996, November 2, 1997 and November 1, 1998
and the Nine Months Ended August 2, 1998 (unaudited) and
August 1, 1999 (unaudited)................................ F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 188
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Maxxim Medical, Inc.:
We have audited the consolidated balance sheets of Maxxim Medical, Inc. and
subsidiaries as of November 2, 1997 and November 1, 1998, and the consolidated
statements of operations, shareholders' equity and comprehensive income, and
cash flows for the fiscal years ended November 3, 1996, November 2, 1997 and
November 1, 1998. 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 Maxxim
Medical, Inc. and subsidiaries as of November 2, 1997, and November 1, 1998, and
the results of their operations and their cash flows for the fiscal years ended
November 3, 1996, November 2, 1997 and November 1, 1998, in conformity with
generally accepted accounting principles.
KPMG LLP
Houston, Texas
January 7, 1999
F-2
<PAGE> 189
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NOVEMBER 2, NOVEMBER 1, AUGUST 1,
1997 1998 1999
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 3,130 $ 4,125 $ 5,354
Accounts receivable, net of allowances of
$3,181, $1,840 and $1,608, respectively... 77,209 70,429 101,188
Inventory, net............................... 83,184 79,648 131,512
Net current deferred tax asset............... 8,691 10,325 16,398
Prepaid expenses and other................... 2,309 8,690 7,717
-------- -------- --------
Total current assets...................... 174,523 173,217 262,169
Property and equipment......................... 122,938 169,048 237,493
Less: accumulated depreciation............... (31,384) (41,538) (53,881)
-------- -------- --------
91,554 127,510 183,612
Goodwill, net of accumulated amortization of
$8,038, $11,826 and $17,386, respectively.... 129,520 147,016 272,656
Other assets, net.............................. 28,449 20,308 36,369
-------- -------- --------
Total assets.............................. $424,046 $468,051 $754,806
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt......... $ 12,750 $ -- $ 25,000
Current maturities of other long-term
obligations............................... 3,133 2,544 1,853
Accounts payable............................. 32,194 35,834 42,117
Accrued liabilities.......................... 26,631 25,921 51,645
-------- -------- --------
Total current liabilities................. 74,708 64,299 120,615
Long-term debt, net of current maturities...... 78,550 13,800 229,700
10 1/2% Senior subordinated notes.............. 100,000 100,000 100,000
6 3/4% Convertible subordinated debentures..... 23,352 -- --
Other long-term obligations, net of current
maturities................................... 3,300 5,339 6,917
Net non-current deferred tax liability......... 6,208 11,704 13,161
-------- -------- --------
Total liabilities......................... 286,118 195,142 470,393
Commitments and contingencies
Shareholders' equity
Preferred Stock, $1.00 par, 20,000,000 shares
authorized, none issued or outstanding.... -- -- --
Common Stock, $.001 par value, 40,000,000
shares authorized, 8,871,355, 14,238,822
and 14,276,682 shares issued and
outstanding, respectively................. 9 14 14
Additional paid-in capital................... 103,872 219,268 220,322
Retained earnings............................ 45,250 64,886 80,739
Subscriptions receivable..................... (5,200) (5,200) (5,200)
Accumulated other comprehensive loss......... (6,003) (6,059) (11,462)
-------- -------- --------
Total shareholders' equity................ 137,928 272,909 284,413
-------- -------- --------
Total liabilities and shareholders'
equity.................................. $424,046 $468,051 $754,806
======== ======== ========
</TABLE>
See accompanying notes to Consolidated Financial Statements.
F-3
<PAGE> 190
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED NINE MONTHS ENDED
--------------------------------------- ---------------------
NOVEMBER 3, NOVEMBER 2, NOVEMBER 1, AUGUST 2, AUGUST 1,
1996 1997 1998 1998 1999
----------- ----------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales...................... $399,836 $529,552 $522,516 $389,018 $485,367
Cost of sales.................. 294,164 397,691 381,638 285,891 324,327
-------- -------- -------- -------- --------
Gross profit................... 105,672 131,861 140,878 103,127 161,040
-------- -------- -------- -------- --------
Operating expenses
Marketing and selling........ 51,781 62,603 65,837 47,804 78,974
General and administrative... 26,199 27,498 28,573 21,321 30,973
Transition expenses.......... -- -- -- -- 3,371
-------- -------- -------- -------- --------
77,980 90,101 94,410 69,125 113,318
-------- -------- -------- -------- --------
Income from operations......... 27,692 41,760 46,468 34,002 47,722
Interest expense, net.......... 13,143 22,145 13,420 10,382 19,940
Other income, net.............. 583 2,751 1,042 514 299
-------- -------- -------- -------- --------
Income before income taxes..... 15,132 22,366 34,090 24,134 28,081
Income taxes................... 6,422 9,485 14,454 10,220 12,228
-------- -------- -------- -------- --------
Net income..................... $ 8,710 $ 12,881 $ 19,636 $ 13,914 $ 15,853
======== ======== ======== ======== ========
Basic earnings per share....... $ 1.08 $ 1.55 $ 1.55 $ 1.15 $ 1.11
======== ======== ======== ======== ========
Diluted earnings per share..... $ 1.02 $ 1.42 $ 1.50 $ 1.11 $ 1.09
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to Consolidated Financial Statements.
F-4
<PAGE> 191
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY AND COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON STOCK ADDITIONAL COMPREHENSIVE
------------------ PAID-IN RETAINED SUBSCRIPTIONS INCOME
SHARES PAR VALUE CAPITAL EARNINGS RECEIVABLE (LOSS) TOTAL
------ --------- ---------- -------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT OCTOBER 31, 1995........ 8,088 $ 8 $ 91,677 $23,659 $ -- $ 1,007 $116,351
Stock option compensation........... -- -- 311 -- -- -- 311
Stock options exercised, including
federal income tax benefit of
$123.............................. 41 -- 417 -- -- -- 417
Payment received on officer loan.... -- -- 40 -- -- -- 40
Comprehensive income:
Net income.......................... -- -- -- 8,710 -- -- 8,710
Other comprehensive income (loss)
Unrealized gain on investment
securities -- net of tax........ -- -- -- -- -- 259 259
Translation adjustment............ -- -- -- -- -- (2,532) (2,532)
--------
Total comprehensive income...... 6,437
------ --- -------- ------- ------- -------- --------
BALANCES AT NOVEMBER 3, 1996........ 8,129 8 92,445 32,369 -- (1,266) 123,556
Senior management stock purchase.... 400 1 5,199 -- (5,200) -- --
Officer loan, net of payment
received.......................... -- -- (11) -- -- -- (11)
Stock options compensation.......... -- -- 471 -- -- -- 471
Stock options exercised, including
federal income tax benefit of
$122.............................. 43 -- 536 -- -- -- 536
Conversion of convertible
debentures........................ 299 -- 5,232 -- -- -- 5,232
Comprehensive income:
Net income.......................... -- -- -- 12,881 -- -- 12,881
Other comprehensive income (loss)
Realized gain on investment
securities -- net of
reclassification adjustment (see
disclosure)..................... -- -- -- -- -- (259) (259)
Translation adjustment............ -- -- -- -- -- (4,478) (4,478)
--------
Total comprehensive income...... 8,144
------ --- -------- ------- ------- -------- --------
BALANCE AT NOVEMBER 2, 1997......... 8,871 9 103,872 45,250 (5,200) (6,003) 137,928
Officer loan, net of payment
received.......................... -- -- (40) -- -- -- (40)
Stock options compensation.......... -- -- 625 -- -- -- 625
Stock options exercised, including
federal income tax benefit of
$269.............................. 66 -- 1,119 -- -- -- 1,119
Conversion of convertible
debentures........................ 1,277 1 22,278 -- -- -- 22,279
Secondary stock offering............ 4,025 4 91,414 -- -- -- 91,418
Comprehensive income:
Net income.......................... -- -- -- 19,636 -- -- 19,636
Other comprehensive income (loss)
Net unrealized gain on investment
securities -- net of tax........ -- -- -- -- -- 796 796
Translation adjustment............ -- -- -- -- -- (852) (852)
--------
Total comprehensive income...... 19,580
------ --- -------- ------- ------- -------- --------
BALANCE AT NOVEMBER 1, 1998......... 14,239 14 219,268 64,886 (5,200) (6,059) 272,909
Stock options compensation
(unaudited)....................... -- -- 595 -- -- -- 595
Stock options exercised, including
federal income tax benefit of $269
(unaudited)....................... 38 -- 459 -- -- -- 459
Comprehensive income:
Net income (unaudited).............. -- -- -- 15,853 -- -- 15,853
Other comprehensive loss
Net unrealized loss on investment
securities -- net of tax
(unaudited)....................... -- -- -- -- -- (1,746) (1,746)
Translation adjustment
(unaudited)..................... -- -- -- -- -- (3,657) (3,657)
--------
Total comprehensive income
(unaudited)................... 10,450
------ --- -------- ------- ------- -------- --------
BALANCE AT AUGUST 1, 1999
(UNAUDITED)....................... 14,277 $14 $220,322 $80,739 $(5,200) $(11,462) $284,413
====== === ======== ======= ======= ======== ========
</TABLE>
See accompanying notes to Consolidated Financial Statements.
F-5
<PAGE> 192
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED NINE MONTHS ENDED
--------------------------------------- ---------------------
NOVEMBER 3, NOVEMBER 2, NOVEMBER 1, AUGUST 2, AUGUST 1,
1996 1997 1998 1998 1999
----------- ----------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 8,710 $ 12,881 $ 19,636 $ 13,914 $ 15,853
Adjustment to reconcile net income to net cash provided
by operating activities:
Deferred income tax expense............................ 3,352 3,846 5,584 5,314 2,299
Depreciation and amortization.......................... 14,682 16,665 18,379 13,544 23,080
Amortization of financing fees......................... 286 830 1,021 421 828
Compensation expense for outstanding stock options..... 311 471 625 469 595
Gain on sale of investment in equity securities........ -- (1,510) -- -- --
Gain on sale of building............................... -- -- (25) (25) (168)
Changes in current assets and liabilities, net of
effects of asset acquisitions and dispositions and
business combinations:
(Increase) decrease in accounts receivable, net........ (8,793) 8,694 10,680 15,067 2,842
(Increase) decrease in inventory, net.................. (9,447) 11,073 6,057 9,278 (16,176)
(Increase) decrease in prepaid expenses and other...... (2,248) (619) (454) 212 765
Increase (decrease) in accounts payable................ 10,299 23 (1,716) (2,262) (3,151)
(Decrease) increase in accrued liabilities............. (16,795) (2,777) (4,245) (4,085) 9,882
--------- -------- -------- -------- ---------
Net cash provided by operating activities................. 357 49,577 55,542 51,847 36,649
--------- -------- -------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities........................ (1,620) -- -- -- --
Proceeds from sale of investment securities.............. -- 3,130 1,650 1,500 --
Proceeds from building sale.............................. -- 500 1,200 1,200 336
Proceeds from the sale of Henley assets.................. 6,000 -- -- -- --
Proceeds from product line sale.......................... -- -- -- -- 1,592
Purchase of Sterile Concepts, net of cash acquired....... (118,676) -- -- -- --
Purchase of Winfield Medical, net of cash acquired....... -- -- (31,267) (31,267) --
Purchase of glove plant assets and assumption of
liabilities, net....................................... -- -- (16,096) -- --
Purchase of Circon, net of cash acquired................. -- -- -- -- (246,769)
Purchase of property and equipment, net of asset
acquisitions and business combinations................. (10,625) (6,829) (23,441) (15,519) (23,365)
--------- -------- -------- -------- ---------
Net cash used in investing activities..................... (124,921) (3,199) (67,954) (44,086) (268,206)
--------- -------- -------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term borrowings......................... (73,687) (7,500) (81,000) (81,000) (29,900)
Proceeds from long-term borrowings....................... 90,000 -- -- -- 206,100
Net borrowing (payments) on revolving line of credit..... 35,290 (29,790) 3,500 (10,300) 64,700
(Decrease) increase in other long-term obligations and
capital lease obligations.............................. 4,580 (4,153) (4,143) (1,144) (2,921)
Net proceeds from secondary stock offering............... -- -- 91,418 91,394 --
Net proceeds from the issuance of 10 1/2% Notes.......... 97,000 -- -- -- --
Payments on Sterile Concepts debt........................ (34,247) -- -- -- --
Payment of debt financing costs.......................... -- -- -- -- (5,584)
Increase (decrease) in bank overdraft.................... 6,091 (7,893) 2,843 3,514 453
Other, net............................................... 457 529 753 (354) 126
--------- -------- -------- -------- ---------
Net cash provided by (used in) financing activities....... 125,484 (48,807) 13,371 2,110 232,974
--------- -------- -------- -------- ---------
Effect of foreign currency translation adjustment......... (44) (391) 36 (104) (188)
--------- -------- -------- -------- ---------
Net increase (decrease) in cash and cash equivalents...... 876 (2,820) 995 9,767 1,229
Cash and cash equivalents at beginning of year............ 5,074 5,950 3,130 3,130 4,125
--------- -------- -------- -------- ---------
Cash and cash equivalents at end of year.................. $ 5,950 $ 3,130 $ 4,125 $ 12,897 $ 5,354
========= ======== ======== ======== =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid during the period.......................... $ 9,090 $ 21,643 $ 13,718 $ 8,254 $ 16,102
Income taxes paid during the period...................... 5,336 6,147 5,568 1,645 6,145
Noncash investing and financing activities
Conversion of 6 3/4% convertible subordinated
debentures............................................. $ -- $ 5,232 $ 22,278 $ 22,278 $ --
Conversion of note receivable into investment
securities........................................... -- -- 4,000 4,000 --
Receipt of investment securities in exchange for
certain assets and intangible assets................. -- -- 2,706 2,706 --
Subscriptions receivable from senior management for
stock purchase....................................... -- 5,200 -- -- --
Note received on building sale......................... -- 300 -- -- 196
Note receivable from sale of product line.............. -- -- -- -- 1,543
Convertible note received from sale of Henley assets... 7,000 -- -- -- --
Net unrealized gain on investment...................... 259 -- 796 -- 1,746
</TABLE>
See accompanying notes to Consolidated Financial Statements.
F-6
<PAGE> 193
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE NINE MONTHS ENDED
AUGUST 2, 1998 AND AUGUST 1, 1999 IS UNAUDITED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Maxxim Medical, Inc. ("Maxxim"), a Texas corporation, and its subsidiaries
(collectively, "the Company") develops, manufactures, and markets specialty
medical products.
Basis of Presentation
Certain reclassifications have been made to the fiscal year 1996, fiscal
year 1997 and fiscal year 1998 consolidated financial statements and the nine
months ended August 2, 1999 unaudited consolidated financial information to
conform with the nine months ended August 1, 1999 presentation.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Maxxim and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
Cash Equivalents and Financial Instruments
Cash equivalents consist of highly liquid investments purchased with
original maturities of three months or less.
Investment Securities
Investment securities at November 1, 1998 and August 1, 1999 consist of
corporate equity securities and are reflected in the Balance Sheets in prepaid
expenses and other current assets. The Company classifies its equity securities
as available-for-sale. Available-for-sale securities are recorded at fair value.
Unrealized holding gains and losses, net of the related tax effect, on
available-for-sale securities are excluded from earnings and are reported as a
separate component of shareholders' equity until realized. Realized gains and
losses from the sale of available-for-sale securities are determined on a
specific identification basis. A decline in the market value of any
available-for-sale security below cost that is deemed to be other than temporary
results in a reduction in carrying amount to fair value. The impairment is
charged to earnings and a new cost basis for the security is established.
Dividend income is recognized when earned.
The Company had no investment securities at November 2, 1997. At November
1, 1998, the cost, gross unrealized holding gains, gross unrealized holding
losses and fair value of available-for-sale equity securities were $4,810,000,
$1,794,000, $420,000, and $6,184,000, respectively. Gross realized gains
included in income were $0, $1,510,000, $0, and in fiscal years 1996, 1997 and
1998, respectively, and $0 in both the nine months ended August 2, 1998 and
August 1, 1999, which is reflected in other income in the Consolidated
Statements of Operations. In adjusting the Company's investment securities to
fair value, an unrealized gain (loss) of $796,000, and $(1,746,000) net of tax,
was recognized at November 1, 1998 and August 1, 1999, respectively.
F-7
<PAGE> 194
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Concentration Of Credit Risk
Trade receivables have a concentration of credit risk with hospitals and
healthcare distributors. The Company performs continuing credit evaluations of
its customers and generally does not require collateral; however in certain
circumstances, the Company may require letters of credit from its customers.
Historically, the Company has not experienced significant losses related to
receivables from individual customers or groups of customers in any geographic
area.
Inventory
Inventory is priced at the lower of cost or market. In determining market
value, allowances for excess and obsolete items are provided. Cost is determined
using the average cost method.
Inventory included the following as of:
<TABLE>
<CAPTION>
NOVEMBER 2, NOVEMBER 1, AUGUST 1,
1997 1998 1999
----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Raw Materials................................. $36,613 $33,936 $ 57,643
Work in Progress.............................. 7,227 8,450 22,315
Finished Goods................................ 43,393 43,487 58,144
Allowance for excess and obsolete inventory... (4,049) (6,225) (6,590)
------- ------- --------
$83,184 $79,648 $131,512
======= ======= ========
</TABLE>
Property and Equipment
The costs of ordinary maintenance and repairs are expensed, while renewals
and betterments are capitalized. Depreciation on property and equipment is
computed for financial reporting purposes using the straight-line method over
the estimated useful lives of the assets. Property and equipment included the
following as of:
<TABLE>
<CAPTION>
NOVEMBER 2, NOVEMBER 1, AUGUST 1,
USEFUL LIFE 1997 1998 1999
----------- ----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Land................................ $ 15,610 $ 15,815 $ 14,458
Buildings and improvements.......... 5-25 years 40,240 47,658 98,195
Machinery and equipment............. 2-10 years 64,370 100,579 117,012
Furniture and fixtures.............. 3-5 years 2,718 4,996 7,828
Accumulated depreciation............ (31,384) (41,538) (53,881)
-------- -------- --------
$ 91,554 $127,510 $183,612
======== ======== ========
</TABLE>
In fiscal 1997, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of" (SFAS No. 121). SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in
F-8
<PAGE> 195
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
circumstances indicate that the carrying value of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by
comparison of the carrying amount of an asset to future net cash flows
(undiscounted and without interest charges) expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. The adoption of SFAS No. 121 did not have a
material impact on the Company's Consolidated Financial Statements.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Goodwill
Goodwill represents the excess of the aggregate price paid by the Company
in business combinations accounted for as purchases over the fair market value
of the tangible and identifiable intangible net assets acquired. The Company
assesses the recoverability of intangible assets by determining whether
amortization of the asset balance over its remaining useful life can be
recovered through undiscounted future operating cash flows of the acquired
operation. The amount of asset impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. The Company believes that no
impairment of goodwill exists.
Revenue Recognition
The Company recognizes revenue upon shipment to customers, pursuant to
customer orders. The Company grants rebates to certain of its customers. These
sales and related receivables are recorded net of the expected rebate.
Research and Development Expenses
The Company is continually conducting research and developing new products
utilizing a team approach that involves its engineering, manufacturing and
marketing resources. Although the Company has developed a number of its own
products, most of its research and development efforts have historically been
directed towards product improvement and enhancement of previously developed or
acquired products. Company research and development expenses were approximately
$5,124,000, $5,158,000, and $5,649,000, in fiscal years 1996, 1997 and 1998,
respectively and $4,092,000 and $10,092,000 for the nine months ended August 2,
1998 and August 1, 1999, respectively.
F-9
<PAGE> 196
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Earnings Per Share
The Company adopted Statement of Financial Accounting Standard No. 128,
"Earnings per Share" (SFAS No. 128) during the first quarter of fiscal 1998. In
accordance with SFAS No. 128, basic earnings per share is computed by dividing
net earnings available to common shareholders by the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
determined on the assumption that outstanding dilutive stock options have been
exercised and the aggregate proceeds as defined were used to reacquire Company
common stock using the average price of such common stock for the period and
assuming the conversion of the convertible subordinated debentures from the date
of issue. Prior period earnings per share amounts have been restated.
The following table summarizes the calculation of net income, weighted
average number of common shares and weighted average number of diluted common
shares outstanding for purposes of the computation of earnings per share in
accordance with SFAS No. 128:
<TABLE>
<CAPTION>
PER SHARE
INCOME SHARES AMOUNTS
-------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
FISCAL YEAR ENDED NOVEMBER 3, 1996
Basic EPS
Net Income.......................................... $ 8,710 8,102 $1.08
=====
Effects of dilutive securities:
Convertible Debt.................................. $ 1,364 1,597
Options........................................... -- 162
------- -------
Diluted EPS....................................... $10,074 9,861 $1.02
======= ======= =====
FISCAL YEAR ENDED NOVEMBER 2, 1997
Basic EPS
Net Income.......................................... $12,881 8,326 $1.55
=====
Effects of dilutive securities:
Convertible Debt.................................. $ 1,123 1,297
Options........................................... -- 208
------- -------
Diluted EPS....................................... $14,004 9,831 $1.42
======= ======= =====
FISCAL YEAR ENDED NOVEMBER 1, 1998
Basic EPS
Net Income.......................................... $19,636 12,665 $1.55
=====
Effects of dilutive securities:
Convertible Debt.................................. $ 107 94
Options........................................... -- 365
------- -------
Diluted EPS....................................... $19,743 13,124 $1.50
======= ======= =====
</TABLE>
F-10
<PAGE> 197
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PER SHARE
INCOME SHARES AMOUNTS
-------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
NINE MONTHS ENDED AUGUST 2, 1998 (UNAUDITED)
Basic EPS
Net Income.......................................... $13,914 12,144 $1.15
=====
Effects of dilutive securities:
Convertible Debt.................................. $ 107 121
Options........................................... -- 381
------- -------
Diluted EPS....................................... $14,021 12,646 $1.11
======= ======= =====
NINE MONTHS ENDED AUGUST 1, 1999 (UNAUDITED)
Basic EPS
Net Income.......................................... $15,853 14,268 $1.11
=====
Effects of dilutive securities:
Options........................................... -- 330
------- -------
Diluted EPS....................................... $15,853 14,598 $1.09
======= ======= =====
</TABLE>
Stock Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123). SFAS No. 123 allows a company to adopt a new fair
value based method of accounting for its stock based compensation plans, or to
continue to follow the intrinsic method of accounting prescribed by Accounting
Principles Board (APB) Opinion No. 25 "Accounting for Stock to Employees."
The Company has elected to continue to follow APB Opinion No. 25. If the
Company had adopted SFAS No. 123, the Company's net income and earnings per
share for the years ended November 3, 1996, November 2, 1997 and November 1,
1998 would have been impacted as discussed in Note 9.
Use Of Estimates In The Preparation Of Financial Statements
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.
F-11
<PAGE> 198
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
52 Week Fiscal Year
The Company's fiscal year ends on the Sunday following the last Thursday in
October.
Translation Of Foreign Currency Financial Statements
Assets and liabilities of foreign subsidiaries have been translated into
United States dollars at the applicable rates of exchange in effect at the end
of the period reported. Revenues and expenses have been translated at the
applicable weighted average rates of exchange in effect during the period
reported. Translation adjustments are reflected as a separate component of
shareholders equity. Any transaction gains and losses are included in net
income.
Comprehensive Income (Loss)
On November 2, 1998, the Company adopted SFAS No. 130 "Reporting
Comprehensive Income" ("SFAS No. 13"). SFAS No. 130 establishes standards for
reporting and presentation of comprehensive income (loss) and its components.
Comprehensive income (loss), consisting of net income (loss), unrealized holding
gains and losses on available-for-sale securities, and foreign currency
translation adjustments is presented in the consolidated statements of
shareholders' equity and comprehensive income. SFAS No. 130 does not affect the
Company's financial position or results of operations. Prior year consolidated
financial statements have been reclassified to conform to the requirements of
SFAS No. 130.
The components of accumulated other comprehensive income (loss) are as
follows (in thousands):
<TABLE>
<CAPTION>
ACCUMULATED
UNREALIZED OTHER
FOREIGN CURRENCY HOLDING GAINS COMPREHENSIVE
TRANSLATION (LOSSES) INCOME (LOSS)
---------------- -------------- -------------
<S> <C> <C> <C>
Balance at October 31, 1995..... $ 1,007 $ -- $ 1,007
Fiscal year 1996 change......... (2,532) 259 (2,273)
-------- ------- --------
Balance at November 3, 1996..... (1,525) 259 (1,266)
Fiscal year 1997 change......... (4,478) (259) (4,737)
-------- ------- --------
Balance at November 2, 1997..... (6,003) -- (6,003)
Fiscal year 1998 change......... (852) 796 (56)
-------- ------- --------
Balance at November 1, 1998..... (6,855) 796 (6,059)
Nine months ended August 1, 1999
change (unaudited)............ (3,657) (1,746) (5,403)
-------- ------- --------
Balance at August 1, 1999
(unaudited)................... $(10,512) $ (950) $(11,462)
======== ======= ========
</TABLE>
F-12
<PAGE> 199
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The change in holding gains (losses) in fiscal year 1997 is calculated as
follows:
<TABLE>
<S> <C>
Unrealized holding gains arising in fiscal year 1997........ $ 1,251
Less: reclassification adjustment for gains included in net
income in fiscal year 1997.................................. (1,510)
-------
Net unrealized gains on securities.......................... $ (259)
=======
</TABLE>
There were no reclassification adjustments for fiscal years 1996 or 1998,
or for the nine months ended August 1, 1999.
Interim Consolidated Financial Statements
The interim consolidated financial statements as of August 1, 1999 and for
the nine months ended August 2, 1998 and August 1, 1999 are unaudited. In the
opinion of management, the accompanying unaudited financial statements contain
all adjustments necessary to present fairly the financial position as of August
1, 1999 and the results of operations and cash flows for the nine months ended
August 2, 1998 and August 1, 1999. The operating results for interim periods are
not necessarily indicative of results to be expected for an entire year.
New Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosure About Segments of an Enterprise and Related Information"
(SFAS No. 131), which is effective for the Company's fiscal year ending in 1999.
This statement establishes standards for reporting segment information in annual
and interim financial statements. It also establishes standards for related
disclosure of products and services, geographical areas and major customers.
Under SFAS No. 131, reporting segments are determined consistent with the way
management organizes and evaluates financial information internally for making
operating decisions and assessing performance. The Company does not believe the
adoption of SFAS No. 131 will have a material impact on its consolidated
financial statements.
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133), was issued by the
Financial Accounting Standards Board in June 1998. SFAS No. 133 standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts. Under the standard, entities are required to carry
all derivative instruments in the statement of financial position at fair value.
SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. The Company will adopt SFAS No. 133 beginning in the first
quarter of fiscal 2001.
(2) BUSINESS COMBINATIONS, SIGNIFICANT ASSET ACQUISITIONS AND DISPOSITIONS
Business Combinations
On July 30, 1996, the Company successfully completed a tender offer (the
"Tender Offer") for Sterile Concepts. As of completion of a cash-out merger
between Sterile Concepts and a subsidiary of Maxxim in September of 1996, Maxxim
completed its acquisition of Sterile Concepts for approximately $110,500,000,
excluding acquisition costs
F-13
<PAGE> 200
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of approximately $8,600,000 paid in fiscal 1996 and $465,000 of cash acquired
with the acquisition. The Company also refinanced existing Maxxim debt of
approximately $72,700,000 contemporaneously with and repaid approximately
$34,200,000 of Sterile Concepts debt shortly after the consummation of the
Tender Offer. Funding to complete the acquisition and debt repayment was derived
from approximately $121,000,000 of borrowings under a $165,000,000 amended
credit facility with its primary lender and the net proceeds of $97,000,000 from
the offering of $100,000,000 of 10 1/2% Senior Subordinated Notes (See Note 3).
The assets acquired in the Sterile Concepts acquisition consist primarily of
accounts receivable, inventory, furniture and equipment and leased assembly and
other facilities in Richmond, Virginia, Temecula, California and Minnetonka,
Minnesota. Sterile Concepts assembles, packages and sterilizes custom procedure
trays for hospitals, outpatient surgery centers and medical clinics. In the
fourth quarter of fiscal 1996, Sterile Concepts was integrated into the already
existing custom procedure tray assembly and packaging operations of the Company.
The acquisition was accounted for by the purchase method of accounting and
approximately $116,000,000 of goodwill was recorded with the transaction, which
is being amortized on a straight line basis over 40 years. One time costs of
$3,500,000 relating to the acquisition were recorded in the fourth fiscal
quarter of fiscal 1996.
On June 26, 1998, the Company purchased all of the issued and outstanding
common stock of Winfield Medical. The assets acquired in the Winfield
acquisition consist primarily of accounts receivable, inventory, furniture and
equipment and leased manufacturing and other facilities in San Diego, California
and Clarksburg, West Virginia. Winfield Medical was a developer, manufacturer
and distributor of medical products. The purchase price consisted of
approximately $31,267,000 in cash and the assumption of approximately $5,300,000
of capital lease obligations. The acquisition has been accounted for as a
purchase with the purchase price and direct acquisition costs allocated based on
fair value of assets acquired and liabilities assumed. Goodwill of approximately
$23,300,000 was recorded in connection with this transaction, and is being
amortized on a straight line basis over 30 years.
Effective January 6, 1999, the Company successfully completed a tender
offer for Circon Corporation ("Circon"). Upon the completion of a cash-out
merger between Circon and a subsidiary of Maxxim on January 8, 1999, Maxxim
completed its acquisition of Circon for approximately $260,000,000, including
the repayment of $32,500,000 of Circon debt and certain fees and expenses
incurred in connection with the acquisition. The Company obtained all funds
required in connection with the acquisition through a bank loan, pursuant to the
Third Amended and Restated Credit Agreement, dated as of January 4, 1999. The
assets acquired in the Circon acquisition consist primarily of accounts
receivable, inventory, furniture and equipment, intangible assets and owned or
leased facilities in Stamford, Connecticut; Norwalk, Ohio; Racine, Wisconsin and
Santa Barbara, California. Circon markets medical devices for diagnosis and
minimally invasive surgery and general surgery. This acquisition was accounted
for by the purchase method of accounting and approximately $144,000,000 of
intangible assets were recorded in connection with the transaction
(approximately $13,500,000 related to patents and $130,500,000 related to
goodwill). Patents are being amortized over 15 years and goodwill is being
amortized over 30 years, using the straight-line method in each case. Transition
expenses of $3,371,000 were recorded in the first quarter of fiscal 1999. See
note 15.
F-14
<PAGE> 201
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following unaudited pro forma summary results of operations assume the
acquisition of Circon occurred on November 3, 1997.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
NOVEMBER 1, 1998
-------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C>
Revenues........................................ $674,980
Net income...................................... 4,059
Basic earnings per share........................ 0.32
Diluted earnings per share...................... 0.31
</TABLE>
The pro forma adjustments to the historical accounts include (a) the
elimination of intercompany sales, (b) the additional amortization expense
associated with goodwill and intangibles acquired, (c) the elimination of
expenses incurred by Circon related to the merger, (d) the additional interest
expense on the debt incurred to make the acquisition as of the beginning of the
Company's fiscal year as well as the additional amortization expense associated
with debt financing costs and (e) the federal income tax impact of the previous
adjustments.
The pro forma information does not purport to be indicative of results of
operations or financial position which would have occurred had the acquisition
been consummated on the date indicated, or which may be expected to occur in the
future by reason of such acquisition.
Asset Acquisition
In September 1998, the Company acquired the property, equipment and
inventory and assumed liabilities of a non-latex medical examination glove plant
in Eaton, Ohio for approximately $16,096,000. This acquisition was accounted for
by the purchase method of accounting.
Asset Dispositions
Effective May 1, 1996, the Company sold certain assets related to its
Henley Healthcare division operations to Henley Healthcare, Inc., formerly and
at the time of the transaction, Lasermedics, Inc., for approximately
$13,000,000, which consisted of approximately $6,000,000 in cash and a
$7,000,000 convertible note. The assets, which were sold at net book value,
consisted primarily of receivables, inventory, furniture and equipment, two
manufacturing facilities located in Sugar Land and Belton, Texas, and intangible
assets related to the Henley product lines. The assets were used by the Henley
division to manufacture and sell various types of products for the physical
medicine, rehabilitation and pain management markets. In fiscal 1998, the
Company, at its option, converted $4,000,000 of the convertible note into
2,000,000 shares of Henley Healthcare common stock. Subsequent to this
conversion, the Company sold 975,000 shares during fiscal 1998 in various
private transactions. The Company's consolidated financial statements reflect
the remaining available-for-sale securities at fair value at November 1, 1998.
In May 1998, the Company sold certain assets and liabilities associated
with its Bovie brand of electrosurgical products to An-Con Genetics for
3,000,000 shares of An-Con Genetics common stock. Included in this sale was the
"Bovie" Tradename which An-Con
F-15
<PAGE> 202
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Genetics now uses as its Company name. The assets, which were sold at net book
value, consisted primarily of inventory and intangibles. The Company's
consolidated financial statements reflect these available-for-sale securities at
fair value at November 1, 1998.
(3) DEBT AND OTHER LONG-TERM OBLIGATIONS
Long-Term Debt
The following summarizes the Company's long-term debt as of:
<TABLE>
<CAPTION>
NOVEMBER 2, NOVEMBER 1, AUGUST 1,
1997 1998 1999
----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Revolving line of credit..................... $ 10,300 $13,800 $ 64,700
Term loan.................................... 81,000 -- 190,000
Less -- Current maturities................... (12,750) -- (25,000)
-------- ------- --------
$ 78,550 $13,800 $229,700
======== ======= ========
</TABLE>
Credit Facility
On July 30, 1996, the Company entered into a Second Amended and Restated
Credit Agreement ("Second Credit Agreement") with several lending institutions.
The Second Credit Agreement replaced the Company's previous credit facility. The
Second Credit Agreement provided for a term loan of $90,000,000 and a
$75,000,000 revolving line of credit. At closing, the term loan was fully drawn
and approximately $31,000,000 of the revolver was used in conjunction with
proceeds from the 10 1/2% Senior Subordinated Notes to finance the Sterile
Concepts acquisition (See Note 2). Both loans were scheduled to mature on July
30, 2002; however, the term loan was repaid in March 1998 from the net proceeds
of the Company's public stock offering. (See Note 12). The interest rate for the
credit facilities was prime or, for LIBOR advances, the LIBOR rate, plus a
margin ranging from 1.0% to 2.0%, indexed according to a defined financial
ratio. For fiscal 1998, the weighted average rate of interest on the revolver
was 5.94%. In connection with this repayment, $464,000 of financing costs were
written off to interest expense. On November 1, 1998, the unused portion of the
revolver was approximately $61,200,000. The credit facility was unsecured and
required the Company to maintain certain customary financial and operating
ratios and prohibited payment of dividends.
In connection with the acquisition of Circon (See Note 2), the Company
entered into a Third Amended and Restated Credit Agreement ("Third Credit
Agreement") with several lending institutions. The Third Credit Agreement
replaced the Second Credit Agreement. The Third Credit Agreement provides for a
term loan of $200,000,000 and a $125,000,000 revolving line of credit.
Additionally the Third Credit Agreement requires a pledge of the common stock of
the Company's subsidiaries. Financing for the Circon acquisition required the
full use of the term loan and approximately $60,000,000 of the revolver (See
Note 2). Both loans mature on January 6, 2005, with the term loan requiring
repayment in twenty-four quarterly installments ranging from $5,000,000 to
$10,000,000, commencing April 30, 1999. Both loans bear interest, payable
quarterly on the Interest Period as defined in the Third Credit Agreement. The
interest rate is prime or, for LIBOR advances, the LIBOR rate, plus a margin
ranging from 1.5% to 2.75%, indexed
F-16
<PAGE> 203
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
according to a defined financial ratio. In connection with the Third Credit
Agreement, the Company incurred approximately $5,584,000 in debt financing fees
which are being amortized over the life of the Third Credit Agreement.
10 1/2% Senior Subordinated Notes
In July 1996, the Company issued $100,000,000 of 10 1/2% Senior
Subordinated Notes ("Notes"). The Notes mature on August 1, 2006, unless
previously redeemed by the Company. Interest on the Notes is payable
semi-annually on February 1 and August 1, commencing on February 1, 1997.
The Notes will not be redeemable at the Company's option prior to August 1,
2001. Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on August
1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
August 1, 2001.............................................. 105.25%
August 1, 2002.............................................. 103.50
August 1, 2003.............................................. 101.75
August 1, 2004 and thereafter............................... 100.00
</TABLE>
Net proceeds from the offering of approximately $97,000,000 were used in
conjunction with proceeds from the new credit facility to finance the Sterile
Concepts acquisition (See Note 2).
On September 30, 1999, the Company commenced a tender offer to acquire any
and all of the Notes (the "Debt Tender Offer"). As part of the Debt Tender
Offer, Holdings solicited consents from holders of the Notes to amendments to
the terms of the Notes and the indenture governing the Notes in order to
eliminate substantially all of the restrictive covenants contained therein. (See
Recapitalization at Note 17). Holders of $99,995,000 of the principal amount of
the Notes consented to the amendments and tendered their Notes, and all of such
Notes were purchased in the Debt Tender Offer on November 12, 1999.
6 3/4% Convertible Subordinated Debentures
In March 1993, the Company issued $28,750,000 of 6 3/4% Convertible
Subordinated Debentures (the "Debentures") due March 1, 2003. The Debentures
were convertible at the option of the holder into Common Stock at a conversion
price of $18 per share and paid interest every six months commencing September
1, 1993, through maturity on March 1, 2003.
On October 3, 1997, the Company called for redemption of $10,000,000, in
principal amount, of the Debentures effective as of November 4, 1997 (the "First
Redemption Date"). On the First Redemption Date, the redemption price of 104.17%
of the principal amount, or $1,041.70 plus accrued interest of $11.81 per $1,000
face amount of the Debentures, was paid to the holders of Debentures called for
redemption who had not exercised their right to convert their Debentures into
common stock. As of November 2,
F-17
<PAGE> 204
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1997, $5,398,000 of the debentures had been converted into 299,882 shares of the
Company's common stock and debt issuance costs of $166,000 related to these
converted debentures were written off to additional paid-in capital in fiscal
1997 and are reflected in the accompanying consolidated financial statements.
On November 12, 1997, the Company called for the redemption of the
remaining outstanding Debentures effective as of December 12, 1997 (the "Second
Redemption Date"). On the Second Redemption Date, the redemption price of
104.17% of the principal amount, or $1,041.70 plus accrued interest of $18.94
per $1,000 face amount of the Debentures, was paid to the holders who had not
exercised their right to convert their Debentures into common stock. In the
first quarter of fiscal 1998, $22,983,000 of the Debentures were converted into
1,276,732 shares of the Company's common stock and debt issuance costs of
$705,000 related to these converted debentures were written off to additional
paid-in capital and are reflected in the accompanying consolidated financial
statements in fiscal 1998. The Company paid $369,000 to debenture holders who
did not exercise their right to convert upon surrender of their certificates in
fiscal 1998.
Future Minimum Principal Payments
Future minimum principal payments on long-term debt and other obligations
are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS (IN THOUSANDS)
- ------------ --------------
<S> <C>
1999........................................................ $ 2,036
2000........................................................ 505
2001........................................................ 175
2002........................................................ 13,928
2003........................................................ --
Thereafter.................................................. 100,000
--------
$116,644
========
</TABLE>
(4) FINANCIAL INSTRUMENTS
During the first quarter of fiscal 1996, the Company entered into an
interest rate swap agreement with its primary lender in order to reduce the
impact of changes in variable interest rates on consolidated results of
operations and future cash outflows for interest. The agreement converted a
portion of the non-indexed part of the interest rate of the original version of
the Credit Agreement facilities to a fixed rate of 5.4%. The original notional
amount of the swap was $63,750,000 with an expiration of March 31, 2000. During
fiscal 1998, the Company sold this agreement for $191,000. In fiscal 1998, the
Company's financial position and results of operations were not materially
impacted by the swap agreement.
The Company used the interest rate swap to manage the interest risk
associated with its borrowings and to manage the Company's allocation of fixed
and variable rate debt. The Company accounted for its interest rate swap on the
accrual method, whereby the net receivable or payable was recognized on a
periodic basis and included as a component of interest expense. The Company does
not trade in derivative securities.
F-18
<PAGE> 205
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The estimated fair value of cash and cash equivalents, accounts receivable,
and accounts payable, approximate their carrying amount. The estimated fair
values and carrying amounts of long-term borrowings and the interest rate swap
were as follows as of:
<TABLE>
<CAPTION>
NOVEMBER 2, NOVEMBER 1,
1997 1998
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Swap agreement, receiving fixed..... $ -- $ 310 $ -- $ --
Long-term debt (including current
maturities)....................... (221,085) (230,559) (121,683) (130,133)
</TABLE>
Fair values were determined from quoted market prices or discounted cash
flows.
(5) COMMITMENTS AND CONTINGENCIES
Capital Leases
The Company leases a production facility and various equipment under
long-term leases and has the option to purchase the assets for a nominal cost at
the termination of the lease.
Included in property, plant and equipment are the following assets held
under capital leases as of:
<TABLE>
<CAPTION>
NOVEMBER 2, NOVEMBER 1,
1997 1998
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Land.................................................... $ -- $ 271
Buildings............................................... -- 1,914
Machinery and equipment................................. -- 6,240
Accumulated amortization................................ -- (358)
------ ------
$ -- $8,067
====== ======
</TABLE>
F-19
<PAGE> 206
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments for assets under capital leases at November
1, 1998 are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS
- ------------ (IN THOUSANDS)
<S> <C>
1999........................................................ $ 854
2000........................................................ 784
2001........................................................ 760
2002........................................................ 760
2003........................................................ 760
Thereafter.................................................. 2,455
------
Total minimum lease payments.............................. 6,373
Less -- amount representing interest........................ 1,334
------
Present value of net minimum lease payments............... 5,039
Less current maturities..................................... 508
------
$4,531
======
</TABLE>
OPERATING LEASES
The Company is obligated under various operating leases. Rent expense under
these operating leases for fiscal years 1996, 1997 and 1998 was approximately
$1,215,000, $3,519,000 and $3,430,000, respectively. Minimum future rental
payments are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS
- ------------ (IN THOUSANDS)
<S> <C>
1999........................................................ $ 3,533
2000........................................................ 3,322
2001........................................................ 3,367
2002........................................................ 3,144
2003........................................................ 2,484
Thereafter.................................................. 3,658
-------
$19,508
=======
</TABLE>
CLAIMS AND LITIGATION. The Company is currently, and is from time to time,
subject to claims and lawsuits arising in the ordinary course of business,
including those relating to product liability, safety and health and employment
matters. In some of such actions, plaintiffs request punitive or other damages
or nonmonetary relief, which may not be covered by insurance, and which could,
in the case of nonmonetary relief, if granted, materially affect the conduct of
the Company's business. Although the Company maintains insurance that it
believes to be reasonable and appropriate, the amount and scope of any coverage
may be inadequate to protect the Company in the event of a substantial adverse
judgment. In management's opinion (taking third party indemnities into
consideration), these various asserted claims and litigation in which the
Company is currently involved are not reasonably likely to have a material
adverse effect on the Company's business, results of operations or financial
position. However, no assurance can be given as to the ultimate outcome with
respect to such claims and litigation.
Since March 1996, the Company has been served with lawsuits alleging
various adverse reactions to the latex used in certain of the medical gloves
alleged to have been
F-20
<PAGE> 207
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
manufactured by the Company or the prior owner of the assets relating to the
Company's latex glove operations acquired in June 1995 as well as certain glove
products distributed by the Company since 1989. The Company believes that most
of such claims relate to gloves sold or shipped prior to June 1995. The Company
has been and believes it will continue to be indemnified by the prior owner with
regard to such claims. Because the Company, as well as its competitors, have
continued to manufacture and sell latex gloves, the Company may be subject to
further claims. The Company is not entitled to indemnification from the prior
owner for gloves that were manufactured, sold or shipped in or from one of such
prior owner's plants or the Company's plants after June 1995. The Company
intends to vigorously defend against such claims. The Company is aware that an
increasing number of lawsuits have been brought against latex glove
manufacturers with respect to such adverse reactions. There can be no assurance
that the Company will prevail in any such lawsuits, that the prior owner will
continue to indemnify the Company or that the Company will not incur costs or
liabilities relating to such claims that will result in a material adverse
effect on the Company's business, financial condition or results of operations.
A complaint was filed on June 15, 1999 in state court in Harris County,
Texas, and another was filed on June 25, 1999 in state court in Pinellas County,
Florida, each naming the Company, its former directors and Fox Paine & Company,
LLC as defendants. Each complaint is brought on behalf of a purported class of
former public shareholders of the Company and alleges that the consideration
paid in the merger contemplated by the Agreement and Plan of Merger entered into
by the Company on June 13, 1999 (the "Merger") was unfair and inadequate, and
that such directors breached their fiduciary duties by failing to obtain the
best price for the Company. As relief, each complaint seeks, among other things,
damages in an unspecified amount. The cases are titled Steiner v. Maxxim
Medical, Inc., et al. No. 1999-30682 (281st Judl. Dist., Harris Cty., Tex.) and
Burnetti v. Maxxim Medical, Inc. et al. No. 99-4347-CI-15 (6th Judl. Circ.,
Pinellas Cty., Fla.). As of August 16, 1999, the plaintiffs in the Steiner
action voluntarily dismissed the action. On September 30, 1999, counsel for the
plaintiffs in the Burnetti action and counsel for defendants entered into a
memorandum of understanding providing that the claims asserted in the Burnetti
case will be settled, the action will be dismissed and defendants will receive a
release of all claims. However, the settlement is subject to court approval and
certain other conditions.
On September 28, 1999, a complaint was filed in state court in Henderson
County, Texas naming the Company and its former directors as defendants. The
complaint is brought on behalf of a purported class of former public
shareholders of the Company and alleges, among other things, that the
consideration paid in the Merger was unfair and inadequate and that the former
directors of the Company breached their fiduciary duties by failing to obtain
the best price for the Company. As relief, the complaint seeks, among other
things, damages in an unspecified amount. This case is titled Krim v. Maxxim
Medical, Inc., et al., No. 99-143 (3rd Judl. Dist., Henderson Cty., Tex). The
Company believes the allegations of the complaint are without merit and intends
to vigorously defend the lawsuit.
In the ordinary course of business, the Company has been named in various
other lawsuits. While the final resolution of any matter may have an impact on
the Company's
F-21
<PAGE> 208
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
consolidated financial results for a particular reporting period, management
believes, based on consultation with counsel, that the ultimate resolution of
these matters and the matters specifically discussed above will not have a
material adverse impact on the Company's financial position or results of
operations.
Product Liability
The Company currently has product liability insurance which it believes to
be adequate for its business. The Company's existing policy expires in November
2000.
(6) INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------------------
NOVEMBER 3, NOVEMBER 2, NOVEMBER 1,
1996 1997 1998
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current domestic............................. $1,050 $3,784 $ 8,189
Current foreign.............................. 2,020 1,855 681
------ ------ -------
3,070 5,639 8,870
------ ------ -------
Deferred domestic............................ 2,693 3,724 5,118
Deferred foreign............................. 659 122 466
------ ------ -------
3,352 3,846 5,584
------ ------ -------
Total................................... $6,422 $9,485 $14,454
====== ====== =======
</TABLE>
Income tax expense differed from the amounts computed by applying the
statutory U.S. federal income tax rate as a result of the following:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------------------
NOVEMBER 3, NOVEMBER 2, NOVEMBER 1,
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Statutory rate............................... 35% 35% 35%
Amortization of goodwill..................... 4 4 3
State taxes, net of federal benefit.......... 2 2 3
Other, net................................... 1 1 1
-- -- --
Effective rate............................... 42% 42% 42%
== == ==
</TABLE>
F-22
<PAGE> 209
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The net effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below at:
<TABLE>
<CAPTION>
NOVEMBER 2, NOVEMBER 1,
1997 1998
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current deferred:
Deferred tax assets:
Accounts receivable, principally due to allowance for
doubtful accounts..................................... $ 1,257 $ 1,359
Inventory, principally due to reserve for obsolescence
and costs inventoried for tax purposes................ 3,369 3,507
Net operating loss carryforwards......................... 84 629
Accruals and provisions not currently deductible......... 4,160 4,830
------- --------
8,870 10,325
Deferred tax liabilities:
Tax over book depreciation............................... (179) --
------- --------
Net current deferred tax asset........................... $ 8,691 $ 10,325
======= ========
Noncurrent deferred:
Deferred tax assets:
Net operating loss carryforwards......................... 506 1,440
Deferred tax liabilities:
Book over tax amortization............................... (5,933) (7,299)
Differences between book and tax basis of property and
equipment............................................. (781) (5,845)
------- --------
Net noncurrent deferred tax liability.................... $(6,208) $(11,704)
======= ========
</TABLE>
There is no valuation allowance as of the year ended November 1, 1998. It
is the opinion of management that future operations will more likely than not
generate taxable income to realize the deferred tax assets.
At November 1, 1998, the Company has $10.1 million of net operating loss
carryforwards for federal income tax purposes which were acquired in various
acquisitions. The utilization of certain net operating loss carryforwards is
subject to limitations under U.S. Federal Income Tax laws. The Company did not
record a deferred tax asset for $4.2 million of these net operating loss
carryforwards in the allocation of the purchase price of these acquisitions, for
which subsequently recognized benefits will be allocated to reduce goodwill. The
net operating loss carryforwards are available to offset future federal taxable
income, if any, through 2009.
F-23
<PAGE> 210
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) ACCRUED LIABILITIES
Accrued liabilities include the following as of:
<TABLE>
<CAPTION>
NOVEMBER 2, NOVEMBER 1, AUGUST 1,
1997 1998 1999
----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Health insurance and benefit accrual..... $ 8,471 $ 7,799 $11,666
Accrued taxes payable.................... 3,831 5,314 11,993
Fees payable to hospital buying groups... 1,941 2,357 2,036
Accrued payroll and commissions.......... 2,751 2,958 8,114
Accrued interest payable................. 3,349 2,807 5,924
Other.................................... 6,288 4,686 11,912
------- ------- -------
$26,631 $25,921 $51,645
======= ======= =======
</TABLE>
(8) STOCK OPTION AGREEMENTS
Commencing with November 1, 1989, it has been the practice of the board of
directors to grant stock options to certain employees of the Company from time
to time. The Company has also granted options to its non-employee directors from
time to time. The shares purchasable by employees under such stock option
agreements (subject to continued employment with the Company) vest over five
years. The shares purchasable by non-employee directors under such stock option
agreements (subject to continued director service to the Company) vest over a
period of one to three years. Set forth below is certain information regarding
such issuances, exercises and cancellations of options in each of the indicated
fiscal years and nine months ended:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE EXERCISE
SHARES PRICE
--------- ----------------
<S> <C> <C>
BALANCE AT OCTOBER 29, 1995........................... 581,300 $11.22
Fiscal 1996:
Granted............................................. 275,000 $11.48
Exercised........................................... (41,180) 7.06
Cancelled........................................... (21,420) 12.06
---------
BALANCE AT NOVEMBER 3, 1996........................... 793,700 11.40
Fiscal 1997:
Granted............................................. 294,800 $11.48
Exercised........................................... (43,000) 12.99
Cancelled........................................... (28,780) 11.68
---------
BALANCE AT NOVEMBER 2, 1997........................... 1,016,720 11.40
Fiscal 1998:
Granted............................................. 302,800 $19.64
Exercised........................................... (65,760) 12.94
Cancelled........................................... (11,680) 13.13
---------
BALANCE AT NOVEMBER 1, 1998........................... 1,242,080 $13.31
---------
</TABLE>
F-24
<PAGE> 211
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The 1,242,080 options outstanding as of November 1, 1998 had exercise
prices ranging between $10.73 and $24.76, a weighted average exercise price of
$13.31 and a weighted average remaining contract life of 2.68 years. At November
1, 1998, options to purchase 667,476 shares, were exercisable with exercise
prices ranging between $10.73 and $19.02, and a weighted average exercise price
of $11.84.
The Company has elected to continue to follow APB Opinion No. 25: however,
if the Company adopted SFAS No. 123, the Company's net income and earnings per
share for the years ended November 3, 1996, November 2, 1997, and November 1,
1998 and for the nine months ended August 2, 1998 and August 1, 1999 would have
been reduced as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------------------------------------------
NOVEMBER 3, 1996 NOVEMBER 2, 1997 NOVEMBER 1, 1998
---------------------- ---------------------- ----------------------
AS REPORTED PROFORMA AS REPORTED PROFORMA AS REPORTED PROFORMA
----------- -------- ----------- -------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Net income........... $8,710 $8,663 $12,881 $12,638 $19,636 $19,042
Basic earnings per
share.............. 1.08 1.07 1.55 1.52 1.55 1.50
Diluted earnings per
share.............. 1.02 1.02 1.42 1.40 1.50 1.46
</TABLE>
The weighted average fair value of options granted in 1996, 1997, and 1998
was $7.10, $6.59, and $13.58, respectively. The fair value of each option was
determined using the Black-Scholes option valuation model. The key input
variables used in valuing the options were as follows: average risk-free
interest rate based on 5-year Treasury bonds, estimated option terms ranging
from 2 to 6 years, and stock price volatility of 36% for fiscal years 1996 and
1997 and 53% for fiscal year 1998. The Company has no present plans to pay
dividends on its Common Stock. The effect of applying SFAS No. 123 as calculated
above may not be representative of the effects on reported net income for future
years.
(9) SAVINGS PLAN
The Company has a 401(k) savings plan which permits participants to
contribute up to 15 percent of their base compensation (as defined) each
calendar year. The Company will match at least 25 percent of a participant's
contribution up to a maximum of 6 percent of gross pay. The Company's matching
percentage may be adjusted as Company profitability dictates. Employer
contributions were $606,000, $801,000, and $910,000, for the 1996, 1997 and 1998
plan years, respectively. Employer contributions were $502,000 and $684,000, for
the seven months ended August 2, 1998 and August 1, 1999, respectively.
(10) DEFERRED COMPENSATION PLAN
During 1998, the Company established a nonqualified deferred compensation
plan for key employees of the Company. Under the program, participants may elect
to reduce their compensation and to have elective deferrels credited to their
accounts by making an election under the Plan, but no participants may defer
more than 90% of their base and 100% of bonuses. The Company will match 100% of
the first 6% of the participants'
F-25
<PAGE> 212
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
compensation deferral. Vesting in the plan is 100% immediate and the retirement
age under the plan is age 55. A participant terminating employment before
retirement age is entitled to a lump sum payment of all vested amounts. Employer
contributions were $50,200 for fiscal year 1998 and $119,300 for the nine months
ended August 1, 1999.
(11) MANAGEMENT STOCK PURCHASE PLAN
In May 1997, the Company issued 400,000 shares of common stock pursuant to
a Senior Management Stock Purchase Plan at $13.00 per share. The stock was
issued in exchange for an aggregate of $5,200,000 in non-interest bearing, full
recourse promissory notes due May 23, 2000 from the participating managers.
These notes have been recorded as subscriptions receivable and are included in
the shareholders' equity section of the Consolidated Balance Sheet. Payment of
these notes also is secured by the pledge of the 400,000 shares of common stock.
(12) PUBLIC OFFERING OF COMMON STOCK
In March 1998, the Company completed an offering of 4,025,000 shares of its
common stock at a price to the public of $24.00 per share, including 525,000
shares pursuant to the underwriters' exercise of the overallotment option. After
deducting offering costs and commissions, the Company received net proceeds of
approximately $91,418,000. The Company used the proceeds to repay amounts due
under the Second Credit Agreement.
(13) SHAREHOLDER RIGHTS PLAN
On July 10, 1997, the Board of Directors of the Company declared a dividend
of one right to purchase preferred stock ("Right") for each outstanding share of
the Company's Common Stock, par value $0.001 per share ("Common Stock"), to
stockholders of record at the close of business on September 15, 1997 (the
"Record Date").
The Rights have certain anti-takeover effects. The Rights are designed to
protect and maximize the value of the outstanding equity interests in the
Company in the event of an unsolicited attempt by an acquiror to take over the
Company in a manner or on terms not approved by the Board of Directors. The
Rights will cause substantial dilution to any person or group that attempts to
acquire the Company without the approval of the Company's Board of Directors. As
a result, the overall effect of the Rights may be to render more difficult or
discourage any attempt to acquire the Company, even if such acquisition may be
favorable to the interests of the Company's stockholders. Because the Board of
Directors can redeem the Rights or approve a Permitted Offer, the Rights should
not interfere with a merger or other business combination approved by the Board
of Directors of the Company.
The description and terms of the Rights are set forth in a Rights Agreement
dated as of July 10, 1997, as amended on June 13, 1999, as it may from time to
time be further supplemented or amended (the "Rights Agreement"), between the
Company and Harris Trust and Savings Bank, as Rights Agent.
F-26
<PAGE> 213
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(14) FINANCIAL INFORMATION REGARDING GUARANTOR SUBSIDIARIES
Consolidating financial information regarding the Company, guarantor
subsidiaries and non-guarantor subsidiaries as of and for each of the fiscal
years ended November 1, 1998, November 2, 1997, and November 3, 1996 is
presented below for purposes of complying with the reporting requirements of the
guarantor subsidiaries. Separate financial statements and other disclosures
concerning each guarantor subsidiary have not been presented because management
has determined that such information is not material to investors. The guarantor
subsidiaries are wholly-owned subsidiaries of the Company who have fully and
unconditionally guaranteed the Senior Subordinated Discount Notes due 2009
issued in connection with the recapitalization (see Note 17).
CONSOLIDATED BALANCE SHEET
NOVEMBER 1, 1998
<TABLE>
<CAPTION>
NOVEMBER 1, 1998
---------------------------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 742 $ 3,383 $ -- $ 4,125
Accounts receivable, net................. 94,199 7,491 (31,261) 70,429
Inventory, net........................... 69,261 10,387 -- 79,648
Net current deferred tax asset........... 10,325 -- -- 10,325
Prepaid expenses and other............... 8,263 427 -- 8,690
-------- -------- -------- --------
Total current assets................... 182,790 21,688 (31,261) 173,217
Property and equipment..................... 116,125 52,923 -- 169,048
Less: accumulated depreciation........... (28,688) (12,850) -- (41,538)
-------- -------- -------- --------
87,437 40,073 -- 127,510
Investment in subsidiaries................. 22,898 -- (22,898) --
Goodwill, net.............................. 146,135 881 -- 147,016
Other assets, net.......................... 19,072 1,236 -- 20,308
-------- -------- -------- --------
Total assets........................... $458,332 $ 63,878 $(54,159) $468,051
======== ======== ======== ========
</TABLE>
F-27
<PAGE> 214
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NOVEMBER 1, 1998
---------------------------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of other long-term
obligations............................ $ 2,544 $ 14,699 $(14,699) $ 2,544
Accounts payable......................... 30,089 5,745 -- 35,834
Accrued liabilities...................... 23,194 2,727 -- 25,921
-------- -------- -------- --------
Total current liabilities.............. 55,827 23,171 (14,699) 64,299
Long-term debt, net of current
maturities............................... 13,800 -- -- 13,800
10 1/2% Senior subordinated notes.......... 100,000 -- -- 100,000
Other long-term obligations, net of current
maturities............................... 5,339 16,562 (16,562) 5,339
Net non-current deferred tax liability..... 10,457 1,247 -- 11,704
-------- -------- -------- --------
Total liabilities...................... 185,423 40,980 (31,261) 195,142
Commitments and contingencies
Shareholders' equity
Preferred Stock.......................... -- -- -- --
Common Stock............................. 14 -- -- 14
Additional paid-in capital............... 219,268 -- -- 219,268
Retained earnings........................ 64,886 -- -- 64,886
Subscriptions receivable................. (5,200) -- -- (5,200)
Accumulated other comprehensive income... (6,059) -- -- (6,059)
-------- -------- -------- --------
Total shareholders' equity............. 272,909 -- -- 272,909
Net equity of non-guarantor
subsidiaries........................... -- 22,898 (22,898) --
-------- -------- -------- --------
Total liabilities and shareholders'
equity............................... $458,332 $ 63,878 $(54,159) $468,051
======== ======== ======== ========
</TABLE>
CONSOLIDATED BALANCE SHEET
NOVEMBER 2, 1997
<TABLE>
<CAPTION>
NOVEMBER 2, 1997
---------------------------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 526 $ 2,604 $ -- $ 3,130
Accounts receivable, net................. 87,242 7,054 (17,087) 77,209
Inventory, net........................... 74,944 8,240 -- 83,184
Net current deferred tax asset........... 8,691 -- -- 8,691
Prepaid expenses and other............... 1,529 780 -- 2,309
-------- ------- -------- --------
Total current assets................... 172,932 18,678 (17,087) 174,523
Property and equipment..................... 87,044 35,894 -- 122,938
Less: accumulated depreciation........... (21,557) (9,827) -- (31,384)
-------- ------- -------- --------
65,487 26,067 -- 91,554
Investment in subsidiaries................. 21,802 -- (21,802) --
Goodwill, net.............................. 128,658 862 -- 129,520
Other assets, net.......................... 27,169 1,280 -- 28,449
-------- ------- -------- --------
Total assets........................... $416,048 $46,887 $(38,889) $424,046
======== ======= ======== ========
</TABLE>
F-28
<PAGE> 215
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NOVEMBER 2, 1997
---------------------------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt..... $ 12,750 $ -- $ -- $ 12,750
Current maturities of other long-term
obligations............................ 2,953 707 (527) 3,133
Accounts payable......................... 28,375 3,819 -- 32,194
Accrued liabilities...................... 23,733 2,898 -- 26,631
-------- ------- -------- --------
Total current liabilities.............. 67,811 7,424 (527) 74,708
Long-term debt, net of current
maturities............................... 78,550 -- -- 78,550
10 1/2% Senior subordinated notes.......... 100,000 -- -- 100,000
6 3/4% Convertible subordinated
debentures............................... 23,352 -- -- 23,352
Other long-term obligations, net of current
maturities............................... 2,980 16,880 (16,560) 3,300
Net non-current deferred tax liability..... 5,427 781 -- 6,208
-------- ------- -------- --------
Total liabilities...................... 278,120 25,085 (17,087) 286,118
Commitments and contingencies
Shareholders' equity
Preferred Stock.......................... -- -- -- --
Common Stock............................. 9 -- -- 9
Additional paid-in capital............... 103,872 -- -- 103,872
Retained earnings........................ 45,250 -- -- 45,250
Subscriptions receivable................. (5,200) -- -- (5,200)
Accumulated other comprehensive income... (6,003) -- -- (6,003)
-------- ------- -------- --------
Total shareholders' equity............. 137,928 -- -- 137,928
Net equity of non-guarantor
subsidiaries........................... -- 21,802 (21,802) --
-------- ------- -------- --------
Total liabilities and shareholders'
equity............................... $416,048 $46,887 $(38,889) $424,046
======== ======= ======== ========
</TABLE>
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 1, 1998
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 1, 1998
---------------------------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales -- third party................... $459,728 $62,788 $ -- $522,516
Net sales -- intercompany.................. 8,918 17,181 (26,099) --
Cost of sales -- third party............... 337,268 47,071 (2,701) 381,638
Cost of sales -- intercompany.............. 7,903 15,495 (23,398) --
-------- ------- -------- --------
Gross profit............................... 123,475 17,403 -- 140,878
-------- ------- -------- --------
Operating expenses
Marketing and selling.................... 56,770 9,067 -- 65,837
General and administrative............... 24,679 3,894 -- 28,573
-------- ------- -------- --------
81,449 12,961 -- 94,410
-------- ------- -------- --------
Income from operations..................... 42,026 4,442 -- 46,468
Interest (income)/expense.................. 13,465 (45) -- 13,420
Other (income)/expense, net................ (2,435) 1,393 -- (1,042)
-------- ------- -------- --------
Income before income taxes................. 30,996 3,094 -- 34,090
Income taxes............................... 13,308 1,146 -- 14,454
-------- ------- -------- --------
Net income................................. $ 17,688 $ 1,948 $ -- $ 19,636
======== ======= ======== ========
</TABLE>
F-29
<PAGE> 216
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 2, 1997
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 2, 1997
---------------------------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales -- third party................... $463,611 $65,941 $ $529,552
Net sales -- intercompany.................. 5,825 13,552 (19,377) --
Cost of sales -- third party............... 350,714 48,961 (1,984) 397,691
Cost of sales -- intercompany.............. 5,162 12,231 (17,393) --
-------- ------- -------- --------
Gross profit............................... 113,560 18,301 -- 131,861
-------- ------- -------- --------
Operating expenses
Marketing and selling.................... 54,692 7,911 -- 62,603
General and administrative............... 23,695 3,803 -- 27,498
-------- ------- -------- --------
78,387 11,714 -- 90,101
-------- ------- -------- --------
Income from operations..................... 35,173 6,587 -- 41,760
Interest (income)/expense.................. 22,203 (58) -- 22,145
Other (income)/expense, net................ (4,304) 1,553 -- (2,751)
-------- ------- -------- --------
Income before income taxes................. 17,274 5,092 -- 22,366
Income taxes............................... 7,624 1,861 -- 9,485
-------- ------- -------- --------
Net income................................. $ 9,650 $ 3,231 $ -- $ 12,881
======== ======= ======== ========
</TABLE>
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 3, 1996
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 3, 1996
---------------------------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales -- third party................... $332,785 $67,051 $ $399,836
Net sales -- intercompany.................. 2,247 15,701 (17,948) --
Cost of sales -- third party............... 249,303 46,841 (1,980) 294,164
Cost of sales -- intercompany.............. 1,954 14,014 (15,968) --
-------- ------- -------- --------
Gross profit............................... 83,775 21,897 -- 105,672
-------- ------- -------- --------
Operating expenses
Marketing and selling.................... 43,831 7,950 -- 51,781
General and administrative............... 21,781 4,418 -- 26,199
-------- ------- -------- --------
65,612 12,368 -- 77,980
-------- ------- -------- --------
Income from operations..................... 18,163 9,529 -- 27,692
Interest (income)/expense.................. 13,207 (64) -- 13,143
Other (income)/expense, net................ (2,570) 1,987 -- (583)
-------- ------- -------- --------
Income before income taxes................. 7,526 7,606 -- 15,132
Income taxes............................... 3,363 3,059 -- 6,422
-------- ------- -------- --------
Net income................................. $ 4,163 $ 4,547 $ -- $ 8,710
======== ======= ======== ========
</TABLE>
F-30
<PAGE> 217
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENT OF CASH FLOWS
FOR FISCAL YEARS ENDED NOVEMBER 3, 1996, NOVEMBER 2, 1997 AND
NOVEMBER 1, 1998
<TABLE>
<CAPTION>
NOVEMBER 3, 1996 NOVEMBER 2, 1997 NOVEMBER 1, 1998
------------------------- ------------------------- -------------------------
GUARANTOR NON-GUARANTOR GUARANTOR NON-GUARANTOR GUARANTOR NON-GUARANTOR
--------- ------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income......................... $ 4,161 $ 4,549 $ 9,650 $3,231 $ 17,688 $ 1,948
Adjustment to reconcile net income
to net cash provided by operating
activities:
Deferred income tax expense...... 2,693 659 3,724 122 5,118 466
Depreciation and amortization.... 11,099 3,869 13,966 3,529 16,330 3,070
Compensation expense for
outstanding stock options...... 311 -- 471 -- 625 --
Gain on sale of investment in
equity securities.............. -- -- (1,510) -- -- --
Gain on sale of building......... -- -- -- -- (25) --
Changes in current assets and
liabilities, net of effects of
asset acquisitions and
dispositions and business
combinations:
(Increase) decrease in accounts
receivable, net................ (8,458) (335) 11,342 (2,648) 11,117 (437)
(Increase) decrease in inventory,
net............................ (7,220) (2,227) 9,201 1,872 8,204 (2,147)
(Increase) decrease in prepaid
expenses and other............. (2,275) 27 (169) (450) (730) 276
Increase (decrease) in accounts
payable........................ 10,102 197 2,626 (2,603) (3,642) 1,926
(Decrease) increase in accrued
liabilities.................... (16,227) (568) (1,580) (1,197) (4,074) (171)
--------- --------- -------- ------ -------- --------
Net cash provided by (used in)
operating activities............... (5,814) 6,171 47,721 1,856 50,611 4,931
--------- --------- -------- ------ -------- --------
Cash flows from investing
activities:
Purchase of investment
securities....................... (1,620) -- -- -- -- --
Proceeds from sale of investment
securities....................... -- -- 3,130 -- 1,650 --
Proceeds from building sale........ -- -- 500 -- 1,200 --
Proceeds from the sale of Henley
assets........................... 6,000 -- -- -- -- --
Proceeds from product line sale.... -- -- -- -- -- --
Purchase of Sterile Concepts, net
of cash acquired................. (119,461) 785 -- -- --
Purchase of Winfield Medical, net
of cash acquired................. -- -- -- -- (31,267) --
Purchase of glove plant assets and
assumption of liabilities, net... -- -- -- -- (16,096) --
Purchase of Circon, net of cash
acquired......................... -- -- -- -- -- --
Purchase of property and equipment,
net of asset acquisitions and
business combinations............ (6,466) (4,159) (3,632) (3,197) (6,467) (16,974)
--------- --------- -------- ------ -------- --------
Net cash used in investing
activities......................... (121,547) (3,374) (2) (3,197) (50,980) (16,974)
--------- --------- -------- ------ -------- --------
</TABLE>
F-31
<PAGE> 218
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NOVEMBER 3, 1996 NOVEMBER 2, 1997 NOVEMBER 1, 1998
------------------------- ------------------------- -------------------------
GUARANTOR NON-GUARANTOR GUARANTOR NON-GUARANTOR GUARANTOR NON-GUARANTOR
--------- ------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from financing
activities:
Payments on long-term borrowings... $ (73,687) $ (2,380) $ (7,500) -- $(81,000) --
Proceeds from long-term
borrowings....................... 92,380 -- -- -- -- --
Net borrowing (payments) on
revolving line of credit......... 35,290 -- (29,790) -- 3,500 --
(Decrease) increase in other long-
term obligations and capital
lease obligations................ 4,580 -- (4,653) $ 500 (17,817) $ 13,674
Net proceeds from secondary stock
offering....................... -- -- -- -- 91,418 --
Net proceeds from the issuance of
10 1/2% Senior subordinated
notes............................ 97,000 -- -- -- -- --
Payments on Sterile Concepts
debt............................. (34,247) -- -- -- -- --
Payment of debt financing costs.... -- -- -- -- -- --
Increase (decrease) in bank
overdraft........................ 6,091 -- (7,893) -- 2,843 --
Other, net......................... 559 (102) 529 -- 753 --
--------- --------- -------- ------ -------- --------
Net cash provided by (used in)
financing activities 127,966 (2,482) (49,307) 500 (303) 13,674
--------- --------- -------- ------ -------- --------
Effect of foreign currency
translation adjustment -- (44) 280 (671) 888 (852)
--------- --------- -------- ------ -------- --------
Net increase (decrease) in cash and
cash equivalents 605 271 (1,308) (1,512) 216 779
Cash and cash equivalents at
beginning of year 1,229 3,845 5,950 4,116 526 2,604
--------- --------- -------- ------ -------- --------
Cash and cash equivalents at end of
year $ 1,834 $ 4,116 $ 4,642 $2,604 $ 742 $ 3,383
========= ========= ======== ====== ======== ========
</TABLE>
F-32
<PAGE> 219
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(15) QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
YEAR ENDED NOVEMBER 2, 1997
Net Sales............................. $133,401 $136,042 $128,654 $131,455
Gross Profit.......................... 32,236 33,439 32,489 33,697
Net Income............................ 3,459 2,717 3,192 3,513
Basic earnings per share.............. 0.43 0.33 0.38 0.41
Diluted earnings per share............ 0.39 0.31 0.34 0.37
YEAR ENDED NOVEMBER 1, 1998
Net Sales............................. $128,003 $132,958 $128,057 $133,498
Gross Profit.......................... 33,061 34,742 35,324 37,751
Net Income............................ 3,751 4,719 5,444 5,722
Basic earnings per share.............. 0.38 0.38 0.38 0.40
Diluted earnings per share............ 0.37 0.37 0.37 0.39
NINE MONTHS ENDED AUGUST 1, 1999
Net Sales............................. $136,126 $175,963 $173,278
Gross Profit.......................... 41,561 60,647 58,832
Net Income............................ 3,876 6,067 5,910
Basic earnings per share.............. 0.27 0.43 0.41
Diluted earnings per share............ 0.26 0.42 0.41
</TABLE>
(16) TRANSITION EXPENSES (UNAUDITED)
Transition expenses for the nine months ended August 1, 1999 represent
expenses incurred in connection with the Company's sales force restructuring and
the acquisition and integration of Circon with the Company and include the
following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
AUGUST 1, 1999
-----------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C>
Severance............................... $1,243
Training................................ 950
Other transition expenses............... 1,178
------
$3,371
======
</TABLE>
Other transition expenses include bonuses and professional fees incurred as
a result of the acquisition of Circon.
F-33
<PAGE> 220
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(17) RECAPITALIZATION (UNAUDITED)
On November 12, 1999, the Company completed a recapitalization whereby each
outstanding share of Maxxim, except for a portion of the shares held by certain
senior executive officers and certain other current shareholders of Maxxim and
shares as to which holders have perfected appraisal rights, were converted into
the right to receive $26.00 per share in cash. In connection with the merger,
the existing debt of the Company was refinanced, with the Company making a
consent solicitation and tender offer for all of its outstanding 10 1/2% Senior
Subordinated Notes, due 2006 (see note 3). The recapitalization required total
funding of approximately $799,600,000.
F-34
<PAGE> 221
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation has the power to indemnify its officers, directors, employees and
agents (or persons serving in such positions in another entity at the request of
the corporation) against expenses, including attorneys' fees, judgments, fines
or settlement amounts actually and reasonably incurred by them in connection
with the defense of any action by reason of being or having been directors or
officers, if such person shall have acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation (and, with respect to any criminal action, had no reasonable cause
to believe the person's conduct was unlawful), except that if such action shall
be by or in the right of the corporation, no such indemnification shall be
provided as to any claim, issue or matter as to which such person shall have
been judged to have been liable to the corporation unless and to the extent that
the Court of Chancery of the State of Delaware, or another court in which the
suit was brought, shall determine upon application that, in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity. The Registrant's Certificate of Incorporation and Bylaws provide that
the Registrant will indemnify its officers and directors to the fullest extent
permitted by Delaware law. In addition, the Registrant's Bylaws require it to
pay the expenses incurred by its officers, directors, employees and agents (or
persons serving in such positions in another entity at the request of the
corporation) in defending a pending or threatened civil or criminal action, suit
or proceeding in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such persons to
repay such amount if it shall ultimately be determined that he or she is not
entitled to indemnification by the Registrant.
As permitted by Section 102 of the DGCL, the Registrant's Certificate of
Incorporation provides that no director shall be liable to the Registrant or its
stockholders for monetary damages for any breach of fiduciary duty as a director
other than (i) for breaches of the director's duty of loyalty to the Registrant
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) for the
unlawful payment of dividends or unlawful stock purchases or redemptions under
Section 174 of the DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<C> <C> <S>
3.1 -- Certificate of Incorporation of the Registrant.
3.2 -- By-Laws of the Registrant.
3.3 -- Certificate of Incorporation of Maxxim Medical, Inc., a
Texas corporation
3.4 -- By-Laws of Maxxim Medical, Inc., a Texas corporation
3.5 -- Certificate of Incorporation of Maxxim Medical, Inc., a
Delaware corporation
3.6 -- By-Laws of Maxxim Medical, Inc., a Delaware corporation
3.7 -- Certificate of Incorporation of Maxxim Investment
Management, Inc.
3.8 -- By-Laws of Maxxim Investment Management, Inc.
</TABLE>
II-1
<PAGE> 222
<TABLE>
<S> <C> <C>
3.9 -- Certificate of Incorporation of Fabritek La Romana, Inc.
3.10 -- By-Laws of Fabritek La Romana, Inc.
4.1 -- Indenture, dated as of November 12, 1999, among the Registrant, the Guarantors (as defined
therein) and the Bank of New York, as Trustee.
4.2 -- Purchase Agreement, dated as of November 12, 1999, by and among the Registrant, the
Guarantors and the Purchasers (as defined therein).
4.3 -- Warrant Agreement, dated as of November 12, 1999, among Maxxim Medical, Inc., a Texas
corporation, and the Purchasers (as defined therein).
4.4 -- Exchange and Registration Rights Agreement, dated as of November 12, 1999, by and among the
Registrant and the Purchasers (as defined therein).
4.5 -- Indenture, dated as of November 12, 1999, by and between Maxxim Medical, Inc., a Texas
corporation, and Wilmington Trust Company, as Trustee.
4.6 -- Purchase Agreement, dated as of November 12, 1999, by and among Maxxim Medical Inc., a
Texas corporation, and GS Mezzanine Partners, L.P. and GS Mezzanine Partners Offshore, L.P.
4.7 -- Warrant Agreement, dated as of November 12, 1999, among Maxxim Medical Inc., a Texas
corporation, and GS Mezzanine Partners, L.P. and GS Mezzanine Partners Offshore, L.P.
4.8 -- Exchange and Registration Rights Agreement, dated as of November 12, 1999, by and among
Maxxim Medical Inc., a Texas corporation, and GS Mezzanine Partners, L.P. and GS Mezzanine
Partners Offshore, L.P.
*5 -- Opinion of counsel (including consent).
10.1 -- Credit Agreement, dated as of November 12, 1999, by and among the Registrant, Maxxim
Medical, Inc., a Texas corporation, The Chase Manhattan Bank, Bankers Trust Company,
Merrill Lynch Capital Corporation, Canadian Imperial Bank of Commerce, Credit Suisse First
Boston and the financial institutions party thereto.
10.2 -- Stockholders' Agreement, dated as of November 12, 1999, by and among Maxxim Medical, Inc.,
a Texas corporation, and the shareholders listed on the signature pages thereto.
*10.3 -- Employment Agreement, dated as of March 12, 1999, by and among the Registrant, Maxxim
Medical, Inc., a Texas corporation, and Kenneth W. Davidson.
*10.4 -- Employment Agreement, dated as of March 12, 1999, by and among the Registrant, Maxxim
Medical, Inc., a Texas corporation, and Peter M Graham.
*10.5 -- Employment Agreement, dated as of April 19, 1999, by and among the Registrant, Maxxim
Medical, Inc., a Texas corporation, and Alan S. Blazei.
*10.6 -- Employment Agreement, dated as of April 19, 1999, by and among the Registrant, Maxxim
Medical, Inc., a Texas corporation, and Jack F. Cahill.
10.7 -- Maxxim Medical, Inc., a Texas corporation, 1999 Stock Incentive Plan.
10.8 -- Form of Vested Stock Option Agreement.
10.9 -- Form of Time Accelerated Stock Option Agreement.
10.10 -- Form of Time Vesting Stock Option Agreement.
12 -- Statement re: computation of ratios.
21 -- Subsidiaries of the Registrant.
</TABLE>
II-2
<PAGE> 223
<TABLE>
<S> <C> <C>
23.1 -- Consent of KPMG LLP.
*23.2 -- Consent of counsel (included in Exhibit No. 5).
24 -- Powers of Attorney. A power of attorney, pursuant to which amendments to this Registration
Statement may be filed, is included in the signature pages contained in Part II.
25 -- Statement of Eligibility and Qualification of Trustee on Form T-1 of the Bank of New York
under the Trust Indenture Act of 1939.
27 -- Financial Data Schedule (for SEC use only).
*99.1 -- Form of Letter of Transmittal for the Senior Subordinated Discount Notes due 2009.
*99.2 -- Form of Notice of Guaranteed Delivery.
*99.3 -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
*99.4 -- Form of Institutions Letter
*99.5 -- Form of Client Letter
</TABLE>
- -------------------------
* To be filed by amendment.
(b) Financial Statement Schedule.
Schedule II -- Valuation and Qualifying Account and Allowances
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable or information
required is included in the consolidated financial statements and, therefore,
have been omitted.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the
II-3
<PAGE> 224
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change in such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has 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 Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 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 the documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
(d) The undersigned Registrant 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> 225
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Clearwater, State of
Florida on December 15, 1999.
MAXXIM MEDICAL, INC.
(a Texas corporation)
By: /s/ KENNETH W. DAVIDSON
-----------------------------------
Kenneth W. Davidson
Chairman of the Board,
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kenneth W. Davidson and Alan S. Blazei, and each
of them, his attorney-in-fact with power of substitution for him in any and all
capacities, to sign any amendments, supplements, subsequent registration
statements relating to the offering to which this registration statement
relates, or other instruments he deems necessary or appropriate, and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact or his substitute may 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 by the following persons in the
capacities indicated on December 15, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ KENNETH W. DAVIDSON Chairman of the Board, President and
- --------------------------------------------------- Chief Executive Officer
Kenneth W. Davidson
/s/ ALAN S. BLAZEI Executive Vice President, Controller
- --------------------------------------------------- and Treasurer (principal financial
Alan S. Blazei officer)
/s/ ERNEST J. HENLEY, PH.D Director
- ---------------------------------------------------
Ernest J. Henley, Ph.D
/s/ SAUL A. FOX Director
- ---------------------------------------------------
Saul A. Fox
/s/ W. DEXTER PAINE, III Director
- ---------------------------------------------------
W. Dexter Paine, III
/s/ JASON B. HURWITZ Director
- ---------------------------------------------------
Jason B. Hurwitz
</TABLE>
II-5
<PAGE> 226
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Clearwater, State of
Florida on December 15, 1999.
MAXXIM MEDICAL GROUP, INC.
By: /s/ KENNETH W. DAVIDSON
-----------------------------------
Kenneth W. Davidson
Chairman of the Board, President,
Chief Executive Officer, Treasurer
and Secretary
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kenneth W. Davidson and Alan S. Blazei, and each
of them, his attorney-in-fact with power of substitution for him in any and all
capacities, to sign any amendments, supplements, subsequent registration
statements relating to the offering to which this registration statement
relates, or other instruments he deems necessary or appropriate, and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact or his substitute may 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 by the following persons in the
capacities indicated on December 15, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ KENNETH W. DAVIDSON Chairman of the Board, President,
- --------------------------------------------------- Chief Executive Officer, Treasurer
Kenneth W. Davidson and Secretary
/s/ ALAN S. BLAZEI Vice President, Chief Financial
- --------------------------------------------------- Officer and Assistant Treasurer
Alan S. Blazei (principal accounting officer)
/s/ ERNEST J. HENLEY, PH.D Director
- ---------------------------------------------------
Ernest J. Henley, Ph.D
/s/ SAUL A. FOX Director
- ---------------------------------------------------
Saul A. Fox
/s/ W. DEXTER PAINE, III Director
- ---------------------------------------------------
W. Dexter Paine, III
/s/ JASON B. HURWITZ Director
- ---------------------------------------------------
Jason B. Hurwitz
</TABLE>
II-6
<PAGE> 227
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Clearwater, State of
Florida on December 15, 1999.
MAXXIM MEDICAL, INC.
(a Delaware corporation)
By: /s/ KENNETH W. DAVIDSON
-----------------------------------
Kenneth W. Davidson
President, Chief Executive Officer
and Secretary
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kenneth W. Davidson and Alan S. Blazei, and each
of them, his attorney-in-fact with power of substitution for him in any and all
capacities, to sign any amendments, supplements, subsequent registration
statements relating to the offering to which this registration statement
relates, or other instruments he deems necessary or appropriate, and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact or his substitute may 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 by the following persons in the
capacities indicated on December 15, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ KENNETH W. DAVIDSON President, Chief Executive Officer
- --------------------------------------------------- and Secretary
Kenneth W. Davidson
/s/ ALAN S. BLAZEI Executive Vice President, Treasurer
- --------------------------------------------------- and Controller (principal financial
Alan S. Blazei officer)
</TABLE>
II-7
<PAGE> 228
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Clearwater, State of
Florida on December 15, 1999.
MAXXIM INVESTMENT MANAGEMENT, INC.
By: /s/ PETER M. GRAHAM
-----------------------------------
Peter M. Graham
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Peter M. Graham and Alan S. Blazei, and each of
them, his attorney-in-fact with power of substitution for him in any and all
capacities, to sign any amendments, supplements, subsequent registration
statements relating to the offering to which this registration statement
relates, or other instruments he deems necessary or appropriate, and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact or his substitute may 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 by the following persons in the
capacities indicated on December 15, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ PETER M. GRAHAM President, Chief Executive Officer
- --------------------------------------------------- and Director
Peter M. Graham
/s/ ALAN S. BLAZEI Treasurer and Director (principal
- --------------------------------------------------- accounting officer and principal
Alan S. Blazei financial officer)
Director
- ---------------------------------------------------
Janice George
</TABLE>
II-8
<PAGE> 229
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Clearwater, State of
Florida on December 15, 1999.
FABRITEK LA ROMANA, INC.
By: /s/ KENNETH W. DAVIDSON
-----------------------------------
Kenneth W. Davidson
President, Secretary and Treasurer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kenneth W. Davidson and Alan S. Blazei, and each
of them, his attorney-in-fact with power of substitution for him in any and all
capacities, to sign any amendments, supplements, subsequent registration
statements relating to the offering to which this registration statement
relates, or other instruments he deems necessary or appropriate, and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact or his substitute may 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 by the following persons in the
capacities indicated on December 15, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ KENNETH W. DAVIDSON President, Secretary, Treasurer and
- -------------------------------------- Director (principal executive
Kenneth W. Davidson officer)
/s/ ALAN S. BLAZEI Vice President (principal accounting
- -------------------------------------- officer and principal financial
Alan S. Blazei officer)
</TABLE>
II-9
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
MAXXIM MEDICAL GROUP, INC.
* * * * * *
FIRST. The name of the corporation is Maxxim Medical Group, Inc. (the
"Corporation").
SECOND. The address of the registered office of the Corporation in the
State of Delaware is 9 East Loockerman Street, in the City of Dover, Kent
County, Delaware 19901. The name of its registered agent at such address is
National Registered Agents, Inc.
THIRD. The nature of the business or purposes to be conducted or
promoted by 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 (the "DGCL").
FOURTH. The total number of shares of capital stock which the
Corporation shall have authority to issue is 1,000 shares of common stock with
a par value of $0.01 per share ("Common Stock").
FIFTH. The Corporation is to have perpetual existence.
SIXTH. In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware:
A. The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal the By-Laws of the Corporation.
B. Elections of directors need not be by written ballot unless
the By-Laws of the Corporation shall so provide.
C. The books of the Corporation may be kept at such place within
or without the State of Delaware as the By-Laws of the Corporation may provide
or as may be designated from time to time by the Board of Directors of the
Corporation.
D. The number of shares of authorized Common Stock of the
Corporation may be increased or decreased (but not below the number then
outstanding) by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the Corporation entitled to vote
thereon, voting together as a single class, notwithstanding the provisions of
Section 242(b)(2) of the DGCL.
<PAGE> 2
SEVENTH. The Corporation eliminates the personal liability of each
member of its Board of Directors to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided, however,
that, to the extent provided by applicable law, the foregoing shall not
eliminate the liability of a director (i) for any breach of such director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of Title 8 of the DGCL or
(iv) for any transaction from which such director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
EIGHTH. The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation.
NINTH. The Corporation shall initially have one (1) director to hold
office until the first annual meeting of the shareholder and until his
successors have been elected and qualified, or until his earlier resignation,
removal from office or death. The number of directors may be either increased
or decreased from time to time in accordance with the Bylaws of the
Corporation. The name and address of the initial director of the Corporation
are:
<TABLE>
<CAPTION>
Name Address
---- --------
<S> <C>
Kenneth W. Davidson 10300 49th Street North
Clearwater, Florida 33762
</TABLE>
TENTH. The name and mailing address of the sole incorporator is as
follows:
Paul R. Lynch, Esquire
101 East Kennedy Blvd., Suite 2800
Tampa, Florida 33602
ELEVENTH. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the DGCL or on the
2
<PAGE> 3
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the DGCL, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
TWELFTH. The Corporation shall, to the full extent permitted by Section
145 of the DGCL, as amended from time to time, indemnify all persons whom it
may indemnify pursuant thereto. The indemnification provided by this Section 12
shall not limit or exclude any rights, indemnities or limitations of liability
to which any person may be entitled, whether as a matter of law, under the
By-laws of the Corporation, by agreement, vote of the stockholders or
disinterested directors of the Corporation or otherwise.
I, THE UNDERSIGNED, being the sole incorporator hereinabove named, for
the purpose of forming a corporation pursuant to the DGCL, do make this
certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand
this 20th day of August, 1999.
/s/ Paul R. Lynch
-----------------
Paul R. Lynch
Incorporator
3
<PAGE> 1
Exhibit 3.2
BY-LAWS OF
MAXXIM MEDICAL GROUP, INC.
A DELAWARE CORPORATION
August 23, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I MEETINGS OF STOCKHOLDERS...................................................1
Section 1. Place of Meetings......................................................1
Section 2. Annual Meeting.........................................................1
Section 3. Special Meetings.......................................................1
Section 4. Notice of Meetings.....................................................1
Section 5. Voting List............................................................1
Section 6. Quorum.................................................................2
Section 7. Adjournments...........................................................2
Section 8. Action at Meetings.....................................................2
Section 9. Voting and Proxies.....................................................2
Section 10. Action Without Meeting.................................................3
ARTICLE II DIRECTORS.................................................................3
Section 1. Number, Election, Tenure and Qualification.............................3
Section 2. Enlargement............................................................3
Section 3. Vacancies..............................................................3
Section 4. Resignation and Removal................................................4
Section 5. General Powers.........................................................4
Section 6. Chairman of the Board..................................................4
Section 7. Place of Meetings......................................................4
Section 8. Regular Meetings.......................................................4
Section 9. Special Meetings.......................................................4
Section 10. Quorum, Action at Meeting, Adjournments................................4
Section 11. Action by Consent......................................................5
Section 12. Telephonic Meetings....................................................5
Section 13. Committees.............................................................5
Section 14. Compensation...........................................................5
ARTICLE III OFFICERS.................................................................6
Section 1. Enumeration............................................................6
Section 2. Election...............................................................6
Section 3. Tenure.................................................................6
Section 4. President..............................................................6
Section 5. Vice Presidents........................................................7
Section 6. Secretary..............................................................7
Section 7. Assistant Secretaries..................................................7
Section 8. Treasurer..............................................................7
Section 9. Assistant Treasurers...................................................8
Section 10. Bond...................................................................8
ARTICLE IV NOTICES...................................................................8
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1. Delivery...............................................................8
Section 2. Waiver of Notice.......................................................9
ARTICLE V INDEMNIFICATION............................................................9
Section 1. Actions other than by or in the Right of the Corporation...............9
Section 2. Actions by or in the Right of the Corporation..........................9
Section 3. Success on the Merits..................................................9
Section 4. Specific Authorization................................................10
Section 5. Advance Payment.......................................................10
Section 6. Non-Exclusivity.......................................................10
Section 7. Insurance.............................................................10
Section 8. Continuation of Indemnification and Advancement of Expenses...........10
Section 9. Severability..........................................................11
Section 10. Intent of Article.....................................................11
ARTICLE VI CAPITAL STOCK............................................................11
Section 1. Certificates of Stock.................................................11
Section 2. Lost Certificates.....................................................11
Section 3. Transfer of Stock.....................................................12
Section 4. Record Date...........................................................12
Section 5. Registered Stockholders...............................................12
ARTICLE VII CERTAIN TRANSACTIONS..................................................13
Section 1. Transactions with Interested Parties..................................13
Section 2. Quorum................................................................13
ARTICLE VIII GENERAL PROVISIONS.....................................................13
Section 1. Dividends.............................................................13
Section 2. Reserves..............................................................13
Section 3. Checks................................................................13
Section 4. Fiscal Year...........................................................14
Section 5. Seal..................................................................14
ARTICLE IX AMENDMENTS...............................................................14
Register of Amendments to the By-Laws................................................15
</TABLE>
ii
<PAGE> 4
* * * * *
MAXXIM MEDICAL GROUP, INC.
BY-LAWS
* * * * *
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders
shall be held at such place within or without the State of Delaware as may be
fixed from time to time by the Board of Directors or the Chief Executive
Officer, or if not so designated, at the registered office of the Corporation.
Section 2. Annual Meeting. Annual meetings of stockholders shall
be held on the third Thursday of April in each year if not a legal holiday, and
if a legal holiday, then on the next secular day following, at 10:00 a.m., or
at such other date and time as shall be designated from time to time by the
Board of Directors or the Chief Executive Officer, at which meeting the
stockholders shall elect by a plurality vote a Board of Directors and shall
transact such other business as may properly be brought before the meeting. If
no annual meeting is held in accordance with the foregoing provisions, the
Board of Directors shall cause the meeting to be held as soon thereafter as
convenient, which meeting shall be designated a special meeting in lieu of
annual meeting.
Section 3. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes, may, unless otherwise prescribed by
statute or by the Certificate of Incorporation, be called by the Board of
Directors or the Chief Executive Officer and shall be called by the Chief
Executive Officer or Secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of stockholders owning forty
percent (40%) of the entire capital stock of the Corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at any special meeting
shall be limited to matters relating to the purpose or purposes stated in the
notice of meeting.
Section 4. Notice of Meetings. Except as otherwise provided by
law, written notice of each meeting of stockholders, annual or special, stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be given not
less than ten or more than sixty (60) days before the date of the meeting, to
each stockholder entitled to vote at such meeting.
Section 5. Voting List. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, 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 shall be open to
1
<PAGE> 5
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city or town 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. The list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. The holders of a majority of the stock issued
and outstanding and entitled to vote 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, the
Certificate of Incorporation or these By-Laws. Where a separate vote by a class
or classes is required, a majority of the outstanding shares of such class or
classes, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter. If no quorum
shall be present or represented at any meeting of stockholders, such meeting
may be adjourned in accordance with Section 7 hereof, until a quorum shall be
present or represented.
Section 7. Adjournments. Any meeting of stockholders may be
adjourned from time to time to any other time and to any other place at which a
meeting of stockholders may be held under these By-Laws, which time and place
shall be announced at the meeting, by a majority of the stockholders present in
person or represented by proxy at the meeting and entitled to vote (whether or
not a quorum is present), or, if no stockholder is present or represented by
proxy, by any officer entitled to preside at or to act as Secretary of such
meeting, without notice other than announcement at the meeting. At such
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting, provided that a quorum either was present
at the original meeting or is present at the adjourned meeting. If the
adjournment is for more than thirty 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 8. Action at Meetings. When a quorum is present at any
meeting, the affirmative vote of the holders of a majority of the stock present
in person or represented by proxy, entitled to vote and voting on the matter
(or where a separate vote by a class or classes is required, the affirmative
vote of the majority of shares of such class or classes present in person or
represented by proxy at the meeting) shall decide any matter (other than the
election of Directors) brought before such meeting, unless the matter is one
upon which by express provision of law, the Certificate of Incorporation or
these By-Laws, a different vote is required, in which case such express
provision shall govern and control the decision of such matter. The stock of
holders who abstain from voting on any matter shall be deemed not to have been
voted on such matter. Directors shall be elected by a plurality of the votes of
the shares present in person or represented by proxy at the meeting, entitled
to vote and voting on the election of Directors.
Section 9. Voting and Proxies. Unless otherwise provided in the
Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders
2
<PAGE> 6
be entitled to one vote for each share of capital stock having voting power
held of record by such stockholder. Each stockholder entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action
in writing without a meeting, may authorize another person or persons to act
for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period.
Section 10. Action Without Meeting. Any action required to be
taken at any annual or special meeting of stockholders, 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 or
consents in writing, setting forth the action so taken, shall be (1) signed and
dated by the holders of outstanding stock 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 and
(2) delivered to the Corporation within sixty days of the earliest dated
consent by delivery to its registered office in the State of Delaware (in which
case delivery shall be by hand or by certified or registered mail, return
receipt requested), its principal place of business, or an officer or agent of
the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. 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 II
DIRECTORS
Section 1. Number, Election, Tenure and Qualification. The
number of Directors which shall constitute the whole board shall be not less
than one or more than seven. Within such limit, the number of Directors shall
be determined by resolution of the Board of Directors or by the stockholders at
the annual meeting or at any special meeting of stockholders. The Directors
shall be elected at the annual meeting or at any special meeting of the
stockholders, except as provided in Section 3 of this Article, and each
director elected shall hold office until his successor is elected and
qualified, unless sooner displaced. Directors need not be stockholders.
Section 2. Enlargement. The number of the Board of Directors may
be increased at any time by vote of a majority of the Directors then in office.
Section 3. Vacancies. 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, unless sooner displaced. If there are no Directors in office, then an
election of Directors may be held in the manner provided by statute. In the
event of a vacancy in the Board of Directors, the remaining Directors, except
as otherwise provided by law or these By-Laws, may exercise the powers of the
full board until the vacancy is filled.
3
<PAGE> 7
Section 4. Resignation and Removal. Any Director may resign at
any time upon written notice to the Corporation at its principal place of
business or to the Chief Executive Officer or Secretary. Such resignation shall
be effective upon receipt unless it is specified to be effective at some other
time or upon the happening of some other event. Any Director or the entire
Board of Directors may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of Directors,
unless otherwise specified by law or the Certificate of Incorporation.
Section 5. 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 6. Chairman of the Board. If the Board of Directors
appoints a chairman of the board, he shall, when present, preside at all
meetings of the stockholders and the Board of Directors. He shall perform such
duties and possess such powers as are customarily vested in the office of the
chairman of the board or as may be vested in him by the Board of Directors.
Section 7. Place of Meetings. The Board of Directors may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 8. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the board; provided that any director who is
absent when such a determination is made shall be given prompt notice of such
determination. A regular meeting of the Board of Directors may be held without
notice immediately after and at the same place as the annual meeting of
stockholders.
Section 9. Special Meetings. Special meetings of the board may
be called by the Chief Executive Officer, Secretary, or on the written request
of two (2) or more Directors, or by one director in the event that there is
only one director in office. Two (2) days' notice to each director, either
personally or by telegram, cable, telecopy, commercial delivery service, telex
or similar means sent to his business or home address, or three (3) days'
notice by written notice deposited in the mail, shall be given to each director
by the Secretary or by the officer or one of the Directors calling the meeting.
A notice or waiver of notice of a meeting of the Board of Directors need not
specify the purposes of the meeting.
Section 10. Quorum, Action at Meeting, Adjournments. At all
meetings of the board a majority of Directors then in office, but in no event
less than one third of the entire board, shall constitute a quorum for the
transaction of business and the act of 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 law or by the
Certificate of Incorporation. For purposes of this section, the term "entire
board" shall mean the number of Directors last fixed by the stockholders or
Directors, as the case may be, in accordance with law and these By-Laws;
provided, however, that if
4
<PAGE> 8
less than all the number so fixed of Directors were elected, the "entire board"
shall mean the greatest number of Directors so elected to hold office at any
one time pursuant to such authorization. If a quorum shall not be present at
any meeting of the Board of Directors, a majority of 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 11. Action by Consent. 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 thereof 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 12. Telephonic Meetings. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, members of the Board of
Directors or of any committee thereof may participate in a meeting of the Board
of Directors or of any committee, as the case may be, 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 13. Committees. The Board of Directors may designate one
or more committees, each committee to consist of one or more of the Directors
of the Corporation. The board may designate one or more Directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. 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 (a) adopting,
amending or repealing the By-Laws of the Corporation or any of them or (b)
approving or adopting, or recommending to the stockholders any action or matter
expressly required by law to be submitted to stockholders for approval. 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 make such reports to the Board
of Directors as the Board of Directors may request. Except as the Board of
Directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the Directors or in such
rules, its business shall be conducted as nearly as possible in the same manner
as is provided in these By-Laws for the conduct of its business by the Board of
Directors.
Section 14. Compensation. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, the Board of Directors shall
have the authority to fix from time to time the compensation of Directors. The
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and the performance of their responsibilities as
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors and/or a stated salary as Director.
5
<PAGE> 9
No such payment shall preclude any Director from serving the Corporation or its
parent or subsidiary corporations in any other capacity and receiving
compensation therefor. The Board of Directors may also allow compensation for
members of special or standing committees for service on such committees.
ARTICLE III
OFFICERS
Section 1. Enumeration. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, a Secretary and a
Treasurer and such other officers with such titles, terms of office and duties
as the Board of Directors may from time to time determine, including a Chairman
of the Board, one or more Vice-Presidents, and one or more Assistant
Secretaries and Assistant Treasurers. If authorized by resolution of the Board
of Directors, the Chief Executive Officer may be empowered to appoint from time
to time Assistant Secretaries and Assistant Treasurers. Any number of 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 stockholders shall choose a President, a Secretary
and a Treasurer. Other officers may be appointed by the Board of Directors at
such meeting, at any other meeting, or by written consent.
Section 3. Tenure. The officers of the Corporation shall hold
office until their successors are chosen and qualify, unless a different term
is specified in the vote choosing or appointing him, or until his earlier
death, resignation or removal. Any officer elected or appointed by the Board of
Directors or by the Chief Executive Officer may be removed at any time, with or
without cause, by the affirmative vote of a majority of the Board of Directors
or a committee duly authorized to do so, except that any officer appointed by
the Chief Executive Officer may also be removed at any time, with or without
cause, by the Chief Executive Officer. Any vacancy occurring in any office of
the Corporation may be filled by the Board of Directors, at its discretion. Any
officer may resign by delivering his written resignation to the Corporation at
its principal place of business or to the Chief Executive Officer or the
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some
other event.
Section 4. President. The President shall be the Chief Operating
Officer of the corporation. He shall also be the Chief Executive Officer unless
the Board of Directors otherwise provides. If no Chief Executive Officer shall
have been appointed by the Board of Directors, all references herein to the
"Chief Executive Officer" shall be to the President. The President shall,
unless the Board of Directors provides otherwise in a specific instance or
generally, preside at all meetings of the stockholders and the Board of
Directors, have general and active management of the business of the
6
<PAGE> 10
Corporation and see that all orders, and resolutions of the Board of Directors
are carried into effect. The President shall execute bonds, mortgages, and
other contracts requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or agent of the Corporation.
Section 5. Vice Presidents. In the absence of the President or
in the event of his or her inability or refusal to act, the Vice President, or
if there be more than one Vice President, the Vice Presidents in the order
designated by the Board of Directors or the Chief Executive Officer (or in the
absence of any designation, then in the order determined by their tenure in
office) 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. The Vice Presidents shall perform such other duties and have such
other powers as the Board of Directors or the Chief Executive Officer may from
time to time prescribe.
Section 6. Secretary. The Secretary shall have such powers and
perform such duties as are incident to the office of Secretary. The Secretary
shall maintain a stock ledger and prepare lists of stockholders and their
addresses as required and shall be the custodian of corporate records. The
Secretary shall attend all meetings of the Board of Directors and all meetings
of the stockholders and record all the proceedings of the meetings of the
Corporation and of the Board of Directors in a book to be kept for that purpose
and shall 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 from time to time prescribed by the Board of
Directors or Chief Executive Officer, under whose supervision the Secretary
shall be. The Secretary shall have custody of the corporate seal of the
Corporation and the Secretary, 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 or her 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
or her signature.
Section 7. Assistant Secretaries. The assistant Secretary, or if
there be more than one, the assistant secretaries in the order determined by
the Board of Directors, the Chief Executive Officer or the Secretary (or if
there be no such determination, then in the order determined by their tenure in
office), shall, in the absence of the Secretary or in the event of his or her
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors, the Chief Executive Officer or the Secretary may from time
to time prescribe. In the absence of the Secretary or any assistant Secretary
at any meeting of stockholders or Directors, the person presiding at the
meeting shall designate a temporary or acting Secretary to keep a record of the
meeting.
Section 8. Treasurer. The Treasurer shall perform such duties
and shall have such powers as may be assigned to him or her by the Board of
Directors or
7
<PAGE> 11
the Chief Executive Officer. In addition, the Treasurer shall perform such
duties and have such powers as are incident to the office of Treasurer. The
Treasurer 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. 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 Chief Executive
Officer and the Board of Directors, when the Chief Executive Officer or Board
of Directors so requires, an account of all his or her transactions as
Treasurer and of the financial condition of the Corporation.
Section 9. Assistant Treasurers. The assistant Treasurer, or if
there shall be more than one, the assistant Treasurers in the order determined
by the Board of Directors, the Chief Executive Officer or the Treasurer (or if
there be no such determination, then in the order determined by their tenure in
office), shall, in the absence of the Treasurer or in the event of his or her
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors, the Chief Executive Officer or the Treasurer may from time
to time prescribe.
Section 10. Bond. If required by the Board of Directors, any
officer shall give the Corporation a bond in such sum and with such surety or
sureties and upon such terms and conditions as shall be satisfactory to the
Board of Directors, including without limitation a bond for the faithful
performance of the duties of his office and for the restoration to the
Corporation of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control and belonging to the
Corporation.
ARTICLE IV
NOTICES
Section 1. Delivery. Whenever, under the provisions of law, or
of the Certificate of Incorporation or these By-Laws, written notice is
required to be given to any Director or stockholder, such notice may be given
by mail, addressed to such Director or stockholder, at his address as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Unless written notice by mail is required
by law, written notice may also be given by telegram, cable, telecopy,
commercial delivery service, telex or similar means, addressed to such Director
or stockholder at his address as it appears on the records of the Corporation,
in which case such notice shall be deemed to be given when delivered into the
control of the persons charged with effecting such transmission, the
transmission charge to be paid by the Corporation or the person sending such
notice and not by the addressee. Oral notice or other in-hand delivery (in
person or by telephone) shall be deemed given at the time it is actually given.
8
<PAGE> 12
Section 2. Waiver of Notice. Whenever any notice is required to
be given under the provisions of law or of the Certificate of Incorporation or
of these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
INDEMNIFICATION
Section 1. Actions other than by or in the Right of the
Corporation. 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, officer, employee or agent 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 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 proceedings, 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. Actions by or in the Right of the Corporation. 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 or she is or was a Director, officer, employee or agent 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 or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in
a manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and 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 unless and only to the extent that the Court of
Chancery of the State of Delaware 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 of the State of Delaware or such other court shall deem proper.
Section 3. Success on the Merits. To the extent that any person
described in Section 1 or 2 of this Article V has been successful on the merits
or
9
<PAGE> 13
otherwise in defense of any action, suit or proceeding referred to in said
Sections, 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.
Section 4. Specific Authorization. Any indemnification under
Section 1 or 2 of this Article V (unless ordered by a court) shall be made by
the Corporation only as authorized in the specific case upon a determination
that indemnification of any person described in said Sections is proper in the
circumstances because he has met the applicable standard of conduct set forth
in said Sections. Such determination shall be made (1) by the Board of
Directors by a majority vote of Directors who were not parties to such action,
suit or proceeding (even though less than a quorum), or (2) by a committee of
such Directors designated by a majority vote of such Directors (even though
less than a quorum) or (3) if there are no disinterested Directors or if a
majority of disinterested Directors so directs, by independent legal counsel
(who may be regular legal counsel to the Corporation) in a written opinion, or
(4) by the stockholders of the Corporation.
Section 5. Advance Payment. Expenses incurred in defending a
pending or threatened civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of any person
described in said Section to repay such amount if it shall ultimately be
determined that he or she is not entitled to indemnification by the Corporation
as authorized in this Article V.
Section 6. Non-Exclusivity. The indemnification and advancement
of expenses provided by, or granted pursuant to, the other Sections of this
Article V shall not be deemed exclusive of any other rights to which those
provided indemnification or advancement of expenses may be entitled under any
By-Law, agreement, vote of stockholders or disinterested Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
Section 7. Insurance. The Board of Directors may authorize, by
a vote of the majority of the full board, the Corporation to purchase and
maintain insurance on behalf of any person who is or was a Director, officer,
employee or agent 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 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 to indemnify him against such liability under the provisions of this
Article V.
Section 8. Continuation of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article V shall continue as to a person who has
ceased to be a Director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
10
<PAGE> 14
Section 9. Severability. If any word, clause or provision of
this Article V or any award made hereunder shall for any reason be determined
to be invalid, the provisions hereof shall not otherwise be affected thereby
but shall remain in full force and effect.
Section 10. Intent of Article. The intent of this Article V is
to provide for indemnification and advancement of expenses to the fullest
extent permitted by Section 145 of the General Corporation Law of Delaware. To
the extent that such Section or any successor section may be amended or
supplemented from time to time, this Article V shall be amended automatically
and construed so as to permit indemnification and advancement of expenses to
the fullest extent from time to time permitted by law.
ARTICLE VI
CAPITAL STOCK
Section 1. Certificates of Stock. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the chairman or Vice-chairman of the Board of Directors,
or the President or a Vice-President and the Treasurer or an assistant
Treasurer, or the Secretary or an assistant Secretary of the Corporation,
certifying the number of shares owned by such holder in the Corporation. Any or
all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue. Certificates may be issued
for partly paid shares and in such case upon the face or back of the
certificates issued to represent any such partly paid shares, the total amount
of the consideration to be paid therefor, and the amount paid thereon shall be
specified.
Section 2. Lost Certificates. The Board of Directors may direct
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to give
reasonable evidence of such loss, theft or destruction, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond in
such sum 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 or the issuance of such new certificate.
11
<PAGE> 15
Section 3. Transfer of Stock. Upon surrender to the Corporation
or the transfer agent of the Corporation of a certificate for shares, duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, and proper evidence of compliance with other conditions
to rightful transfer, it shall be the duty 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. 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, the Board of Directors may fix a
record date, which shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which shall not be
more than sixty days nor less than ten days before the date of such meeting. 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. If no record date is fixed, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day before the day on
which notice is given, or, if notice is waived, at the close of business on the
day before the day on which the meeting is held. In order that the Corporation
may determine the stockholders entitled to consent to corporate action in
writing without a meeting, the Board of Directors may fix a record date, which
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which shall not be more than ten days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date is fixed, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required
by statute, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the Corporation
as provided in Section 10 of Article I. If no record date is fixed and prior
action by the Board of Directors is required, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the date on which the Board of
Directors adopts the resolution taking such prior action. In order that the
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or the stockholders
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 a record date, which shall not precede the date upon which
the resolution fixing the record date is adopted, and which shall be not more
than sixty days prior to such action. If no record date is fixed, the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating to such purpose.
Section 5. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as the
owner of shares, and 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 the laws of Delaware.
12
<PAGE> 16
ARTICLE VII
CERTAIN TRANSACTIONS
Section 1. Transactions with Interested Parties. No contract or
transaction between the Corporation and one or more of its Directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its Directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the Director or officer
is present at or participates in the meeting of the board or committee thereof
which authorizes the contract or transaction or solely because his or their
votes are counted for such purpose, if:
(a) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested Directors, even though the disinterested
Directors be less than a quorum; or
(b) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders.
Section 2. Quorum. Common or interested Directors may be counted
in determining the presence of a quorum at a meeting of the Board of Directors
or of a committee which authorizes the contract or transaction.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, if any, may be declared by the Board of Directors at any regular
or special meeting or by written consent, pursuant to law. Dividends may be
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation.
Section 2. Reserves. The Directors may set apart out of any
funds of the Corporation available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve.
Section 3. Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
13
<PAGE> 17
Section 4. Fiscal Year. The fiscal year of the Corporation shall
be fixed by resolution of the Board of Directors.
Section 5. Seal. The Board of Directors may, by resolution,
adopt a corporate seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the word "Delaware."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise. The seal may be altered from time to time
by the Board of Directors.
ARTICLE IX
AMENDMENTS
These By-Laws may be altered, amended or repealed or 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, provided, however, that in the case of a regular or special meeting
of stockholders, notice of such alteration, amendment, repeal or adoption of
new By-Laws be contained in the notice of such meeting.
14
<PAGE> 18
Register of Amendments to the By-Laws
Date Section Affected Change
- ---- ---------------- ------
15
<PAGE> 1
Exhibit 3.3
STATEMENT OF RESOLUTION
ESTABLISHING SERIES OF SHARES
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, the undersigned corporation submits the following statement for
the purpose of establishing and designating a series of shares and fixing and
determining the relative rights and preferences thereof.
1. The name of the corporation is Maxxim Medical, Inc. (the
"Corporation").
2. That pursuant to the authority conferred upon the Board of Directors
by the Articles of Incorporation of the said Corporation, the said Board of
Directors on July 10, 1997 adopted the following resolution establishing and
designating a series of shares and fixing and determining the preferences,
limitations and relative rights thereof:
"RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by the Articles of Incorporation, the Board of Directors does
hereby provide for the issue of a series of Preferred Stock, $1.00 par value per
share, of the Corporation, to be designated "Series A Participating Preferred
Stock," initially consisting of 40,000 shares, and to the extent that the
designations, powers, preferences and relative and other special rights and the
qualifications, limitations, and restrictions of the Series A Participating
Preferred Stock are not stated and expressed in the Articles of Incorporation,
does hereby fix and herein state and express such designations, powers,
preferences and relative and other special rights and the qualifications,
limitations and restrictions thereof, as follows (all terms used herein which
are defined in the Articles of Incorporation shall be deemed to have the
meanings provided therein):
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Participating Preferred Stock," $1.00 par value per
share, and the number of shares constituting such series shall be 40,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior right of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Participating Preferred Stock with respect to dividends, the holders
of shares of Series A Participating Preferred Stock shall be entitled to receive
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in
<PAGE> 2
cash on the last day of September, December, March and June in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to, subject
to the provision for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock of the Corporation (the "Common
Stock") since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Participating
Preferred Stock. In the event the Corporation shall at any time after July 10,
1997 (the "Rights Dividend Declaration Date") (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which holders of shares
of Series A Participating Preferred Stock were entitled immediately prior to
such event under the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue on outstanding shares of Series A
Participating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Participating Preferred
Stock, unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series A Participating
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Participating Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and
-2-
<PAGE> 3
payable on such shares shall be allocated pro rate on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Participating
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Participating Preferred Stock shall entitle the holder
thereof to 1,000 votes on all matters submitted to a vote of the shareholders
of the Corporation. In the event the Corporation shall at any time after the
Rights Dividend Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Series A Participating Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a
vote of shareholders of the Corporation.
(C) Except as required by law, holders of Series A Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith
it shall declare a dividend on the Series A Participating Preferred Stock as
required by Section 2 hereof.
(B) Whenever quarterly dividends or other dividends or
-3-
<PAGE> 4
distributions payable on the Series A Participating Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Participating Preferred Stock;
(ii) declare or pay dividends on, or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with Series A
Participating Preferred Stock, except dividends paid ratably on the Series A
Participating Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Participating Preferred
Stock;
(iv) purchase or otherwise acquire for consideration any shares
of Series A Participating Preferred Stock, or any shares of stock ranking on a
parity with the Series A Participating Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(C) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be canceled promptly
-4-
<PAGE> 5
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Participating Preferred Stock unless,
prior thereto, the holders of shares of Series A Participating Preferred Stock
shall have received $1.00 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Participating
Preferred Stock unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series A Liquidation Preference by (ii)
1,000 (as appropriately adjusted as set forth in subparagraph (C) below to
reflect such events as stock splits, stock dividends and recapitalization with
respect to the Common Stock) (such number in clause (ii), the "Adjustment
Number"). Following the payment of the full amount of the Series A Liquidation
Preference and the Common Adjustment in respect of all outstanding shares of
Series A Participating Preferred Stock and Common Stock, respectively, holders
of Series A Participating Preferred Stock and holders of shares of Common Stock
shall receive their ratable and proportionate share of the remaining assets to
be distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Dividend Declaration Date (i) declare any dividend on
-5-
<PAGE> 6
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such
Adjustment Number by a fraction the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Dividend Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Participating Preferred Stock shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Participating Preferred
Stock shall not be redeemable.
Section 9. Ranking. The Series A Participating Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. Amendment. The Articles of Incorporation of the Corporation
shall not be further amended in any manner which would materially alter or
change the powers, preference or special rights of the Series A Participating
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series A
Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Participating
-6-
<PAGE> 7
Preferred Stock may be issued in fractions of a share which shall entitle the
holder in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Participating Preferred Stock.
RESOLVED FURTHER, that the President and the Secretary or any Assistant
Secretary of this Corporation be, and they hereby are, authorized and directed
to prepare and file (or cause to be prepared and filed) a Statement of
Resolution Establishing Series of Shares in accordance with the foregoing
resolution and the provisions of Texas law and to take such actions as they may
deem necessary or appropriate to carry out the intent of the foregoing
resolution.
Dated August 29, 1997.
MAXXIM MEDICAL, INC.
By: /s/ Kenneth W. Davidson
---------------------------------------
Kenneth W. Davidson, President
/s/ Peter M. Graham
---------------------------------------
Secretary
STATE OF TEXAS S.
COUNTY OF HARRIS S.
Before me, a notary public, on this day personally appeared Kenneth W.
Davidson, known to me to be the person whose name is subscribed to the foregoing
document and, being by me first duly sworn, declared that the statements
therein contained are true and correct.
Given under my hand and seal of office this 29th day of August, A.D., 1997.
/s/ Grace K. Shephard
----------------------------------------
(Printed or stamped name)
Notary Public, State of Texas
My commission expires: July 16, 1998
-7-
<PAGE> 8
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
MAXXIM MEDICAL, INC.
*****
PURSUANT to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation (the "Corporation") adopted the
following Articles of Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the Corporation is Maxxim Medical, Inc.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
the shareholders of the Corporation on March 15, 1996:
SECTION 1 of ARTICLE IV of the Articles of Incorporation of the Corporation
is amended in its entirety so that, as amended, SECTION 1 of ARTICLE IV
shall be and read as follows:
"ARTICLE IV
Capital Stock
Section 1. Authorized Shares. The total number of shares of stock
which the Corporation shall have authority to issue is 50,000,000,
divided into classes as follows: (i) 10,000,000 shares of Preferred
Stock, $1.00 par value each (hereinafter referred to as "Preferred
Stock"), and (ii) 40,000,000 shares of Common Stock, $0.001 par value
each (hereinafter referred to as "Common Stock")."
ARTICLE THREE
The number of shares of the Corporation outstanding at the time of such
adoption was 8,069,847 shares of common stock, $0.001 par value per share
("Common Stock"), and the number of shares entitled to vote thereon was
8,069,847 shares of Common Stock.
<PAGE> 9
ARTICLE FOUR
The number of shares of Common Stock voted for such amendment was
7,004,397; and the number of shares of Common Stock voting against such
amendment was 215,776.
ARTICLE FIVE
This amendment does not provide for a reclassification or exchange of
issued shares of the Corporation's capital stock.
ARTICLE SIX
This amendment effects no change in the amount of stated capital of the
Corporation.
DATED: March 15, 1996.
MAXXIM MEDICAL, INC.
By: /s/ Kenneth Davidson
---------------------------------------
Kenneth Davidson, Chairman of the Board,
President and Chief Executive Officer
<PAGE> 10
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
HENLEY INTERNATIONAL, INC.
* * * * *
PURSUANT to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation (the "Corporation") adopts the
following Articles of Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the Corporation is Henley International, Inc.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by the
shareholders of the Corporation on March 4, 1993:
ARTICLE I of the Articles of Incorporation of the Corporation is amended in
its entirety so that, as amended, ARTICLE I shall be and read as follows:
"ARTICLE I
The name of the Corporation is MAXXIM MEDICAL, INC."
ARTICLE THREE
The number of shares of the Corporation outstanding at the time of such
adoption was 5,431,257 shares of common stock, $.001 par value per share
("Common Stock"), and the number of shares entitled to vote thereon was
5,431,257 shares of Common Stock.
ARTICLE FOUR
The number of shares of Common Stock voted for such amendment was
3,623,513; and the number of shares of Common Stock voting against such
<PAGE> 11
amendment was 26,197.
ARTICLE FIVE
This amendment does not provide for a reclassification of issued shares of
the Corporation's capital stock.
ARTICLE SIX
This amendment effects no change in the amount of stated capital of the
Corporation.
DATED: March 4, 1993.
HENLEY INTERNATIONAL, INC.
By: /s/ Kenneth W. Davidson
------------------------------------
Kenneth W. Davidson, President
<PAGE> 12
RESTATED ARTICLES OF INCORPORATION
ARTICLE ONE
Henley Merger Corp., pursuant to the provisions of Article 4.07 of the
Texas Business Corporation Act, hereby adopts restated articles of
incorporation which 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 which contain
no other change in any provision hereof.
ARTICLE TWO
The articles of incorporation of the corporation are amended by the
restated articles of incorporation as follows:
Article I, Section 3(e) of Article IV, Section 6(c) of Article IV, and
Article VIII of the Articles of Incorporation of the Corporation in effect
on the date hereof are hereby deleted in their entirety and replaced by
Article I, Section 3(e) of Article IV, Section 6(c) of Article IV, and
Article VIII of the Restated Articles of Incorporation as hereinafter set
forth.
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 1st day of December, 1989.
ARTICLE FOUR
The number of shares outstanding at the time of such adoption was 1,000,
and the number of shares entitled to vote on the restated articles of
incorporation as so amended was 1,000, the holders of all of which have signed
a written consent to the adoption of such restated articles of incorporation as
so amended.
<PAGE> 13
ARTICLE FIVE
The articles of incorporation and all amendments and supplements thereto
are hereby superseded by the restated articles of incorporation set forth on
Exhibit A attached hereto which accurately copy the entire text thereof and as
amended as above set forth.
HENLEY MERGER CORP.
By: /s/ KEN DAVIDSON
-----------------------
Printed Name: Ken Davidson
-------------
Title: President
--------------------
-2-
<PAGE> 14
EXHIBIT A
RESTATED
ARTICLES OF INCORPORATION
OF
HENLEY INTERNATIONAL, INC.
Under the Texas Business Corporation Act, Henley International, Inc. (the
"Corporation") does hereby adopt the following Articles of Incorporation for
the Corporation:
ARTICLE I
Name
The name of the Corporation is Henley International, Inc.
ARTICLE II
Duration
The period of the duration of the Corporation is perpetual.
ARTICLE III
Purpose and Powers
The purpose or purposes for which the Corporation is organized are:
To transact any and all lawful business for which corporations may be
incorporated under the Texas Business Corporation Act (the "Act").
ARTICLE IV
Capital Stock
Section 1. Authorized Shares. The total number of shares of stock which
the Corporation shall have authority to issue is 30,000,000, divided into
classes as follows: (i) 10,000,000 shares of Preferred Stock, $1.00 par value
each (hereinafter referred to as "Preferred Stock"), and (ii) 20,000,000 shares
of Common Stock, $0.001 par value each (hereinafter referred to as "Common
Stock").
Section 2. Preferred Stock. The Preferred Stock shall have the
preferences, limitations, and relative rights as shall be established by the
Board of Directors by a resolution or resolutions adopted in compliance with
Article 2.13(B) of the Act, and may be issued in one or more series pursuant
to Section (IV)(3) hereof.
Section 3. Designation of Series. Series of Preferred Stock may be
established from time to time of any number of the
<PAGE> 15
shares of authorized Preferred Stock pursuant to any resolution or resolutions
adopted by the Board of Directors of the Corporation which establishes a
distinctive serial designation and fixes the relative rights and preference
thereof and otherwise satisfies the requirements of Article 2.13(B) of the Act.
The relative rights and preferences of Preferred Stock may vary between
any series established by the Board of Directors in any and all respects,
including, (by way of illustration but not by way of limitation) differences in
any of the following respects between the characteristics of the series being
established and the relative rights and preferences of any other series or
class of stock of the Corporation:
(a) Voting rights;
(b) The price at and the terms and conditions on which shares may be
redeemed;
(c) The rate, preferences, and priorities of any distributions from the
Corporation payable with respect to shares and the dates, terms, and
other conditions on which such distributions shall be payable and
whether such distributions are cumulative, noncumulative, or partially
cumulative;
(d) Rights upon the dissolution or liquidation of, or upon any
distribution of the assets of, the Corporation;
(e) The terms and conditions on which shares may be converted into shares
of any other class, classes or series of stock of the Corporation;
(f) The right to participate in the benefit of a sinking fund or purchase
fund to be applied to the purchase or redemption of shares; and
(g) The benefit of conditions or restrictions upon (i) the incurrence by
the Corporation or any subsidiary of any indebtedness (ii) the
issuance of any additional stock (including additional shares of such
series or of any other series) or (iii) the payment of distributions
or the making of other distributions on, and the purchase, redemption
or other acquisition by the Corporation or any subsidiary of any
outstanding stock of the Corporation.
Section 4. Increase or Decrease in Shares of a Series. Except where
otherwise provided by the Board of Directors of the Corporation at the time of
the designation of a series, the number of shares comprising such series may be
-2-
<PAGE> 16
increased or decreased (but not below the number of shares then outstanding)
from time to time by a resolution or resolutions adopted by the Board of
Directors of the Corporation.
Section 5. Reissuance of Shares of Preferred Stock. Shares of any series
of Preferred Stock which have been redeemed (whether through the operation of a
sinking fund or otherwise), purchased or otherwise acquired by the Corporation,
or which, if convertible or exchangeable, have been converted into or exchanged
for shares of stock, of any other class or classes, shall have the status of
authorized and unissued shares of Preferred Stock and may be reissued as part
of the series of which they were originally a part or may be reclassified or
reissued as part of any other series of Preferred Stock, all subject to the
conditions or restrictions adopted by the Board of Directors of the Corporation
when establishing the series of Preferred Stock.
Section 6. Common Stock. The Common Stock shall have the following
preferences, limitations, and relative rights:
(a) Each share of Common Stock shall entitle the holder thereof to one
vote, in person or by proxy, at any and all meetings of the
shareholders of the Corporation on any proposition before such
meetings.
(b) Subject to the rights of the holders of any Preferred Stock or any
series thereof, the holders of Common Stock shall be entitled to
receive, when, as and if declared by the Board of Directors of the
Corporation, out of funds legally available therefor, distributions
payable in cash, stock or otherwise.
(c) Upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, and after the holders of the
Preferred Stock of each series shall have been paid in full the
amounts, if any, to which they respectively shall be entitled in
preference to the holders of the Common Stock, or a sum sufficient
for such payments in full shall have been set aside, the remaining
net assets of the Corporation shall be distributed pro rata to the
holders of Common Stock, to the exclusion of the holders of the
Preferred Stock other than holders of Preferred Stock who are
expressly entitled to participate in the distribution of the net
assets of the Corporation remaining after the distribution to holders
of the Preferred Stock which are in preference to the rights of the
holders of the Common Stock.
-3-
<PAGE> 17
ARTICLE V
Initial Consideration for Issuance of Shares
The Corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00), consisting of money, labor done, or property actually received.
ARTICLE VI
Initial Registered Office and Agent
The street address of the initial registered office of the Corporation is
Nine Greenway Plaza, Suite 1717, Houston, Texas 77046, and the name of its
initial registered agent at such address is J. Randolph Ewing.
ARTICLE VII
Board of Directors
The initial Board of Directors of the Corporation consists of six (6)
directors, and the names and addresses of the persons to serve as the directors
of the Corporation until the first annual meeting of shareholders or until their
successors are elected and qualified are:
NAME ADDRESS
Roy M. Borrell, M.D. 2703 Highland Court
Sugar Land, Texas 77478
Kenneth W. Davidson 104 Industrial Boulevard
Sugar Land, Texas 77478
Peter Dorflinger 4000 Technology Drive
Angleton, Texas 77515
Ernest J. Henley 104 Industrial Boulevard
Sugar Land, Texas 77478
Henk Wafelman Enraf-Nonius
Rontgenweg
P. O. Box 483
2600 al delft
Route 0302
Holland
Richard O. Martin 4000 Technology Drive
Angleton, Texas 77515
The number of directors constituting the Board of Directors shall be fixed by,
or in the manner provided in, the Bylaws of the Corporation.
-4-
<PAGE> 18
ARTICLE VIII
Voting; Cumulative Voting Denied; Quorum
No shareholder shall have the right to cumulate his votes for the election
of directors, but each share of the Common Stock shall be entitled to one vote
in the election of each director and for all other purposes. Holders of
Preferred Stock shall not be entitled to vote on any matter unless otherwise
specifically required by law or provided for pursuant to the resolution
establishing the preferences, limitations, and relative rights of the Preferred
Stock. With respect to any matter which the affirmative vote of the holders of a
specified portion 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 the
holders of a majority of the shares entitled to vote on such matter, rather
than the affirmative vote otherwise required by the Act. Any action required to
be taken or which may be taken at an annual or special meeting of the
shareholders may be taken without a meeting, without prior notice and without a
vote if a written consent setting forth the action so taken shall be signed by
those shareholders holding 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. A quorum shall be present at a
meeting of shareholders if the holders of one-third (1/3) of the shares
entitled to vote are represented at a meeting in person or by proxy.
ARTICLE IX
Denial of Preemptive Rights
No shareholder of the Corporation or any other person shall have any
preemptive right whatsoever 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 or other securities of the
Corporation.
ARTICLE X
Bylaws
The initial Bylaws of the Corporation shall be adopted by its Board of
Directors. The power to alter, amend, or repeal the Bylaws or adopt new Bylaws
shall be exclusively vested in the Board of Directors.
ARTICLE XI
Limitation of Liability
A director of the Corporation shall not be liable to the Corporation or
its shareholders for monetary damages for any act or omission made by the
director in the director's capacity as a director, except for the following:
-5-
<PAGE> 19
(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 by statute; or
(E) an act related to an unlawful stock repurchase or payment of dividend.
Any repeal or amendment of this Article by the shareholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the liability of a director of the Corporation existing at the
time of such repeal or amendment. In addition to the circumstances in which a
director shall not be liable pursuant to the provisions of this Article XI, a
director shall not be liable to the fullest extent permitted by any provision of
the statutes of Texas hereafter enacted that further limits the liability of a
director.
ARTICLE XII
Incorporator
The name and address of the incorporator is as follows:
NAME ADDRESS
Casey W. Doherty Nine Greenway Plaza
Suite 1717
Houston, Texas 77046
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 13th day
of December, 1989.
HENLEY INTERNATIONAL, INC.,
formerly known as Henley Merger
Corp.
By: /s/ Kenneth W. Davidson
--------------------
Kenneth W. Davidson
President
-6-
<PAGE> 1
Exhibit 3.4
===============================================================================
BYLAWS
OF
MAXXIM MEDICAL, INC.
A Texas Corporation
As of November 12, 1999
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
TO
BYLAWS
OF
MAXXIM MEDICAL, INC.
A Texas Corporation
<TABLE>
<S> <C>
ARTICLE I REGISTERED OFFICE......................................................................................1
ARTICLE II SHAREHOLDERS..........................................................................................1
Section 1. Place of Meetings...........................................................................1
Section 2. Quorum; Required Vote for Shareholder Action;
Adjournment of Meetings................................................................1
Section 3. Annual Meetings.............................................................................2
Section 4. Special Meetings............................................................................2
Section 5. Closing Share Transfer Records; Record Date.................................................2
Section 6. Notice of Meetings..........................................................................3
Section 7. Voting List.................................................................................3
Section 8. Proxies.....................................................................................4
Section 9. Voting; Inspectors; Elections...............................................................5
Section 10. Conduct of Meetings.........................................................................5
Section 11. Treasury Shares.............................................................................6
Section 12. Action by Written Consent or Telephone Conference...........................................6
Section 13. Fixing Record Dates for Consents to Action..................................................7
ARTICLE III BOARD OF DIRECTORS...................................................................................7
Section 1. Power; Number; Term of Office...............................................................7
Section 2. Quorum; Required Vote for Director Action...................................................8
Section 3. Meetings; Order of Business.................................................................8
Section 4. First Meeting...............................................................................8
Section 5. Regular Meetings............................................................................8
Section 6. Special Meetings............................................................................8
Section 7. Removal.....................................................................................8
Section 8. Vacancies; Increases in the Number of Directors.............................................9
Section 9. Compensation................................................................................9
Section 10. Presumption of Assent.......................................................................9
Section 11. Approval or Ratification of Acts or Contracts by Shareholders...............................9
Section 12. Action by Written Consent or Telephone Conference...........................................9
ARTICLE IV COMMITTEES...........................................................................................10
Section 1. Designation; Powers........................................................................10
Section 2. Procedure; Meetings; Quorum................................................................11
Section 3. Dissolution................................................................................11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V OFFICERS..............................................................................................12
Section 1. Number, Titles and Term of Office..........................................................12
Section 2. Salaries...................................................................................12
Section 3. Removal....................................................................................12
Section 4. Vacancies..................................................................................12
Section 5. Powers and Duties of the Chief Executive Officer...........................................12
Section 6. Powers and Duties of the Chairman of the Board.............................................12
Section 7. Powers and Duties of the President.........................................................12
Section 8. Vice Presidents............................................................................13
Section 9. Treasurer..................................................................................13
Section 10. Assistant Treasurers.......................................................................13
Section 11. Secretary..................................................................................13
Section 12. Assistant Secretaries......................................................................13
Section 13. Action With Respect to Securities of Other Corporations....................................14
ARTICLE VI INDEMNIFICATION OF DIRECTORS,OFFICERS, EMPLOYEES AND AGENTS..........................................14
Section 1. Right to Indemnification...................................................................14
Section 2. Advance Payment............................................................................14
Section 3. Indemnification of Employees and Agents....................................................15
Section 4. Appearance as a Witness....................................................................15
Section 5. Nonexclusivity of Rights...................................................................15
Section 6. Insurance..................................................................................15
Section 7. Shareholder Notification...................................................................15
Section 8. Savings Clause.............................................................................16
ARTICLE VII CAPITAL STOCK.......................................................................................16
Section 1. Certificates of Stock......................................................................16
Section 2. Transfer of Shares.........................................................................16
Section 3. Ownership of Shares........................................................................17
Section 4. Regulations Regarding Certificates.........................................................17
Section 5. Lost, Stolen, Destroyed or Mutilated Certificates..........................................17
ARTICLE VIII MISCELLANEOUS PROVISIONS...........................................................................17
Section 1. Fiscal Year................................................................................17
Section 2. Corporate Seal.............................................................................17
Section 3. Notice and Waiver of Notice................................................................18
Section 4. Resignations...............................................................................18
Section 5. Facsimile Signatures.......................................................................18
Section 6. Books and Records..........................................................................18
ARTICLE IX AMENDMENTS...........................................................................................18
</TABLE>
<PAGE> 4
BYLAWS
OF
MAXXIM MEDICAL, INC.
A Texas Corporation
ARTICLE I
REGISTERED OFFICE
The registered office of the Corporation required by the Texas
Business Corporation Act (the "TBCA") to be maintained in the State of Texas
shall be the registered office named in the original Articles of Incorporation
of the Corporation or such other office (which need not be a place of business
of the Corporation) as may be designated from time to time by the Board of
Directors in the manner provided by law.
ARTICLE II
SHAREHOLDERS
Section 1. Place of Meetings. All meetings of the shareholders shall
be held at the principal place of business of the Corporation or at such other
place within or without the State of Texas as shall be specified or fixed in
the notices or waivers of notice thereof; provided that any or all shareholders
may participate in any such meeting by means of conference telephone or similar
communications equipment pursuant to Article II, Section 12 of these bylaws.
Section 2. Quorum; Required Vote for Shareholder Action; Adjournment
of Meetings. (a) Quorum. A quorum shall be present at a meeting of shareholders
if the holders of a majority of the shares entitled to vote are represented at
the meeting in person or by proxy, unless otherwise provided in the Articles of
Incorporation in accordance with the TBCA.
(b) Voting on Matters Other Than the Election of Directors. With
respect to any matter, other than the election of directors or a matter for
which the affirmative vote of the holders of a specified portion of the shares
entitled to vote is required by the TBCA, the affirmative vote of the holders
of a majority of the shares entitled to vote on that matter and represented in
person or by proxy at a meeting of shareholders at which a quorum is present
shall be the act of the shareholders, unless otherwise provided in the Articles
of Incorporation or these bylaws in accordance with the TBCA.
(c) Voting in the Election of Directors. Unless otherwise provided in
the Articles of Incorporation or these bylaws in accordance with the TBCA,
directors shall be elected by a plurality of the votes cast by the holders of
shares entitled to vote in the election of directors at a meeting of
shareholders at which a quorum is present.
<PAGE> 5
(d) Adjournment. Notwithstanding the other provisions of the Articles
of Incorporation or these bylaws, the chairman of the meeting or the holders of
a majority of the shares entitled to vote that are represented in person or by
proxy at any meeting of shareholders, whether or not a quorum is present, shall
have the power to adjourn such meeting from time to time, without any notice
other than announcement at the meeting of the time and place of the holding of
the adjourned meeting. If such meeting is adjourned by the shareholders, such
time and place shall be determined by a vote of the holders of a majority of
the shares entitled to vote that are represented in person or by proxy at such
meeting. Upon the resumption of such adjourned meeting, any business may be
transacted that might have been transacted at the meeting as originally called.
Section 3. Annual Meetings. An annual meeting of the shareholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, within or without the State of Texas, on such date
and at such time as the Board of Directors shall fix and set forth in the
notice of the meeting, which date shall be within 13 months subsequent to the
date of incorporation or the last annual meeting of shareholders, whichever
most recently occurred.
Section 4. Special Meetings. Unless otherwise provided in the Articles
of Incorporation, special meetings of the shareholders for any proper purpose
or purposes may be called at any time by (a) the Chairman of the Board (if
any), the President, the Board of Directors, or such other person or persons as
may be authorized in the Articles of Incorporation or (b) unless the Articles
of Incorporation provide otherwise, the holders of at least ten percent of all
the shares entitled to vote at the proposed special meeting.
If not otherwise stated in or fixed in accordance with the remaining
provisions hereof, the record date for determining shareholders entitled to
call a special meeting is the date any shareholder first signs the notice of
that meeting.
Only business within the purpose or purposes described in the notice
(or waiver thereof) required by these bylaws may be conducted at a special
meeting of the shareholders.
Section 5. Closing Share Transfer Records; Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive a
distribution by the Corporation (other than a distribution involving a purchase
or redemption by the Corporation of any of its own shares) or a share dividend,
or in order to make a determination of shareholders for any other purpose
(other than determining shareholders entitled to consent to action by
shareholders proposed to be taken without a meeting of shareholders), the Board
of Directors of the Corporation may provide that the share transfer records
shall be closed for a stated period but not to exceed, in any case, 60 days. If
the share transfer records shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders,
such records shall be closed for at least ten days immediately preceding such
meeting.
In lieu of closing the share transfer records, the Board of Directors
may fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be
2
<PAGE> 6
not more than 60 days and, in the case of a meeting of shareholders, not less
than ten days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken.
If the share transfer records are not closed and no record date is
fixed for the determination of shareholders entitled to notice of or to vote at
a meeting of shareholders, or shareholders entitled to receive a distribution
(other than a distribution involving a purchase or redemption by the
Corporation of any of its own shares) or a share dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such distribution or share dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders.
When a determination of shareholders entitled to vote at any meeting
of shareholders has been made as provided herein, such determination shall also
apply to any adjournment thereof except where the determination has been made
through the closing of share transfer records and the stated period of closing
has expired.
Section 6. Notice of Meetings. Written or printed notice stating the
place, day and hour of the 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 nor more than 60 days before the date of the meeting, either
personally or by mail, by or at the direction of the President, the Secretary
or the officer or person calling the meeting, to each shareholder entitled to
vote at such meeting. If mailed, any such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the share transfer records of the
Corporation, with postage thereon prepaid.
Any notice required to be given to any shareholder, under any
provision of the TBCA or the Articles of Incorporation or these bylaws need not
be given to the shareholder if (a) notice of two consecutive annual meetings
and all notices of meetings held during the period between those annual
meetings, if any, or (b) all (but in no event less than two) payments of
distributions or interest on securities during a 12-month period have been
mailed to that person by first-class mail, addressed to him at his address as
shown on the share transfer records of the Corporation, and have been returned
undeliverable. Any action or meeting taken or held without notice to such
person shall have the same force and effect as if the notice had been duly
given and, if the action taken by the Corporation is reflected in any articles
or document filed with the Secretary of State, those articles or that document
may state that notice was duly given to all persons to whom notice was required
to be given. If such a person delivers to the Corporation written notice
setting forth his then current address, the requirement that notice be given to
that person shall be reinstated.
Section 7. Voting List. The officer or agent having charge of the
share transfer records of the Corporation shall make, at least ten days before
each meeting of 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 shares held by each, which list,
for a period of ten days prior to such meeting, shall be kept on file at the
registered office or principal place of business of the Corporation and shall
be subject to inspection by any shareholder at any
3
<PAGE> 7
time during usual business 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 records or to vote at
any meeting of shareholders. Failure to comply with the requirements of this
Section shall not affect the validity of any action taken at such meeting.
Section 8. Proxies. A shareholder may vote either in person or by
proxy executed in writing by the shareholder. A telegram, telex, cablegram or
similar transmission by the shareholder, or a photographic, photostatic,
facsimile or similar reproduction of a writing executed by the shareholder
shall be treated as an execution in writing for purposes of this Section.
Proxies for use at any meeting of shareholders or in connection with the taking
of any action by written consent shall be filed with the Secretary, or such
other officer as the Board of Directors may from time to time determine by
resolution, before or at the time of the meeting or execution of the written
consent, as the case may be. All proxies shall be received and taken charge of
and all ballots shall be received and canvassed by the secretary of the meeting
who shall decide all questions touching upon the qualification of voters, the
validity of the proxies, and the acceptance or rejection of votes, unless an
inspector or inspectors shall have been appointed by the chairman of the
meeting, in which event such inspector or inspectors shall decide all such
questions.
No proxy shall be valid after 11 months from the date of its execution
unless otherwise provided in the proxy. A proxy shall be revocable unless the
proxy form conspicuously states that the proxy is irrevocable and the proxy is
coupled with an interest. Proxies coupled with an interest shall include the
appointment as proxy of any of the persons set forth in the TBCA, including
without limitation:
(a) a pledgee;
(b) a person who purchased or agreed to purchase, or owns or
holds an option to purchase, the shares;
(c) a creditor of the Corporation who extended it credit under
terms requiring the appointment;
(d) an employee of the Corporation whose employment contract
requires the appointment; or (e) a party to a voting
agreement executed under Section B, Article 2.30 of the TBCA.
Should a proxy designate two or more persons to act as proxies, unless
such instrument shall provide to the contrary, a majority of such persons
present at any meeting at which their powers thereunder are to be exercised
shall have and may exercise all the powers of voting or giving consents thereby
conferred, or if only one be present, then such powers may be exercised by that
one; or, if an even number attend and a majority do not agree on any particular
issue, the Corporation shall not be required to recognize such proxy with
respect to such issue if such proxy does not specify how the shares that are
the subject of such proxy are to be voted with respect to such issue.
4
<PAGE> 8
Section 9. Voting; Inspectors; Elections. Unless otherwise required by
law or provided in the Articles of Incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to
a vote at a meeting of shareholders. If the Articles of Incorporation provide
for more or less than one vote per share for all the outstanding shares or for
the shares of any class or series on any matter, every reference in these
bylaws or in the Article of Incorporation (unless expressly stated otherwise
therein), in connection with such matter, to a specified portion of such shares
shall mean such portion of the votes entitled to be cast in respect of such
shares by virtue of the provisions of such Articles of Incorporation.
All voting, except as required by the Articles of Incorporation or
where otherwise required by law, may be by a voice vote; provided, however,
that a vote by ballot shall be taken upon demand therefor by shareholders
holding issued and outstanding shares representing a majority of the voting
power present in person or by proxy at any meeting. Every vote by ballot shall
be taken by written ballots, each of which shall state the name of the
shareholder or proxy voting and such other information as may be required under
the procedure established for the meeting.
At any meeting at which a vote is taken by ballots, the chairman of
the meeting may appoint one or more inspectors, each of whom shall subscribe an
oath or affirmation to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of his ability. Such
inspector shall receive the ballots, count the votes and make and sign a
certificate of the result thereof. The chairman of the meeting may appoint any
person to serve as inspector, except no candidate for the office of director
shall be appointed as an inspector.
At each election of directors each shareholder entitled to vote
thereat shall, unless otherwise provided by law or by the Articles of
Incorporation, have the right to vote the number of shares owned by him for as
many persons as there are to be elected and for whose election he has a right
to vote. Unless expressly prohibited by the Articles of Incorporation, a
shareholder shall have the right to cumulate his votes by giving one candidate
as many votes as the number of such directors multiplied by his shares shall
equal, or by distributing such votes on the same principle among any number of
such candidates. Any shareholder who intends to cumulate his votes shall give
written notice of such intention to the Secretary of the Corporation on or
before the day preceding the election at which such shareholder intends to
cumulate his votes.
Section 10. Conduct of Meetings. All meetings of the shareholders
shall be presided over by the chairman of the meeting, who shall be the
Chairman of the Board (if any), or if he is not present, the President, or if
neither the Chairman of the Board (if any) nor President is present, a chairman
elected at the meeting. The Secretary of the Corporation, if present, shall act
as secretary of such meetings, or if he is not present, an Assistant Secretary
(if any) shall so act; if neither the Secretary nor an Assistant Secretary (if
any) is present, then a secretary shall be appointed by the chairman of the
meeting. The chairman of any meeting of shareholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him in order. Unless
the chairman of the meeting shall otherwise determine or otherwise conduct the
meeting, the order of business shall be as follows:
5
<PAGE> 9
(a) Calling of meeting to order.
(b) Election of a chairman, and the appointment of a secretary,
if necessary.
(c) Presentation of proof of the due calling of the meeting.
(d) Presentation and examination of proxies and determination of
a quorum.
(e) Reading and settlement of the minutes of the previous
meeting.
(f) Reports of officers and committees.
(g) The election of directors, if an annual meeting or a meeting
called for that purpose. (h) Other business.
(i) Adjournment.
Section 11. Treasury Shares. Neither the Corporation nor any other
person shall vote, directly or indirectly, at any meeting, shares of the
Corporation's own stock owned by the Corporation, shares of the Corporation's
own stock owned by another corporation the majority of the voting stock of
which is owned or controlled by the Corporation, and shares of the
Corporation's own stock held by the Corporation in a fiduciary capacity; and
such shares shall not be counted in determining the total number of outstanding
shares at any given time.
Section 12. Action by Written Consent or Telephone Conference. Any
action required or permitted to 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 (i) all the shares entitled to vote
with respect to the action that is the subject of the consent, or (ii) if
provided in the Articles of Incorporation, shares having not less than the
minimum number of votes that would be required to take such action at a meeting
at which the holders of all shares entitled to vote on such action were present
and voted.
Every written consent shall bear the date of signature of each
shareholder who signs the consent. No written consent shall be effective to
take the action that is the subject to the consent unless, within 60 days after
the date of the earliest dated consent delivered to the Corporation in the
manner required by this Section, a consent or consents signed by the holder or
holders of shares having not less than the minimum number of votes that would
be necessary to take the action that is the subject of the consent are
delivered to the Corporation by delivery to its registered office, its
principal place of business, or an officer or agent of the Corporation having
custody of the books in which proceedings of meetings of shareholders are
recorded. Delivery shall be by hand or certified or registered mail, return
receipt requested. Delivery to the Corporation's principal place of business
shall be addressed to the President or chief executive officer.
A telegram, telex, cablegram or similar transmission by a shareholder,
or a photostatic, facsimile or similar reproduction of a writing signed by a
shareholder, shall be regarded as signed by the shareholder for purposes of
this Section.
Prompt notice of the taking of any action by shareholders without a
meeting by less than unanimous written consent shall be given to those
shareholders who did not consent in writing to the action.
6
<PAGE> 10
If any action by shareholders is taken by written consent, any
articles or documents filed with the Secretary of State as a result of the
taking of the action shall state, in lieu of any statement required by the TBCA
concerning any vote of shareholders, that written consent has been given in
accordance with the provisions of the TBCA and that any written notice required
by the TBCA has been given.
Subject to the provisions of the TBCA, the Articles of Incorporation
or these bylaws for notice of meetings, and unless otherwise restricted by the
Articles of Incorporation, shareholders may participate in and hold a meeting
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 meeting shall constitute attendance and 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 13. Fixing Record Dates for Consents to Action. Whenever
action by shareholders is proposed to be taken by consent in writing without a
meeting of shareholders, the Board of Directors may fix a record date for the
purpose of determining shareholders entitled to consent to that action, which
record date shall not precede, and shall not be more than ten days after, the
date upon which the resolution fixing the record date is adopted by the Board
of Directors. If no record date has been fixed by the Board of Directors and
the prior action of the Board of Directors is not required by law, the Articles
of Incorporation or these bylaws, the record date for determining shareholders
entitled to consent to action in writing without a meeting shall be the first
date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office, its principal place of business, or an officer or agent of
the Corporation having custody of the books in which proceedings of meetings of
shareholders are recorded. Delivery shall be by hand or by certified or
registered mail, return receipt requested. Delivery to the Corporation's
principal place of business shall be addressed to the President or the chief
executive officer of the Corporation. If no record date shall have been fixed
by the Board of Directors and prior action of the Board of Directors is
required by the TBCA, the Articles of Incorporation or these bylaws, the record
date for determining shareholders entitled to consent to action in writing
without a meeting shall be at the close of business on the date on which the
Board of Directors adopts a resolution taking such prior action.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Power; Number; Term of Office. The powers of the
Corporation shall be exercised by or under the authority of, and the business
and affairs of the Corporation shall be managed under the direction of, the
Board of Directors.
Unless otherwise provided in the Articles of Incorporation, the number
of directors that shall constitute the entire Board of Directors shall be
determined from time to time by resolution
7
<PAGE> 11
of the Board of Directors (provided that no decrease in the number of directors
that would have the effect of shortening the term of an incumbent director may
be made by the Board of Directors). If the Board of Directors makes no such
determination, the number of directors shall be the number set forth in the
Articles of Incorporation as the number of directors constituting the initial
Board of Directors. Each director shall hold office for the term for which he
is elected and thereafter until his successor shall have been elected and
qualified, or until his earlier death, resignation or removal.
Unless otherwise provided in the Articles of Incorporation, directors
need not be shareholders of the Corporation or residents of the State of Texas.
Section 2. Quorum; Required Vote for Director Action. Unless otherwise
required by law or provided in the Articles of Incorporation or these bylaws, a
majority of the total number of directors fixed by, or in the manner provided
in, the Articles of Incorporation or these bylaws shall constitute a quorum for
the transaction of business of the Board of Directors, and the act of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 3. Meetings; Order of Business. Meetings of the Board of
Directors may be held at such place or places as shall be determined from time
to time by resolution of the Board of Directors. At all meetings of the Board
of Directors business shall be transacted in such order as shall from time to
time be determined by the Chairman of the Board (if any), or in his absence by
the President (if the President is a director), or by resolution of the Board
of Directors.
Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a 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 4. First Meeting. In connection with any annual meeting of
shareholders at which directors were elected, the Board of Directors may, if a
quorum is present, hold its first meeting for the transaction of business
immediately after and at the same place as such annual meeting of the
shareholders. Notice of such meeting at such time and place shall not be
required.
Section 5. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as shall be designated from
time to time by resolution of the Board of Directors. Notice of such regular
meetings shall not be required.
Section 6. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board (if any), the President
or, on the written request of any one director, by the Secretary, in each case
on at least 24 hours personal, written, telegraphic, cable or wireless notice
to each director. Such notice, or any waiver thereof pursuant to Article VIII,
Section 3 hereof, need not state the purpose or purposes of such meeting,
except as may otherwise be required by law or provided for by the Articles of
Incorporation or these bylaws.
Section 7. Removal. At any meeting of shareholders at which a quorum
of shareholders is present called expressly for that purpose, or pursuant to a
written consent adopted pursuant to
8
<PAGE> 12
Article II, Section 12 hereof, any director may be removed, with or without
cause, by vote of the holders of issued and outstanding shares representing a
majority of the votes entitled to be cast for the election of such director;
provided that, if the shareholders have the right to cumulate votes for the
election of directors, and less than the entire Board of Directors is to be
removed, no director may be removed if the votes cast against his removal would
be sufficient to elect him if then cumulatively voted (a) at an election of the
entire Board of Directors, or (b) if there be classes of directors, at an
election of the class of directors of which such director is a part.
Section 8. Vacancies; Increases in the Number of Directors. Any
directorship to be filled by reason of an increase in the number of directors
may be filled (a) by the Board of Directors for a term of office continuing
only until the next election of one or more directors by the shareholders;
provided, however, that during the period between any two successive annual
meetings of shareholders, the Board of Directors may not fill more than two
such directorships; or (b) by election at an annual or special meeting of
shareholders entitled to vote in the election of such directors called for that
purpose.
Any vacancy occurring in the Board of Directors other than by reason
of an increase in the number of directors may be filled (a) by election at an
annual or special meeting of the shareholders called for that purpose or (b) by
the affirmative vote of a majority of the remaining directors though less than
a quorum of the Board of Directors. A director elected to fill a vacancy
occurring other than by reason of an increase in the number of directors shall
be elected for the unexpired term of his predecessor in office.
Section 9. Compensation. Unless restricted by the Articles of
Incorporation, the Board of Directors shall have the authority to fix the
compensation, if any, of directors.
Section 10. Presumption of Assent. A director who is present at a
meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action unless his dissent shall
be entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the Secretary immediately after the adjournment of the meeting. Such right
to dissent shall not apply to a director who voted in favor of such action.
Section 11. Approval or Ratification of Acts or Contracts by
Shareholders. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the
shareholders, or at any special meeting of the shareholders called for the
purpose of considering any such act or contract, and any act or contract that
shall be approved or be ratified by the vote of the shareholders holding a
majority of the issued and outstanding shares of stock of the Corporation
entitled to vote and represented in person or by proxy at such meeting
(provided that a quorum is present), shall be as valid and as binding upon the
Corporation and upon all the shareholders as if it shall have been approved or
ratified by every shareholder of the Corporation.
Section 12. Action by Written Consent or Telephone Conference. Any
action permitted or required by the TBCA, the Articles of Incorporation or
these bylaws to be taken at a meeting
9
<PAGE> 13
of the Board of Directors or any committee designated by the Board of Directors
may be taken without a meeting if a consent in writing, setting forth the
action to be taken, is signed by all the members of the Board of Directors or
committee, as the case may be. Such consent shall have the same force and
effect as a unanimous vote at a meeting and may be stated as such in any
document or instrument filed with the Secretary of State, and the execution of
such consent shall constitute attendance or presence in person at a meeting of
the Board of Directors or any such committee, as the case may be. Subject to
the requirements of the TBCA, the Articles of Incorporation or these bylaws for
notice of meetings, unless otherwise restricted by the Articles of
Incorporation, 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
the Board of Directors or any committee of directors, as the case may be, by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in such meeting shall constitute attendance and 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.
ARTICLE IV
COMMITTEES
Section 1. Designation; Powers. The Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from among
its members one or more committees, each of which shall be comprised of one or
more of its members, and may designate one or more of its members as alternate
members of any committee, who may, subject to any limitations imposed by the
Board of Directors, replace absent or disqualified members at any meeting of
that committee. Any such committee, to the extent provided in such resolution
or in the Articles of Incorporation or bylaws shall have and may exercise all
of the authority of the Board of Directors, subject to the limitations set
forth in the TBCA or below.
No committee of the Board of Directors shall have the authority of the
Board of Directors in reference to:
(1) amending the Articles of Incorporation, except that a
committee may, to the extent provided in the resolution designating
that committee or in the Articles of Incorporation or these bylaws,
exercise the authority of the Board of Directors vested in it in
accordance with Article 2.13 of the TBCA;
(2) proposing a reduction in the stated capital of the
Corporation in the manner permitted by Article 4.12 of the TBCA;
(3) approving a plan of merger or share exchange of the
Corporation;
(4) recommending to the shareholders the sale, lease or
exchange of all or substantially all of the property and assets of the
Corporation otherwise than in the usual and regular course of its
business;
10
<PAGE> 14
(5) recommending to the shareholders a voluntary dissolution
of the Corporation or a revocation thereof;
(6) amending, altering or repealing the bylaws of the
Corporation or adopting new bylaws of the Corporation;
(7) filling vacancies in the Board of Directors;
(8) filling vacancies in or designating alternate members of
any such committee;
(9) filling any directorship to be filled by reason of an
increase in the number of directors;
(10) electing or removing officers of the Corporation or
members or alternate members of any such committee;
(11) fixing the compensation of any member or alternate
members of such committee; or
(12) altering or repealing any resolution of the Board of
Directors that by its terms provides that it shall not be so amendable
or repealable.
Unless the resolution designating a particular committee, the Articles
of Incorporation or these bylaws expressly so provide, no committee of the
Board of Directors shall have the authority to authorize a distribution (as
such term is defined in the TBCA) or to authorize the issuance of shares of the
Corporation.
Section 2. Procedure; Meetings; Quorum. Any committee designated
pursuant to Section 1 of this Article shall choose its own chairman and
secretary, shall keep regular minutes of its proceedings and report the same to
the Board of Directors when requested, shall fix its own rules or procedures,
and shall meet at such times and at such place or places as may be provided by
such rules, or by resolution of such committee or of the Board of Directors. At
every meeting of any such committee, the presence of a majority of all the
members thereof shall constitute a quorum, and the affirmative vote of a
majority of the members present shall be necessary for the adoption by it of
any resolution.
Section 3. Dissolution. The Board of Directors may dissolve any
committee at any time, unless otherwise provided in the Articles of
Incorporation or these bylaws.
11
<PAGE> 15
ARTICLE V
OFFICERS
Section 1. Number, Titles and Term of Office. The officers of the
Corporation shall be a President and a Secretary and such other officers as the
Board of Directors may from time to time elect or appoint, including, without
limitation, a Chairman of the Board, one or more Vice Presidents (any one or
more of whom may be designated Executive Vice President or Senior Vice
President), a Treasurer, one or more Assistant Treasurers and one or more
Assistant Secretaries. Each officer shall hold office until his successor shall
be duly elected and shall qualify or until his death or until he shall resign
or shall have been removed in the manner hereinafter provided. Any number of
offices may be held by the same person. Except for the Chairman of the Board,
if any, no officer need be a director.
Section 2. Salaries. The salaries or other compensation, if any, of
the officers and agents of the Corporation shall be fixed from time to time by
the Board of Directors.
Section 3. Removal. Any officer or agent or member of a committee
elected or appointed by the Board of Directors may be removed, either with or
without cause, by the Board of Directors whenever in its judgment the best
interests of the Corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent or member of a committee shall
not of itself create contract rights.
Section 4. Vacancies. Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors.
Section 5. Powers and Duties of the Chief Executive Officer. The
President shall be the chief executive officer of the Corporation unless the
Board of Directors designates the Chairman of the Board (if any) or other
officer as chief executive officer. Subject to the control of the Board of
Directors, the chief executive officer shall have general executive charge,
management and control of the properties, business and operations of the
Corporation with all such powers as may be reasonably incident to such
responsibilities; he may agree upon and execute all leases, contracts,
evidences of indebtedness and other obligations in the name of the Corporation
and may sign all certificates for shares of capital stock of the Corporation;
and he shall have such other powers and duties as designated in accordance with
these bylaws and as from time to time may be assigned to him by the Board of
Directors.
Section 6. Powers and Duties of the Chairman of the Board. The
Chairman of the Board (if any) shall preside at all meetings of the
shareholders and of the Board of Directors; and the Chairman shall have such
other powers and duties as designated in these bylaws and as from time to time
may be assigned to him by the Board of Directors.
Section 7. Powers and Duties of the President. Unless the Board of
Directors otherwise determines, the President shall have the authority to agree
upon and execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Corporation; and, unless the Board of Directors
otherwise determines, he shall, in the absence of the Chairman of the Board or
if there be no Chairman of the Board, preside at all meetings of the
shareholders and (should he be a director) of the Board of Directors; and the
President shall have such other powers and
12
<PAGE> 16
duties as designated in accordance with these bylaws and as from time to time
may be assigned to him by the Board of Directors.
Section 8. Vice Presidents. The Vice President(s), if any, shall
perform such duties and have such powers as the Board of Directors may from
time to time prescribe. In addition, in the absence of the Chairman of the
Board (if any) or President, or in the event of their inability or refusal to
act, (i) a Vice President designated by the Board of Directors or (ii) in the
absence of such designation, the Vice President who is present and who is
senior in terms of time as a Vice President of the Corporation, shall perform
the duties of the Chairman of the Board (if any), or the President, as the case
may be, and when so acting shall have all the powers of and be subject to all
the restrictions upon the Chairman of the Board (if any), or the President;
provided that he shall not preside at meetings of the Board of Directors unless
he is a director.
Section 9. Treasurer. The Treasurer, if any, shall have responsibility
for the custody and control of all the funds and securities of the Corporation,
and he shall have such other powers and duties as designated in these bylaws
and as from time to time may be assigned to him by the Board of Directors. He
shall perform all acts incident to the position of Treasurer subject to the
control of the chief executive officer and the Board of Directors; and the
Treasurer shall, if required by the Board of Directors, give such bond for the
faithful discharge of his duties in such form as the Board of Directors may
require.
Section 10. Assistant Treasurers. Each Assistant Treasurer, if any,
shall have the usual powers and duties pertaining to his office, together with
such other powers and duties as designated in these bylaws and as from time to
time may be assigned to him by the chief executive officer or the Board of
Directors or the Treasurer. The Assistant Treasurers shall exercise the powers
of the Treasurer during that officer's absence or inability or refusal to act.
Section 11. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors, and the minutes of all meetings of the
shareholders, in books provided for that purpose; he shall attend to the giving
and serving of all notices; he may in the name of the Corporation affix the
seal (if any) of the Corporation to all contracts of the Corporation and attest
thereto; he may sign with the other appointed officers all certificates for
shares of capital stock of the Corporation; he shall have charge of the
certificate books, transfer books and stock ledgers, and such other books and
papers as the Board of Directors may direct, all of which shall at all
reasonable times be open to inspection of any director upon application at the
office of the Corporation during business hours; he shall have such other
powers and duties as designated in these bylaws and as from time to time may be
assigned to him by the chief executive officer or the Board of Directors; and
he shall in general perform all duties incident to the office of Secretary,
subject to the control of the chief executive officer and the Board of
Directors.
Section 12. Assistant Secretaries. Each Assistant Secretary, if any,
shall have the usual powers and duties pertaining to his office, together with
such other powers and duties as designated in these bylaws and as from time to
time may be assigned to him by the chief executive officer or the Board of
Directors or the Secretary. The Assistant Secretaries shall exercise the powers
of the Secretary during that officer's absence or inability or refusal to act.
13
<PAGE> 17
Section 13. Action With Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, each of the chief
executive officer and the Treasurer (if any), or either of them, shall have
power to vote and otherwise act on behalf of the Corporation, in person or by
proxy, at any meeting of shareholders of or with respect to any action of
shareholders of any other corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which this
Corporation may possess by reason of its ownership of securities in such other
corporation.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
Section 1. Right to Indemnification. Subject to the limitations and
conditions as provided in this Article VI, each person who was or is made a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative (hereinafter a "proceeding"), or
any appeal in such a proceeding or any inquiry or investigation that could lead
to such a proceeding, by reason of the fact that he or she, or a person of whom
he or she is the legal representative, is or was a director or officer of the
Corporation or while a director or officer 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 shall be indemnified by the
Corporation to the fullest extent permitted by the TBCA, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) against judgments, penalties (including excise and similar
taxes and punitive damages), fines, settlements and reasonable expenses
(including, without limitation, attorneys' fees) actually incurred by such
person in connection with such proceeding, and indemnification under this
Article VI shall continue as to a person who has ceased to serve in the
capacity which initially entitled such person to indemnity hereunder. The
rights granted pursuant to this Article VI shall be deemed contract rights, and
no amendment, modification or repeal of this Article VI shall have the effect
of limiting or denying any such rights with respect to actions taken or
proceedings arising prior to any such amendment, modification or repeal. It is
expressly acknowledged that the indemnification provided in this Article VI
could involve indemnification for negligence or under theories of strict
liability.
Section 2. Advance Payment. The right to indemnification conferred in
this Article VI shall include the right to be paid or reimbursed by the
Corporation the reasonable expenses incurred by a person of the type entitled
to be indemnified under Section 1 who was, is or is threatened to be made a
named defendant or respondent in a proceeding in advance of the final
disposition of the proceeding and without any determination as to the person's
ultimate entitlement to indemnification; provided, however, that the payment of
such expenses incurred by any such person in advance of the final disposition
of a proceeding, shall be made only upon delivery to the Corporation of a
written affirmation by such director or officer of his or her good
14
<PAGE> 18
faith belief that he or she has met the standard of conduct necessary for
indemnification under this Article VI and a written undertaking, by or on
behalf of such person, to repay all amounts so advanced if it shall ultimately
be determined that such indemnified person is not entitled to be indemnified
under this Article VI or otherwise.
Section 3. Indemnification of Employees and Agents. The Corporation,
by adoption of a resolution of the Board of Directors, may indemnify and
advance expenses to an employee or agent of the Corporation to the same extent
and subject to the same conditions under which it may indemnify and advance
expenses to directors and officers under this Article VI; and, the Corporation
may indemnify and advance expenses to persons who are not or were not
directors, 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 against any
liability asserted against him and incurred by him in such a capacity or
arising out of his status as such a person to the same extent that it may
indemnify and advance expenses to directors under this Article VI.
Section 4. Appearance as a Witness. Notwithstanding any other
provision of this Article VI, the Corporation may pay or reimburse expenses
incurred by a director or officer in connection with his or her appearance as a
witness or other participation in a proceeding at a time when he or she is not
a named defendant or respondent in the proceeding.
Section 5. Nonexclusivity of Rights. The right to indemnification and
the advancement and payment of expenses conferred in this Article VI shall not
be exclusive of any other right which a director or officer or other person
indemnified pursuant to Section 3 of this Article VI may have or hereafter
acquire under any law (common or statutory), provision of the Articles of
Incorporation of the Corporation or these bylaws, agreement, vote of
shareholders or disinterested directors or otherwise.
Section 6. Insurance. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any person who is or was
serving as a director, officer, employee or agent of the Corporation or 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,
proprietorship, employee benefit plan, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under this
Article VI.
Section 7. Shareholder Notification. To the extent required by law,
any indemnification of or advance of expenses to a director or officer in
accordance with this Article VI shall be reported in writing to the
shareholders with or before the notice or waiver of notice of the next
shareholders' meeting or with or before the next submission to shareholders of
a consent to action without a meeting and, in any case, within the 12-month
period immediately following the date of the indemnification or advance.
15
<PAGE> 19
Section 8. Savings Clause. If this Article VI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify and hold harmless each director,
officer or any other person indemnified pursuant to this Article VI as to
costs, charges and expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative to the full extent
permitted by any applicable portion of this Article VI that shall not have been
invalidated and to the fullest extent permitted by applicable law.
ARTICLE VII
CAPITAL STOCK
Section 1. Certificates of Stock. The certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent with
that required by law and the Articles of Incorporation, as shall be approved by
the Board of Directors. The Chairman of the Board (if any), President or a Vice
President (if any) shall cause to be issued to each shareholder one or more
certificates, which shall be signed by the Chairman of the Board (if any),
President or a Vice President (if any) and the Secretary or an Assistant
Secretary (if any) or the Treasurer or an Assistant Treasurer (if any)
certifying the number of shares (and, if the stock of the Corporation shall be
divided into classes or series, the class and series of such shares) owned by
such shareholder in the Corporation; provided, however, that any of or all the
signatures on the certificate may be facsimile. If the Board of Directors shall
have provided for a seal, such certificates shall bear such seal or a facsimile
thereof. The stock record books and the blank stock certificate books shall be
kept by the Secretary, or at the office of such transfer agent or transfer
agents as the Board of Directors may from time to time by resolution determine.
In case any officer, transfer agent or registrar who shall have signed or whose
facsimile signature or signatures shall have been placed upon any such
certificate or certificates shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued by the Corporation, such
certificate may nevertheless be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue. The stock certificates shall be consecutively numbered and shall be
entered in the books of the Corporation as they are issued and shall exhibit
the holder's name and number of shares.
Each certificate shall conspicuously bear any legend required pursuant
to Article 2.19 or Article 2.22 of the TBCA, as well as any other legend
required by law.
Section 2. Transfer of Shares. The shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal
representatives, upon surrender and cancellation of certificates for a like
number of shares (or upon compliance with the provisions of Section 5 of this
Article VII, if applicable). Upon such surrender to the Corporation or a
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer (or upon compliance with the provisions of Section 5 of this Article
VII, if applicable) and of compliance with any transfer restrictions applicable
thereto contained in an agreement to which the Corporation is a party or of
which the
16
<PAGE> 20
Corporation has knowledge by reason of legend with respect thereto placed on
any such surrendered stock certificate, it shall be the duty 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 3. Ownership of Shares. Unless otherwise provided in the TBCA,
and subject to the provisions of Chapter 8 - Investment Securities of the Texas
Business & Commerce Code:
(i) the Corporation may regard the person in whose name any
shares issued by the Corporation are registered in the share transfer records
of the Corporation at any particular time (including, without limitation, as of
a record date fixed pursuant to Article 2.26B or 2.26C of the TBCA) as the
owner of those shares at that time for purposes of voting those shares,
receiving distributions thereon or notices in respect thereof, transferring
those shares, exercising rights of dissent with respect to those shares,
exercising or waiving any preemptive right with respect to those shares,
entering into agreements with respect to those shares in accordance with
Article 2.22 or 2.30 of the TBCA, or giving proxies with respect to those
shares; and
(ii) neither the Corporation nor any of its officers,
directors, employees, or agents shall be liable for regarding that person as
the owner of those shares at that time for those purposes, regardless of
whether that person does not possess a certificate for those shares.
Section 4. Regulations Regarding Certificates. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issuance, transfer and registration or
the replacement of certificates for shares of capital stock of the Corporation.
Section 5. Lost, Stolen, Destroyed or Mutilated Certificates. The
Board of Directors may determine the conditions upon which a new certificate of
stock may be issued in place of a certificate that is alleged to have been
lost, stolen, destroyed or mutilated; and may, in its discretion, require the
owner of such certificate or his legal representative to give bond, with
sufficient surety, to indemnify the Corporation and each transfer agent and
registrar against any and all losses or claims which may arise by reason of the
issuance of a new certificate in the place of the one so lost, stolen,
destroyed or mutilated.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be
such as established from time to time by the Board of Directors.
Section 2. Corporate Seal. The Board of Directors may provide a
suitable seal, containing the name of the Corporation. The Secretary shall have
charge of the seal (if any). If and when so directed by the Board of Directors,
duplicates of the seal may be kept and used by the Treasurer, if any, or by any
Assistant Secretary or Assistant Treasurer.
17
<PAGE> 21
Section 3. Notice and Waiver of Notice. Whenever any notice is
required to be given by law, the Articles of Incorporation or these bylaws,
except with respect to notices of meetings of shareholders (with respect to
which the provisions of Article II, Section 6 apply) and except with respect to
notices of special meetings of directors (with respect to which the provisions
of Article VIII, Section 6 apply), said notice shall be deemed to be sufficient
if given (a) by telegraphic, cable or wireless transmission or (b) by deposit
of same in a post office box in a sealed prepaid wrapper addressed to the
person entitled thereto at his address as it appears on the records of the
Corporation, and such notice shall be deemed to have been given on the day of
such transmission or mailing, as the case may be.
Whenever notice is required to be given by law, the Articles of
Incorporation or these bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice.
Section 4. Resignations. Any director, member of a committee or
officer may resign at any time. Such resignation shall be made in writing and
shall take effect at the time specified therein, or if no time be specified, at
the time of its receipt by the chief executive officer or Secretary. The
acceptance of a resignation shall not be necessary to make it effective, unless
expressly so provided in the resignation.
Section 5. Facsimile Signatures. In addition to the provisions for the
use of facsimile signatures elsewhere specifically authorized in these bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors.
Section 6. Books and Records. The Corporation shall keep books and
records of account and shall keep minutes of the proceedings of its
shareholders, its Board of Directors and each committee of its Board of
Directors. The Corporation shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a
record of the original issuance of shares issued by the Corporation and a
record of each transfer of those shares that have been presented to the
Corporation for registration of transfer. Such records shall contain the names
and addresses of all past and current shareholders of the Corporation and the
number and class of shares issued by the Corporation held by each of them. Any
books, records, minutes and share transfer records may be in written form or in
any other form capable of being converted into written form within a reasonable
time.
ARTICLE IX
AMENDMENTS
The Board of Directors may amend or repeal the Corporation's bylaws,
or adopt new bylaws, unless: (a) the Articles of Incorporation or the TBCA
reserves the power exclusively to the shareholders in whole or part; or (b) the
shareholders, in amending, repealing or adopting a particular bylaw, expressly
provide that the Board of Directors may not amend or repeal that bylaw.
18
<PAGE> 22
Unless the Articles of Incorporation or a bylaw adopted by the
shareholders provides otherwise as to all or some portion of the Corporation's
bylaws, the Corporation's shareholders may amend, repeal or adopt the
Corporation's bylaws even though the bylaws may also be amended, repealed or
adopted by the Board of Directors.
19
<PAGE> 1
Exhibit 3.5
CERTIFICATE OF INCORPORATION
OF
HENLEY INTERNATIONAL, INC.
First: The name of the Corporation is HENLEY INTERNATIONAL, INC.
Second: The registered office of the Corporation in the State of Delaware
is located at 1209 Orange Street in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
Third: The nature of the business, objects and purposes to be transacted,
promoted or carried on by the Corporation are:
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 Corporation is authorized to issue one class of capital stock,
designated Common Stock (hereinafter referred to as "Common Stock"). The total
number of shares of Common Stock which the Corporation shall have authority to
issue is Ten Thousand (10,000) and the par value of each of such shares is One
Dollar ($1.00), amounting in the aggregate to Ten Thousand Dollars ($10,000.00).
Each share of Common Stock shall entitle the holder thereof to one vote, in
person or by proxy, at any and all meetings of the stockholders of the
Corporation on all propositions before such meetings. No holder of Common Stock
shall have the right to cumulate such holder's votes for the election of
directors, but each holder of Common Stock shall be entitled to one vote for
each share held thereof in the election of each director of the Corporation.
No stockholder shall be entitled as a matter of right, preemptive or
otherwise, to subscribe for, purchase or receive any other securities, rights or
options of the Corporation now or hereafter authorized to be issued, or other
securities held in the treasury of the Corporation, whether issued or sold for
cash or other consideration or as a dividend or otherwise.
Fifth:
A. The name and mailing address of the Incorporator is as follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
J. Randolph Ewing Nine Greenway Plaza
Suite 1717
Houston, Texas 77046
</TABLE>
B. The name and mailing address of each person who is to serve as a
director of the Corporation until the first annual meeting of the stockholders
or until a successor is elected and qualified, is as follows:
Page 1 of 5
<PAGE> 2
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Kenneth W. Davidson 104 Industrial Boulevard
Sugar Land, Texas 77478
</TABLE>
Sixth: The Corporation is to have perpetual existence.
Seventh: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
(1) To adopt, amend, or repeal the By-laws of the Corporation.
(2) To authorize and cause to be executed mortgages and liens upon the
real and personal property of the Corporation.
(3) To set apart out of any of the funds of the Corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
(4) By a majority of the whole Board of Directors, to designate one or
more committees, each committee to consist of two 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 the committee. Any such committee, to the extent
provided in the resolution or in the By-laws of the Corporation, shall have and
may exercise the powers 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; provided,
however, that the By-laws may provide that in the absence or disqualification
of any member of such committee or committees, 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 meeting in place of any such absent or disqualified
member.
(5) When and as authorized by the affirmative vote of the holders of a
majority of the stock issued and outstanding having voting power given at a
stockholders' meeting duly called upon such notice as is required by applicable
law, or when authorized by the written consent of the holders of a majority of
the voting stock issued and outstanding, to sell, lease or exchange all or
substantially all of the property and assets of the Corporation, including its
goodwill and its corporate franchises, upon such terms and conditions and for
such consideration, which may consist in whole or in part of money or property
including securities of any other corporation or corporations, as the Board of
Directors shall deem expedient and for the best interests of the Corporation.
The Corporation may in its By-laws confer powers upon its Board of
Directors in addition to the foregoing and in addition to the powers and
authority expressly conferred upon the Board of Directors by applicable law.
Eighth:
(a) Limitation of Liability. To the fullest extent permitted by the
General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended, a director of the Corporation shall not be liable to the
Page 2 of 5
<PAGE> 3
Corporation or the stockholders for monetary damages for breach of fiduciary
duty as a director.
(b) Indemnification and Insurance.
(1) 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, officer, employee or agent 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 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 or
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.
(ii) 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,
officer, employee or agent 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 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 and 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 of 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.
(iii) To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections Eighth (b)(i) and (b)(ii) of
this Certificate of Incorporation, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
(iv) The determination that an officer, director, employee or
agent has met the applicable standard of conduct set forth in Sections
Eighth (b)(i) and (b)(ii) of this Certificate of Incorporation (unless
indemnification is ordered by a court) 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
Page 3 of 5
<PAGE> 4
(ii) if such 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.
(v) Expenses incurred by an officer or director in defending a
civil or criminal action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the 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 Section Eighth (b). Such
expenses incurred by other employees and agents may be so paid upon such terms
and conditions, if any, as the Board of Directors deems appropriate.
(vi) The indemnification and advancement of expenses provided
hereunder or granted pursuant to the other subsections of this Section Eighth
(b) 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, vote of stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such office. The Board of Directors shall also have the authority
to authorize the Corporation to make advances with respect to and to indemnify
any person named in Sections Eighth (b)(i) and (b)(ii) of this Certificate of
Incorporation against, or to make payments on behalf of or to reimburse such
person for, any costs or expenses (including attorneys' fees), judgments or
fines or amounts paid in settlement in connection with any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative to the extent not inconsistent with law as
evidenced by an opinion of counsel.
(vii) The Corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent 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 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 to indemnify him
against such liability under the provisions of this Section Eighth (b).
(viii) For purposes of this Section Eighth (b), reference 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, officers,
employees or agents so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Section Eighth (b) with respect to such constituent corporation if its separate
existence had continued.
For purpose of this Section Eighth (b), references to "other
enterprises" shall include employee benefit plans; 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, officer, employee or agent of the
Corporation which imposes duties
Page 4 of 5
<PAGE> 5
on, or involves services by, such director, officer, employee, or agent 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 Section Eighth (b).
(ix) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section Eighth (b) shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(x) Notwithstanding anything contained in this Certificate of
Incorporation or the By-laws of the Corporation (and notwithstanding that a
lesser percentage may be specified by law, this Certificate of Incorporation or
the By-laws of the Corporation) to the contrary, the alteration, change,
amendment, repeal or adoption of any provisions inconsistent with this Section
Eighth shall require the affirmative vote of the holders of at least 80% of the
voting power (after giving effect to the provisions of Section Tenth) of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors of the Corporation, voting together as a
single class.
Ninth: Meetings of stockholders and the Board of Directors may be held
within or without the State of Delaware, as the By-laws may provide. The books
of the Corporation may be kept (subject to any applicable law) outside of the
State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-laws of the Corporation. Elections
of directors need not be by written ballot unless the By-laws of the
Corporation shall so provide.
Tenth: 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 applicable law and this Certificate of
Incorporation, and all rights conferred upon stockholders herein, are granted
subject to this reservation.
IN WITNESS WHEREOF, I the undersigned, being the incorporator hereinabove
named, do hereby execute this Certificate of Incorporation this 31st day of
October, 1988.
/s/ J. Randolph Ewing
-----------------------------------
J. RANDOLPH EWING
Page 5 of 5
<PAGE> 6
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
HENLEY INTERNATIONAL, INC.
(Pursuant to Section 242 of
the General Corporation Law of the
State of Delaware)
It is hereby certified that:
FIRST: The name of the corporation is Henley International, Inc.
(hereinafter referred to as the "Corporation").
SECOND: The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on October 31, 1988.
THIRD: Article FIRST of the Certificate of Incorporation is hereby deleted
and replaced in its entirety by the following:
"FIRST: The name of the corporation is Henley Operating Company."
FOURTH: The foregoing amendment to the Certificate of Incorporation was
authorized by the affirmative vote of the Board of Directors of the Corporation,
followed by the affirmative vote of the holders of all outstanding shares of
stock of the Corporation in accordance with Section 228(a) of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused the undersigned to execute
this Certificate of Amendment on its behalf as of this 30th day of November,
1989 and they do hereby affirm under the penalties of perjury that the
statements contained herein are true and correct.
HENLEY INTERNATIONAL, INC.
a Delaware corporation
By: /s/ Ken Davidson
--------------------------
Printed Name: KEN DAVIDSON
--------------
Title: President
---------------------
Attest:
/s/ Ken Davidson
------------------------
Printed Name: KEN DAVIDSON
-------------
Title: Secretary
--------------------
<PAGE> 7
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OR
HENLEY OPERATING COMPANY
* * * * *
Henley Operating Company, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), certifies as follows:
FIRST: That the sole director of the Corporation, by unanimous written
consent without a meeting in accordance with the provisions of Section 141(f) of
the General Corporation Law of the State of Delaware, duly adopted a resolution
setting forth a proposed amendment to the Certificate of Incorporation of the
Corporation, declaring the amendment to be advisable and authorizing the
admission of the amendment to the sole shareholder of the Corporation for
consideration thereof. The resolution setting forth the proposed amendment to
the Certificate of Incorporation of the Corporation is as follows:
RESOLVED, that the sole director deems it advisable and in the best
interest of the Corporation, and recommends to the sole shareholder, that the
Certificate of Incorporation of the Corporation be amended by changing Article
First thereof so that, as amended, Article First will read as follows:
"First: The name of the Corporation is Maxxim Medical, Inc."
SECOND: That in lieu of a meeting and vote of stockholders, the sole
stockholder has given written consent to the amendment in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware.
<PAGE> 8
THIRD: That the foregoing amendment was duly adopted in accordance with
the applicable provisions of Sections 228 and 242 of the General Corporation Law
of the State of Delaware.
FOURTH: That this Certificate of Amendment of the Certificate of
Incorporation has been executed by its President, and attested by its Secretary
and shall be filed and recorded in accordance with Section 103 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed and attested by its duly authorized officers this 17th day of May, 1993.
HENLEY OPERATING COMPANY
By: /s/ Kenneth W. Davidson
------------------------------
Kenneth W. Davidson, President
ATTEST:
By: /s/ Kenneth W. Davidson
------------------------------
Kenneth W. Davidson, Secretary
<PAGE> 1
EXHIBIT 3.6
BY-LAWS OF
HENLEY OPERATING COMPANY, formerly
HENLEY INTERNATIONAL, INC.
A Delaware Corporation
Date of Adoption: October 31, 1988
<PAGE> 2
BY-LAWS
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Article I. OFFICES
Section 1.1 Registered Office ................... 1
Section 2.1 Other Offices ....................... 1
Article II. STOCKHOLDERS
Section 2.1 Place of Meetings ................... 1
Section 2.2 Voting List ......................... 1
Section 2.3 Annual Meetings ..................... 1
Section 2.4 Special Meetings .................... 2
Section 2.5 Notices of Meeting .................. 2
Section 2.6 Quorum; Adjournments ................ 2
Section 2.7 Voting; Proxies ..................... 2
Section 2.8 Action Without Meeting .............. 3
Section 2.9 Voting of Stock of Certain Holders;
Elections; Inspections ............ 3
Section 2.10 Conduct of Meetings ................. 4
Section 2.11 Treasury Stock ...................... 5
Section 2.12 Fixing Record Date .................. 5
Article III. BOARD OF DIRECTORS
Section 3.1 Powers .............................. 6
Section 3.2 Number, Election and Term ........... 6
Section 3.3 Vacancies, Additional Directors and
Removal From Office ............... 6
Section 3.4 Regular Meetings .................... 7
Section 3.5 Special Meetings .................... 7
Section 3.6 Notice of Special Meeting ........... 7
Section 3.7 Place of Meetings; Books; Order
of Business ....................... 7
Section 3.8 Quorum and Participation ............ 7
Section 3.9 Presumption of Assent ............... 8
Section 3.10 Meetings By Telephone or Similar
Communications Equipment .......... 8
Section 3.11 Action Without Meeting .............. 8
Section 3.12 Compensation ........................ 8
Section 3.13 Approval or Ratification of Acts or
Contracts by Stockholders ......... 8
Article IV. COMMITTEE OF DIRECTORS
Section 4.1 Designation, Powers and Name ........ 9
Section 4.2 Procedure; Meetings; Quorum ......... 9
Section 4.3 Compensation ........................ 9
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
Article V. NOTICE
Section 5.1 Methods of Giving Notice .................................. 10
Section 5.2 Written Waiver ............................................ 10
Article VI. OFFICERS
Section 6.1 Officers .................................................. 10
Section 6.2 Election and Term of Office ............................... 11
Section 6.3 Removal and Resignation ................................... 11
Section 6.4 Resignation ............................................... 11
Section 6.5 Vacancies ................................................. 11
Section 6.6 Salaries .................................................. 11
Section 6.7 President ................................................. 11
Section 6.8 Vice Presidents ........................................... 12
Section 6.9 Secretary ................................................. 12
Section 6.10 Treasurer ................................................. 12
Section 6.11 Assistant Secretaries and
Assistant Treasurers .................................... 13
Article VII. CONTRACTS, CHECKS AND DEPOSITS
Section 7.1 Contracts ................................................. 13
Section 7.2 Checks and Notes .......................................... 13
Section 7.3 Deposits .................................................. 13
Article VIII. STOCK CERTIFICATES
Section 8.1 Issuance .................................................. 13
Section 8.2 Lost Certificates ......................................... 14
Section 8.3 Transfers ................................................. 15
Section 8.4 Registered Stockholders ................................... 15
Section 8.5 Regulations Regarding Certificates ........................ 15
Article IX. DIVIDENDS
Section 9.1 Declaration ............................................... 15
Section 9.2 Reserve ................................................... 15
Article X. INDEMNIFICATION ................................................ 15
Article XI. MISCELLANEOUS
Section 11.1 Seal ...................................................... 16
Section 11.2 Books ..................................................... 16
Section 11.3 Fiscal Year ............................................... 16
Section 11.4 Resignations .............................................. 16
Section 11.5 Facsimile Signatures ...................................... 16
Section 11.6 Reliance upon Books, Reports and
Records ................................................. 16
Section 11.7 Gender and Number ......................................... 16
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 11.8 Laws and Statutes...................................... 16
Section 11.9 Headings............................................... 16
Article XII. AMENDMENT................................................. 17
</TABLE>
(iii)
<PAGE> 5
BY-LAWS
OF
HENLEY INTERNATIONAL, INC.
ARTICLE 1
OFFICES
SECTION 1.1. Registered Office. The registered office of the
Corporation required by the General Corporation Law of the State of Delaware to
be maintained in the State of Delaware shall be the registered office named in
the original Certificate of Incorporation of the Corporation, or such other
office as may be designated from time to time by the Board of Directors in the
manner provided by law. Should the Corporation maintain a principal office or
place of business within the State of Delaware, such registered office need not
be identical to such principal office or place of business of the Corporation.
SECTION 1.2. 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
STOCKHOLDERS
SECTION 2.1. Place of Meetings. All meetings of the stockholders
shall be held at the principal office of the Corporation, or at such other
place either within or without the State of Delaware and at such date and time
as shall be designated from time to time by the Board of Directors and stated
in the notice or waivers of notice of the meeting.
SECTION 2.2. Voting List. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least 10 days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order for each class
of stock, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least 10 days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice, or if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 2.3. Annual Meetings. An annual meeting of the stockholders,
for the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, within or without the State of Delaware, on the
third Friday in February, and at such
<PAGE> 6
time as the Board of Directors shall fix each year and set forth in the notice
of the meeting, which date shall be within 13 months subsequent to the later of
the date of incorporation or the last annual meeting of stockholders.
SECTION 2.4 Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board, by the
President or by the Board of Directors, or by written order of a majority of the
directors, and shall be called by the Chairman of the Board, the President or
the Secretary at the request in writing of stockholders owning a majority of the
common stock of the Corporation issued and outstanding and entitled to vote.
Special meetings of holders of the outstanding shares of preferred stock of the
Corporation may be called in the manner and for the purposes provided in the
resolutions of the Board of Directors providing for the issue of such stock (a
"Preferred Stock Designation"). All requests for special meetings shall state
the purposes of the proposed meeting. the President or directors so calling, or
the stockholders so requesting, any such meeting shall fix the date and time of,
and the place (either within or without the State of Delaware) for, the meeting.
SECTION 2.5 Notices of Meeting. Written notice of the annual and each
special meeting of stockholders, stating the place, date and hour and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called, shall be given to each stockholder entitled to vote thereat not less
than 10 nor more than 60 days before the meeting. Such notice may be delivered
either personally or by mail. If mailed, notice is given when deposited in the
United States mail, postage prepaid, directed to the stockholder at his address
as it appears on the records of the Corporation.
SECTION 2.6 Quorum; Adjournments. Except as otherwise provided in a
Preferred Stock Designation, the holders of stock having a majority of voting
power entitled to vote at any stockholders' meeting, present in person or
represented by proxy, shall constitute a quorum at any meeting of stockholders
for the transaction of business except as otherwise provided by applicable law
or by the Certificate of Incorporation. The stockholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the departure at said meeting of enough stockholders to leave
less than a quorum present.
Notwithstanding the other provisions of the Certificate of
Incorporation or these By-laws, the chairman of the meeting or the holders of a
majority of the shares of such stock, present in person or represented by proxy,
although not constituting a quorum, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting of the time
and place of the adjourned meeting, until a quorum shall be present or
represented. If the adjournment is for more than 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. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
SECTION 2.7 Voting; Proxies. When a quorum is present at any meeting
of the stockholders, the vote of the holders of a majority of the stock having
voting power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is not one upon which, by
express provision of the statutes, of the Certificate of Incorporation or of
these By-laws, a different vote is required, in
-2-
<PAGE> 7
which case such express provision shall govern and control the decision of such
question. Where a separate vote by class is required, the affirmative vote of
the majority of shares of such class present in person or represented by proxy
at the meeting shall be the act of such class. Every stockholder having the
right to vote at a meeting of stockholders or to express consent or dissent to
a corporate action in writing without a meeting shall be entitled to vote in
person, or by proxy appointed by an instrument in writing subscribed by such
stockholder, bearing a date not more than three years prior to voting, unless
such instrument provides for a longer period, and filed with the Secretary of
the Corporation, or such other officer as the Board of Directors may from time
to time determine by resolution, before, or at the time of, the meeting.
All proxies shall be received and taken charge of and all ballots
shall be received and canvassed by the secretary of the meeting who shall decide
all questions touching upon the qualification of voters, the validity of the
proxies, and the acceptance or rejection of votes, unless an inspector or
inspectors shall have been appointed by the chairman of the meeting, in which
event such inspector or inspectors shall decide all such questions. Each proxy
shall be revocable unless expressly provided therein to be irrevocable and
coupled with an interest sufficient in law to support an irrevocable power. If
such instrument shall designate two or more persons to act as proxies, unless
such instrument shall provide the contrary, a majority of such persons present
at any meeting at which their powers thereunder are to be exercised shall have
and may exercise all of the powers of voting or giving consents thereby
conferred, or if only one be present, then such powers may be exercised by that
one, or, if an even number attend and a majority do not agree on any particular
issue, each proxy so attending shall be entitled to exercise such powers in
respect of the same portion of the shares as he represents of the proxies
representing such shares.
SECTION 2.8 Action Without 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 stock 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 thereupon 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 by the Secretary of the Corporation to those
stockholders who have not consented in writing.
SECTION 2.9 Voting of Stock of Certain Holders; Elections;
Inspectors. Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxy as the by-laws of such
corporation may prescribe, or in the absence of such provision, as the Board of
Directors of such corporation may determine. Shares standing in the name of a
deceased person may be voted by the executor or administrator of such
deceased person, either in person or by proxy. Shares standing in the name of
a guardian, conservator or trustee may be voted by such fiduciary, either in
person or by proxy, but no fiduciary shall be entitled to vote shares held in
such fiduciary capacity without a transfer of such shares into the name of such
fiduciary. Shares standing in the name of a receiver may be voted by such
receiver. A stockholder whose shares are pledged shall be entitled to vote such
shares, unless in the transfer by the pledgor on the books of the Corporation,
he has expressly empowered the pledgee to vote thereon, in which case only the
pledgee, or his proxy, may represent the stock and vote thereon.
-3-
<PAGE> 8
If shares or other securities having voting power stand of record in
the names of two or more persons, whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety or otherwise, or if
two or more persons have the same fiduciary relationship respecting the same
shares, unless the Secretary of the Corporation is given written notice to the
contrary and is furnished with a copy of the instrument or order appointing them
or creating the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect:
(1) If only one votes, his act binds all;
(2) If more than one vote, but the vote is evenly split on any particular
matter, each faction may vote the securities in question proportionately,
or any person voting the shares, or a beneficiary, if any, may apply to the
Court of Chancery or such other court as may have jurisdiction to appoint
an additional person to act with the persons so voting the shares, which
shall then be voted as determined by a majority of such persons and the
person appointed by the Court. If the instrument so filed shows that any
such tenancy is held in unequal interests, a majority or even split for the
purpose of this subsection shall be a majority or even split in interest.
All voting, except as required by the Certificate of Incorporation or where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefor by stockholders holding a majority of the issued and outstanding
stock present in person or by proxy at any meeting, a stock vote shall be taken.
Every stock vote shall be taken by written ballots, each of which shall state
the name of the stockholder or proxy voting and such other information as may be
required under the procedure established for the meeting. All elections of
directors shall be by ballot, unless otherwise provided in the Certificate of
Incorporation.
At any meeting at which a vote is taken by ballots, the chairman of the
meeting may appoint one or more inspectors, each of whom shall subscribe an oath
or affirmation to execute faithfully the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. Such
inspector shall receive the ballots, count the votes and make and sign a
certificate of the result thereof. The chairman of the meeting may appoint any
person to serve as inspector, except no candidate for the office of director
shall be appointed as an inspector.
Unless otherwise provided in the Certificate of Incorporation, cumulative
voting for the election of directors shall be prohibited.
SECTION 2.10 Conduct of Meetings. The meetings of the stockholders shall be
presided over by a chairman of the meeting, who shall be the Chairman of the
Board, or if he is not present, by the President, or if neither the Chairman of
the Board nor the President is present, by a chairman elected at the meeting.
The Secretary of the Corporation, if present, shall act as secretary of such
meetings, or if he is not present, an Assistant Secretary shall so act, and if
neither the Secretary nor an Assistant Secretary is present, then a secretary
shall be appointed by the chairman of the meeting. The chairman of any meeting
of stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him in order. Unless the chairman of the meeting of
stockholders shall otherwise determine, the order of business shall be as
follows:
-4-
<PAGE> 9
(a) Calling of meeting to order.
(b) Election of a chairman and the appointment of a secretary, if
necessary.
(c) Presentation of proof of the due calling of the meeting.
(d) Presentation and examination of proxies and determination of a quorum.
(e) Reading and settlement of the minutes of the previous meeting.
(f) Reports of officers and committees.
(g) The election of directors if an annual meeting, or a meeting called for
that purpose.
(h) Unfinished business.
(i) New business.
(j) Adjournment.
SECTION 2.11. Treasury Stock. The Corporation shall not vote,
directly or indirectly, shares of its own stock owned by it, and such shares
shall not be counted in determining the total number of outstanding shares.
SECTION 2.12. Fixing Record Date. The Board of Directors may fix in
advance a date, not exceeding 60 days preceding the date of any meeting of
stockholders or any adjournment thereof, or the date for payment of any dividend
or distribution, or the date for the allotment of rights, or the date when any
change, conversion or exchange of capital stock shall go into effect, or a date
in connection with obtaining express consent to corporate action in writing
without a meeting, as a record date for the determination of the stockholders
entitled to notice of or to vote at, any such meeting and any adjournment
thereof, or entitled to receive payment of such dividend or distribution, or to
receive any such allotment of rights, or to exercise the rights in respect of
any such change, conversion or exchange of capital stock, or to give such
consent, and in such case such stockholders and only such stockholders as shall
be stockholders of record on the date so fixed shall be entitled to such notice
of, and to vote at, any such meeting and any adjournment thereof, or to receive
payment of such dividends or distribution, or to receive such allotment of
rights, or to exercise such rights, or to give such consent, as the case may be,
notwithstanding any such record date fixed as aforesaid. With respect to a
meeting of stockholders, the record date shall not be less than 10 days before
the date of such meeting.
If the Board of Directors does not fix a record date for any meeting of the
stockholders, the record date for determining stockholders entitled to notice of
or to vote at such meeting shall be at the close of business on the date next
preceding the day on which notice is given, or, if in accordance with Section
5.2 of these By-laws notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. If, in accordance with Section
2.8 of this Article II, corporate action without a meeting of stockholders is to
be taken, the record date for determining stockholders entitled to express
consent to such corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed. The record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. 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.
-5-
<PAGE> 10
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law or by the Certificate of Incorporation or by these
By-laws directed or required to be exercised or done by the stockholders.
SECTION 3.2. Number, Election and Term. The number of directors which
shall constitute the whole Board shall from time to time be fixed and determined
by resolution of the Board of Directors and shall be set forth in the notice of
any meeting of stockholders held for the purpose of electing directors (provided
that no decrease in the number of directors which would have the effect of
shortening the term of an incumbent director may be made by the Board of
Directors and further provided that the number of directors shall never less
than one [1]). If the Board of Directors makes no such determination, the number
of directors shall be the number set forth in the Certificate of Incorporation.
Each director shall hold office for the term for which he is elected, and until
his successor shall have been elected and qualified or until his earlier death,
resignation or removal. The directors shall be elected at the annual meeting of
stockholders, except as provided in Section 3.3 of these By-laws. Unless
otherwise provided in the Certificate of Incorporation, directors need not be
residents of Delaware or stockholders of the Corporation.
SECTION 3.3. Vacancies, Additional Directors and Removal From
Office. If any vacancy occurs in the Board of Directors caused by death,
resignation, retirement, disqualification or removal from office of any
director, or otherwise, or if any new directorship is created by an increase in
the authorized number of directors, a majority of the directors then in office,
though less than a quorum, or a sole remaining director, may choose a successor
or fill the newly created directorship and a director so chosen shall hold
office until the next annual election and until his successor shall be duly
elected and shall qualify, unless sooner displaced.
Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
Certificate of Incorporation, vacancies and created directorships of such class
or classes or series may be filled by a majority of the directors elected by
such class or classes or series therein then in office, or by a sole remaining
director so elected. If the directors of the Corporation are divided into
classes, any directors elected to fill vacancies or newly created directorships
shall hold office until the next election of the class for which such
directors shall have been chosen, and until their successors shall be duly
elected and shall qualify.
Any director or the entire Board of Directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors; provided that, unless the Certificate of
Incorporation otherwise provides, if the Board of Directors is elected by class
or classes or series thereof, then the stockholders may effect such removal
only for cause, and provided further that, if the Certificate of Incorporation
expressly grants to stockholders the right to cumulate votes for the election
of directors and if less than the entire Board is to be removed, no director
may be removed without cause if the votes cast against his removal would be
-6-
<PAGE> 11
sufficient to elect him if then cumulatively voted at an election of the entire
Board of Directors, or, if there be classes of directors, at an election of the
class of directors of which such director is a part.
SECTION 3.4. Regular Meetings; Election of Chairman of the Board. A
regular meeting of the Board of Directors shall be held each year, without
notice other than this By-law, at the place of, and immediately following, the
annual meeting of stockholders if a quorum is present, and other regular
meetings of the Board of Directors shall be held each year, at such time and
place as the Board of Directors may provide, by resolution, either within or
without the State of Delaware, without notice other than such resolution. At
the first meeting of the Board of Directors in each year at which a quorum
shall be present, held next after the annual meeting of stockholders, the
Board of Directors shall proceed to the election of the officers of the
Corporation and a Chairman of the Board. The Chairman of the Board shall be
elected from among the directors and shall preside at all meetings of the Board
of Directors or of the stockholders of the Corporation. In the Chairman's
absence, such duties shall be attended to by the Vice Chairman of the Board, if
any. The Chairman may delegate to any qualified person the chairmanship of any
meeting of the stockholders, either on a temporary or a permanent basis. The
Chairman of the Board shall formulate and submit to the Board of Directors or
the executive committee (if any) matters of general policy of the Corporation
and shall perform such other duties as usually appertain to the office or as
may be prescribed by the Board of Directors or the executive committee.
SECTION 3.5. Special Meetings. A special meeting of the Board of
Directors may be called by the Chairman of the Board or by the President and
shall be called by the Secretary on the written request of any two directors.
The Chairman of the Board or President so calling, or the directors so
requesting, any such meeting shall fix the time and place, either within or
without the State of Delaware, of such meeting.
SECTION 3.6. Notice of Special Meeting. Personal written,
telegraphic, cable or wireless notice of special meetings of the Board of
Directors shall be given to each director at least 24 hours prior to the time
of such meeting. Any director may waive notice of any meeting. The attendance
of a director at any meeting shall constitute a waiver of notice of such
meeting, except where a director attends a meeting for the purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting, except that notice shall be given of any
proposed amendment to the by-laws if it is to be adopted at any special meeting
or with respect to any other matter where notice is required by statute.
SECTION 3.7. Place of Meetings; Books; Order of Business. The
directors may hold their meetings and may have an office and keep the books of
the Corporation, except as otherwise provided by law, in such place or places,
within or without the State of Delaware, as the Board of Directors may from time
to time determine by resolution. At all meetings of the Board of Directors,
business shall be transacted in such order as shall from time to time be
determined by the Chairman of the Board (if any), or in his absence by the
President, or by resolution of the Board of Directors.
SECTION 3.8. Quorum and Participation. A majority of the Board of
Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and the act of a majority of the directors
present at any meeting at
-7-
<PAGE> 12
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 the Board 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 3.9. Presumption of Assent. A director who is present at a
meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action unless his dissent shall
be entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as secretary of the meeting
before the adjournment thereof. Such right to dissent shall not apply to a
director who voted in favor of such action.
SECTION 3.10. Meetings By Telephone or Similar Communications
Equipment. Members of the Board of Directors, or members of any committee
designated by the Board of Directors, may participate in a meeting of the Board
of Directors or such committee, as the case may be, 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 shall
constitute presence in person and attendance 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.
SECTION 3.11. Action Without 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 thereof as provided in Article IV of these By-laws, may be taken
without a meeting, if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee. Such consent
shall have the same force and effect as a unanimous vote at a meeting, and may
be stated as such in any document or instrument filed with the Secretary of
State of Delaware.
SECTION 3.12. Compensation. Unless otherwise restricted by the
Certificate of Incorporation, the Board of Directors shall have the authority
to fix the compensation of directors. No provision of these By-laws shall be
construed to preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 3.13. Approval or Ratification of Acts or Contracts by
Stockholders. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the
stockholders, or at any special meeting of the stockholders called for the
purpose of considering any such act or contract, and any act or contract that
shall be approved or be ratified by the vote of the stockholders holding a
majority of the issued and outstanding shares of stock of the Corporation
entitled to vote and present in person or by proxy at such meeting (provided
that a quorum is present), shall be as valid and as binding upon the
Corporation and upon all of the stockholders as if it had been approved or
ratified by every stockholder of the Corporation. In addition, any such act or
contract may be approved or ratified by the written consent of stockholders
holding a majority of the issued and outstanding shares of capital stock of the
Corporation entitled to vote and such consent shall be as valid and as binding
upon the Corporation and upon all of the stockholders as if it has been
approved or ratified by every stockholder of the Corporation.
-8-
<PAGE> 13
ARTICLE IV
COMMITTEE OF DIRECTORS
SECTION 4.1. Designation, Powers and Name. The Board of Directors
may, by resolution passed by a majority of the whole Board, designate one or
more committees, including, if they shall so determine, an executive committee,
each such committee to consist of one or more of the directors of the
Corporation. Any such designated committee shall have and may exercise such of
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation as may be provided in such resolution.
Any such designated committee may authorize the seal of the Corporation to be
affixed to all papers which may require it. No such committee shall have the
power or authority in reference to amending the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors as provided by statute, fix any of the preferences or rights of
such shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation), 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, By-laws, or Certificate of Incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock, or to adopt a certificate of
ownership and merger. 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 such committee. In the absence or
disqualification of any member of such committee or committees, 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 meeting in the place of any such absent or
disqualified member. Such committee or committees shall have such name or names
and such limitations of authority as may be determined from time to time by
resolution adopted by the Board of Directors.
SECTION 4.2. Procedure; Meetings; Quorum. Any committee designated
pursuant to Section 4.1 of these By-laws shall choose its own chairman, shall
keep regular minutes of its proceedings and report the same to the Board of
Directors when requested, shall fix its own rules or procedures, and shall meet
at such times and at such place or places as may be provided by such rules, or
by resolution of such committee or resolution of the Board of Directors. At
every meeting of any such committee, the presence of a majority of all of the
members thereof shall constitute a quorum and the affirmative vote of a majority
of the members present shall be necessary for the adoption by it of any
resolution.
SECTION 4.3. Compensation. Members of special or standing committees
may be allowed compensation for attending committee meetings, if the Board of
Directors shall so determine.
-9-
<PAGE> 14
ARTICLE V
NOTICE
SECTION 5.1. Methods of Giving 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, member of any committee or stockholder,
such notice shall be in writing and delivered personally or mailed to such
director, member or stockholder; provided that in the case of a director or a
member of any committee, such notice may be given orally or by telephone,
telegram, telegraphic, cable or wireless transmission. If mailed, notice to a
director, member of a committee or stockholder shall be deemed to be given when
deposited in the United States mail first class in a sealed envelope, with
postage thereon prepaid, addressed, in the case of a stockholder, to the
stockholder at the stockholder's address as it appears on the records of the
corporation or, in the case of a director or a member of a committee, to such
person at his business address. If sent by telegram, notice to a director or
member of a committee shall be deemed to be given when the telegram, so
addressed, is delivered to the telegraph company. Notice shall be deemed to have
been given on the date of any telegraphic, cable or wireless transmission.
SECTION 5.2. Written Waiver. Whenever any notice is required to be
given 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 said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting 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. 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 unless
so required by the Certificate of Incorporation or these By-laws.
ARTICLE VI
OFFICERS
SECTION 6.1. Officers. The officers of the Corporation shall be a
President and a Secretary, and may include one or more Vice Presidents, any one
or more of which may be designated Executive Vice President or Senior Vice
President, a Treasurer, and such other officers as the Board of Directors may
elect or appoint. The Board of Directors, in its discretion, may also choose a
Chairman of the Board of Directors (who must be a director). The Board of
Directors may appoint such other officers and agents, including Assistant Vice
Presidents, Assistant Secretaries and Assistant Treasurers, as it shall deem
necessary, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined by the Board. Any two or
more offices may be held by the same person unless the Certificate of
Incorporation provides otherwise. No officer shall execute, acknowledge, verify
or countersign any instrument on behalf of the Corporation in more than one
capacity, if such instrument is required by law, by these By-laws or by any act
of the Corporation to be executed, acknowledged, verified or countersigned by
two or more officers. None of the officers need be a director, except in the
case of the Chairman of the Board of Directors, and none of the officers need be
a stockholder of the Corporation.
-10-
<PAGE> 15
SECTION 6.2. Election and Term of Office. The officers of the
Corporation shall be elected annually by the Board of Directors at its first
regular meeting held after the annual meeting of stockholders or as soon
thereafter as is conveniently possible. Each officer shall hold office until his
successor shall have been chosen and shall have qualified or until his death or
the effective date of his resignation or removal, or until he shall cease to be
a director in the case of the Chairman and the Vice Chairman.
SECTION 6.3. Removal. Any officer or agent elected or appointed by
the Board of Directors may be removed, with or without cause, by the affirmative
vote of a majority of the Board of Directors whenever, in its judgment, the best
interests of the Corporation shall be served thereby, but such removal shall be
without prejudice to the contractual rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
SECTION 6.4. Resignation. Any officer may resign at any time by
giving written notice to the Corporation. Any such resignation shall take effect
at the date of the receipt of such notice or at any later time specified
therein, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 6.5. Vacancies. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be filled by the
Board of Directors for the unexpired portion of the term.
SECTION 6.6. Salaries. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors or pursuant to its
direction. No officer shall be prevented from receiving such salary by reason of
his also being a director.
SECTION 6.7. President. The President shall be the chief executive
officer of the Corporation and, subject to the control of the Board of
Directors, the Chairman of the Board, and the Vice Chairman of the Board, shall
in general manage, supervise and control the properties, business and affairs of
the Corporation with all such powers as may be reasonably incident to such
responsibilities. Unless the Board of Directors, the Chairman of the Board, or
the Vice Chairman of the Board otherwise determines, the President shall have
the authority to agree upon and execute all leases, contracts, evidences of
indebtedness and other obligations in the name of the Corporation. In the
absence of the Chairman of the Board and the Vice Chairman of the Board, the
President shall preside at all meetings of the stockholders and (should he be a
director) of the Board of Directors. He may also preside at any such meeting
attended by the Chairman of the Board if he is so designated by the Chairman of
the Board. He shall have the power to appoint and remove subordinate officers,
agents and employees, except those elected or appointed by the Board of
Directors. The President shall keep the Board of Directors and the executive
committee fully informed and shall consult them concerning the business of the
Corporation. He may sign with the Secretary or any other officer of the
Corporation thereunto authorized by the Board of Directors certificates for
shares of the Corporation and any deeds, bonds, mortgages, contracts, checks,
notes, drafts or other instruments which the Board of Directors has authorized
to be executed, except in cases where the signing and execution thereof has been
expressly delegated by these By-laws or by the Board of Directors to some other
officer or agent of the Corporation, or is required by law to be otherwise
executed. He shall vote, or give a proxy to any other officer of the Corporation
to vote, all shares of stock of any other corporation standing
-11-
<PAGE> 16
in the name of the Corporation and shall exercise any all rights and powers
which the Corporation may possess by reason of its ownership of securities in
such other corporation and in general he shall perform all other duties, and
shall have such other powers, as may be prescribed by the stockholders, the
Board of Directors, the Chairman of the Board, the Vice Chairman of the Board,
or the executive committee from time to time.
SECTION 6.8. Vice Presidents. In the absence of the President, or in the
event of his inability or refusal to act, the Executive Vice President (or in
the event there shall be no Vice President designated Executive Vice President,
any Vice President designated by the Board) shall perform the duties and
exercise the powers of the President, and when so acting shall have all of the
powers of and be subject to all of the restrictions upon the President. In the
absence of a designation by the Board of Directors of a Vice President to
perform the duties of the President, or in the event of his absence or
inability or refusal to act, the Vice President who is present and who is
senior in terms of time as a Vice President of the Corporation shall so act.
Any Vice President may sign, with the Secretary or Assistant Secretary,
certificates for shares of the Corporation. The Vice Presidents shall perform
such other duties, and shall have such other powers, as from time to time may
be assigned to them by the President, the Board of Directors or the executive
committee (if any).
SECTION 6.9. Secretary. The Secretary shall (a) keep the minutes of the
meetings of the stockholders, the Board of Directors and committees of
directors, (b) see that all notices are duly given in accordance with
the provisions of these By-laws and as required by law, (c) be custodian of the
corporate records and of the seal of the Corporation, see that the seal of the
Corporation or a facsimile thereof is affixed to all certificates for shares
prior to the issuance thereof and to all documents, the execution of which on
behalf of the Corporation under its seal is duly authorized in accordance with
the provisions of these By-laws and attest the affixation of the seal of the
Corporation thereto, (d) keep or cause to be kept a register of the post office
address of each stockholder which shall be furnished by such stockholder, (e)
sign with the President, or an Executive Vice President or Vice President,
certificates for shares of the Corporation, the issue of which shall have been
authorized by resolution of the Board of Directors, (f) have general charge of
the stock transfer books of the Corporation, and (g) in general, perform all
duties normally incident to the office of Secretary and such other duties, and
shall have such other powers, as from time to time may be assigned to him by
the President, the Board of Directors or the executive committee (if any).
SECTION 6.10. Treasurer. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such
sum and with such surety or sureties as the Board of Directors shall determine.
He shall (a) have charge and custody of and be responsible for all funds and
securities of the Corporation, receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever and deposit all such
moneys in the name of the Corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of Section
7.3 of these By-laws, (b) prepare, or cause to be prepared, for submission at
each regular meeting of the Board of Directors, at each annual meeting of the
stockholders, and at such other times as may be required by the Board of
Directors, the President or the executive committee (if any), a statement of
financial condition of the Corporation in such detail as may be required, and
(c) in general, perform all of the duties incident to the office of Treasurer
and such other duties, and shall have such other powers, as from time to time
may be assigned to him by the President, the Board of Directors or the
executive committee (if any).
-12-
<PAGE> 17
SECTION 6.11. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries and Assistant Treasurers shall, in general, perform such
duties and have such powers as shall be assigned to them by the Secretary or
the Treasurer, respectively, or by the President, the Board of Directors or the
executive committee. The Assistant Secretaries and Assistant Treasurers shall,
in the absence or inability or refusal to act of the Secretary or Treasurer,
respectively, perform all functions and duties which such absent officers may
delegate, but such delegation shall not relieve the absent officer from the
responsibilities and liabilities of his office. The Assistant Secretaries may
sign, with the President or a Vice President, certificates for shares of the
Corporation, the issuance of which shall have been authorized by a resolution
of the Board of Directors. The Assistant Treasurers shall respectively, if
required by the Board of Directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the Board of Directors
shall determine.
ARTICLE VII
CONTRACTS, CHECKS AND DEPOSITS
SECTION 7.1. Contracts, Subject to the provisions of Section 6.1 of these
By-laws, the Board of Directors may authorize any officer, officers, agent or
agents, to enter into any contract or execute and deliver any instrument in the
name of and on behalf of the Corporation, and such authority may be general or
confined to specific instances.
SECTION 7.2. Checks and Notes. All checks, demands, drafts or other
orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the Corporation shall be signed by such officer or
officers or such agent or agents of the Corporation, and in such manner, as
shall be determined by the Board of Directors.
SECTION 7.3. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VIII
STOCK CERTIFICATES
SECTION 8.1. Issuance. The shares of the Corporation shall be represented
by certificates, provided that the Board of Directors may provide by resolution
that some or all classes or series of the Corporation's stock may be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to a certificate or certificates
showing the number of shares of stock registered in his name on the books of
the Corporation. The certificates shall be in such form as may be determined by
the Board of Directors, shall be issued in numerical order and shall be
entered in the books of the Corporation as they are issued. They shall exhibit
the holder's name and number of shares (and if the stock of the Corporation
shall be divided into classes or series, the class or series of such
-13-
<PAGE> 18
shares) and shall be signed by the President or a Vice President and by the
Secretary or an Assistant Secretary. Any or all of the signatures on the
certificate may be facsimiles. The stock record books and the blank stock
certificate books shall be kept by the Secretary, or at the office of such
transfer agent or transfer agents as the Board of Directors may from time to
time by resolution determine. In case any officer, transfer agent or registrar
who shall have signed or whose facsimile signature or signatures shall have been
placed upon any such certificate or certificates shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued by the
Corporation, such certificate may nevertheless be issued by the Corporation with
the same effect as if such person 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 qualifications, limitations or
restrictions of 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 of stock; provided that, except as otherwise
provided by statute, 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 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. Within a reasonable time after
the issuance or transfer of uncertificated stock, the Corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this Section 8.1
or otherwise required by law or with respect to this Section 8.1 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. Except as otherwise expressly provided by law, the rights and
obligations of the holders of uncertificated stock and the rights and
obligations of the holders of certificates representing stock of the same class
and series shall be identical.
All certificates surrendered to the Corporation for transfer shall be
cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except
that in the case of a lost, stolen, destroyed or mutilated certificate a new
one may be issued therefor upon such terms and with such indemnity, if any, to
the Corporation as the Board of Directors may prescribe. Certificates shall not
be issued representing fractional shares of stock.
SECTION 8.2. Lost Certificates. The Board of Directors may direct a new
certificate of stock or uncertificated shares to 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 of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate, or his
legal representative, to advertise the same in such manner as it shall require
or to give the Corporation a bond in such sum as it may deem sufficient to
indemnify it against any claim that may be made against the Corporation on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares, or both.
-14-
<PAGE> 19
SECTION 8.3. Transfers. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and register the
transaction upon its books. Upon presentation to the Corporation or the transfer
agent of the Corporation of an instruction with a request to transfer, pledge or
release upon its books, and shall provide the registered owner with such notices
as may be required by law. Transfers of shares shall be made only on the books
of the Corporation by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney and filed with the Secretary of the
Corporation or the transfer agent.
SECTION 8.4. Registered Stockholders. The Corporation shall be
entitled to treat the registered owner of any share or shares of stock whether
certificated or uncertificated 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 the laws
of the State of Delaware.
SECTION 8.5. Regulations Regarding Certificates. The Board of
Directors shall have the power and authority to make all such rules and
regulations as they may deem expedient concerning the issue, transfer and
registration or the replacement of certificates for shares of capital stock of
the Corporation.
ARTICLE IX
DIVIDENDS
SECTION 9.1. Declaration. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to applicable law. Dividends may be paid in cash, in property
or in shares of capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 9.2. Reserve. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Board of Directors shall think
conducive to the interest of the Corporation, and the Directors may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE X
INDEMNIFICATION
The Corporation shall indemnify its directors, officers, employees and
agents to the extent set forth in Section Eighth of the Certificate of
Incorporation of the Corporation.
-15-
<PAGE> 20
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Seal. The Board of Directors may provide a suitable
seal, containing the name of the corporation, and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
SECTION 11.2. Books. The books of the Corporation may be kept
(subject to any provision of law) outside the State of Delaware at such place or
places as may be designated from time to time by the Board of Directors.
SECTION 11.3. Fiscal Year. The fiscal year of the Corporation shall
be as established from time to time by the Board of Directors.
SECTION 11.4. Resignations. Any director, member of a committee or
officer may resign at any time. Such resignation shall be made in writing and
shall take effect at the time specified therein, or if no time be specified, at
the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation.
SECTION 11.5. Facsimile Signatures. In addition to the provisions for
the use of facsimile signature elsewhere specifically authorized in these
By-laws, facsimile signatures of any officer or officers of the Corporation may
be used whenever and as authorized by the Board of Directors.
SECTION 11.6. Reliance upon Books, Reports and Records. Each director
and each member of any committee designated by the Board of Directors shall, in
the performance of his duties, be fully protected in relying in good faith upon
the books or account 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.
SECTION 11.7. Gender and Number. Wherever used or appearing in these
By-laws, pronouns of the masculine gender shall include the persons of the
female sex as well as the neuter gender and the singular shall include the
plural wherever appropriate.
SECTION 11.8. Laws and Statutes. Wherever used or appearing in these
By-laws, the words "law" or "laws" or "statute" or "statutes," respectively,
shall mean and refer to laws and statutes, or a law or statute, of the State of
Delaware, to the extent only that such is or are expressly applicable, except
where otherwise expressly stated or the context required that such words not be
so limited.
SECTION 11.9. Headings. The headings of the Articles and Sections of
these By-laws are inserted for convenience of reference only and shall not be
deemed to be a part thereof or used in the construction or interpretation
thereof.
-16-
<PAGE> 21
ARTICLE XII
AMENDMENT
If provided in the Certificate of Incorporation of the Corporation, the
Board of Directors shall have the power to adopt, amend and repeal from time to
time By-laws of the Corporation, subject to the right of the stockholders
entitled to vote with respect thereto to amend or repeal such By-laws as adopted
or amended by the Board of Directors.
-17-
<PAGE> 1
EXHIBIT 3.7
ARTICLES OF INCORPORATION
OF
MAXXIM INVESTMENT MANAGEMENT, INC.
The undersigned, to form a corporation under Chapter 78 of the Nevada
Revised Statutes, certifies that:
I. NAME
The name of the corporation is Maxxim Investment Management, Inc. (the
"Corporation").
II. RESIDENT AGENT AND PRINCIPAL OFFICE
The initial resident agent of the Corporation shall be GRIFFIN CORPORATE
SERVICES. The address of the agent and the registered office of the Corporation
shall be located at the following address:
GRIFFIN CORPORATE SERVICES
1325 Airmotive Way, Suite 130
Reno, Nevada 89902
The Corporation may change its registered office and may also maintain an
office or offices at such other places, in or out of the State of Nevada, as the
board of directors may from time to time determine. Corporate business of every
kind and nature may be conducted, and meetings of the directors and shareholders
may be held in and out of the State of Nevada.
III. PURPOSE
This Corporation is organized for the purpose of engaging in any business
or enterprise permitted by law.
IV. CAPITAL STOCK
The total authorized stock of the Corporation shall consist of 1,000 shares
of common stock without par. As permitted in NRS 78.195, the board of directors,
acting upon a vote of three-fourths of the directors, may:
4.1 Authorize the issuance of other classes of stock, establishing with
respect to each such class any preferences, rights (including voting
rights), privileges, limitations, restrictions, and/or other
variations, as permitted in NRS 78.035(4); and
-1-
<PAGE> 2
4.2 Authorize the conversion of stock between the different classes
and establish the terms and conditions therefor.
V. NON-ASSESSABLE STOCK
The capital stock of the Corporation shall not be subject to assessment for
any purpose, including the payment of the debts of the Corporation, after the
amount of the subscription price, or par value, has been paid in money,
property, or services, as the board of directors shall determine. No stock
issued as fully paid up shall ever be assessable or assessed, and this provision
of the Articles of Incorporation may not be amended or deleted except by
unanimous vote of all shareholders.
VI. DIRECTORS
The Corporation shall be governed by a Board of Directors consisting of at
least one director. The number of directors may from time to time be increased
or decreased as permitted by law and in the manner provided for in the By-Laws
of the Corporation. A director does not have to be a shareholder.
VII. INITIAL DIRECTORS
The initial board of directors shall consist of three (3) directors whose
names and addresses are as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Peter M. Graham 810 Sugar Creek Blvd., Sugar Land, TX 77479
Janice George 1325 Airmotive Way, Suite 130, Reno NV 89502
Alan Blazei 2926 W. Autumn Run Circle, Sugar Land, TX 77479
</TABLE>
VIII. LIABILITY
No director or officer shall be personally liable to the Corporation or its
shareholders for any act or omission arising from his or her failure to exercise
due care regarding the management of this Corporation, or for any other breaches
of fiduciary duty, except for;
8.1 Acts or omissions which involve intentional misconduct, fraud, or
a knowing violation of law; or
8.2 The payment of dividends in violation of Nevada law, including NRS
78,300.
-2-
<PAGE> 3
IX. INCORPORATOR
The incorporator of the Corporation is Thomas A. Cotter whose address is
Shumaker, Loop & Kendrick, LLP, 101 East Kennedy Boulevard, Tampa, Florida
33602.
X. TERM
The Corporation shall have perpetual existence.
XI. AMENDMENT
The Articles may be amended by a vote of shareholders holding a majority
of the voting stock of the Corporation.
XII. PREEMPTIVE RIGHTS
Except to the extent provided otherwise in the Corporation's By-Laws, no
shareholder shall have any preemptive right to acquire shares being issued by
the Corporation and the Corporation shall have no obligation to first offer to
sell such shares to the existing shareholders in proportion of their present
holdings.
XIII. CUMULATIVE VOTING
Except to the extent provided otherwise in the Corporation's By-Laws, the
principal of cumulative voting shall not apply to the election of directors or
officers.
XIV. TRANSACTIONS WITH INTERESTED
DIRECTORS, OFFICER OR EMPLOYEES
The Corporation may not enter into any business transaction in which a
director, officer, or employee has a personal interest, whether directly or
indirectly, unless approved unanimously by all non-interested directors, or if
none, by all voting shareholders.
DATED: 12/19/97
--------------
/s/ Thomas A. Cotter
---------------------------------
Thomas A. Cotter, Incorporator
-3-
<PAGE> 1
EXHIBIT 3.8
BYLAWS OF
MAXXIM INVESTMENT MANAGEMENT, INC.
ARTICLE ONE - SHAREHOLDERS
1.01 Annual Meeting. A meeting of shareholders shall be held each year
for the election of directors and for the transaction of any other business
that may come before the meeting. The time and place of the meeting shall be
designated by the Board of Directors.
1.02 Special Meeting. Special meetings of the shareholders, for any
purpose or purposes, shall be held when directed by the Chairperson of the
Board, President or Board of Directors, or at the request of the holders of not
less than one-tenth (1/10) of all outstanding shares of the Corporation
entitled to vote at the meeting.
1.03 Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Nevada, as the place of meeting for any
annual or special meeting of the shareholders. If no designation is made, the
place of meeting shall be the principal office of the Corporation in the State
of Nevada.
1.04 Action Without a Meeting.
(a) Unless otherwise provided in the Articles of Incorporation,
action required or permitted to be taken at any meeting of the shareholders may
be taken without a meeting, without prior notice, and without a vote if the
action is taken by the holders of outstanding shares of each voting group
entitled to vote on it having not less than the minimum number of votes with
respect to each voting group that would be necessary to authorize or take such
action at a meeting at which all voting groups and shares entitled to vote were
present and voted. In order to be effective, the action must be evidenced by
one (1) or more written consents describing the action taken, dated and signed
by approving shareholders having the requisite number of votes of each voting
group entitled to vote, and delivered to the Corporation at its principal office
in Nevada or its principal place of business, or to the corporate Secretary or
another office or agent of the Corporation having custody of the book in which
proceedings of meetings of shareholders are recorded. No written consent shall
be effective to take corporate action unless, within sixty (60) days of the date
of the earliest dated consent delivered in the manner required by this Section
1.04, written consents signed by the number of holders required to take action
are delivered to the Corporation.
(b) Any written consent may be revoked before the date that the
Corporation received the required number of consents to authorize the proposed
action. No revocation is effective unless in writing and until received by the
Corporation at its principal office or its principal place of business, or
received by the corporate Secretary or other officer or agent of the
-1-
<PAGE> 2
BYLAWS OF MAXXIM INVESTMENT MANAGEMENT, INC.
Corporation having custody of the book in which proceedings of meetings of
shareholders are recorded.
(c) Within ten (10) days after obtaining authorization by written
consent, notice must be given to those shareholders who have not consented in
writing or who are not entitled to vote on the action. The notice shall fairly
summarize the material features of the authorized action and, if the action is
one for which dissenters' rights are provided under the Articles of
Incorporation or Bylaws, the notice shall contain a clear statement of the right
of shareholders dissenting therefrom to be paid the fair market value of their
shares upon compliance with applicable law.
(d) A consent signed as required by this Section 1.04 has the effect
of a vote taken at a meeting and may be described as such in any document.
(e) Whenever action is taken as provided in this Section 1.04, the
written consent of the shareholders consenting or the written reports of
Inspectors appointed to tabulate such consents shall be filed with the minutes
of proceedings of shareholders.
1.05 Notice of Meeting.
(a) Except as provided under Nevada law, a written or printed notice
stating the place, day, and hour of the 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 first-class mail, by or at the direction
of the President or the Secretary, or the officer or other persons calling the
meeting, to each shareholder of record entitled to vote at the meeting. If the
notice is mailed at least thirty (30) days before the date of the meeting, it
may be effected by a class of United States mail other than first-class. If
mailed, the notice shall be effective when mailed, provided the notice is mailed
postage prepaid and correctly addressed to the shareholder's address shown in
the current record of shareholders of the Corporation.
(b) When a meeting is adjourned to another time or place, it shall
not be necessary to give any notice of the adjourned meeting if the time and
place to which the meeting is adjourned are announced at the meeting at which
time the adjournment is taken. At the adjourned meeting any business may be
transacted that might have been transacted on the original date of the meeting.
If, however, after the adjournment, the Board of Directors fixes a new record
date for the adjourned meeting, a notice of the adjourned meeting shall be given
as provided in this Section 1.05 to each shareholder of record on the new record
date entitled to vote at such meeting.
-2-
<PAGE> 3
BYLAWS OF MAXXIM INVESTMENT MANAGEMENT, INC.
1.06 Waiver of Notice of Meeting. Whenever any notice is required to be
given to any shareholder, a waiver in writing signed by the person or persons
entitled to such notice, whether signed before, during or after the time of
the meeting and delivered to the Corporation for inclusion in the minutes or
filing with the corporate records, shall be equivalent to the giving of such
notice. Attendance of a person at a meeting shall constitute a waiver of lack
of or defective notice of the meeting, unless the person objects at the
beginning of the meeting to the holding of the meeting or the transacting of any
business at the meeting, or lack of defective notice of a particular matter at
a meeting that is not within the purpose or purposes described in the meeting
notice, unless the person objects to considering the matter when it is
presented.
1.07 Fixing of Record Date.
(a) In order that the Corporation may determine the shareholders
entitled to notice of, or to vote at, any meeting of shareholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to demand a special meeting, the Board of Directors may
fix, in advance, a record date, not more than seventy (70) days before the date
of the meeting or any other action. A determination of shareholders of record
entitled to notice of, or to vote at, a meeting of shareholders shall apply to
any adjournment of the meeting unless the Board of Directors fixes a new record
date, which it must do if the meeting is adjourned to a date more than one
hundred twenty (120) days after the date fixed for the original meeting.
(b) If no prior action is required by the Board of Directors, the
record date for determining shareholders entitled to take action without a
meeting is the date the first signed written consent is delivered to the
Corporation under Section 1.04 hereof.
1.08 Voting Record.
(a) After fixing a record date for a meeting of shareholders, the
Corporation shall prepare an alphabetical list of the names of all its
shareholders entitled to notice of the meeting, arranged by voting group with
the address of, and the number, class, and series, if any, of shares held by,
each shareholder. The shareholders' list must be available for inspection by any
shareholder for a period of ten (10) days before the meeting or such shorter
time as exists between the record date and the meeting and continuing through
the meeting at the Corporation's principal office, at a place identified in the
meeting notice in the city where the meeting will be held, or at the office of
the Corporation's transfer agent or registrar. Any shareholder of the
Corporation or the shareholder's agent or attorney is entitled on written demand
to inspect the shareholders' list (subject to the requirements of Nevada law)
during regular business hours and at the shareholder's expense, during the
period it is available for inspection.
-3-
<PAGE> 4
BYLAWS OF MAXXIM INVESTMENT MANAGEMENT, INC.
(b) The Corporation shall make the shareholders' list available at
the meeting of shareholders, and any shareholder or the shareholder's agent or
attorney is entitled to inspect the list at any time during the meeting or any
adjournment.
1.09 Voting Per Share. Except as otherwise provided in the Articles of
Incorporation or by Nevada law, each shareholder is entitled to one (1) vote
for each outstanding share held by him or her on each matter voted at a
shareholders' meeting.
1.10 Voting of Shares.
(a) A shareholder may vote at any meeting of shareholders of the
Corporation, either in person or by proxy.
(b) Shares standing in the name of another corporation, domestic or
foreign, may be voted by the officer, agent or proxy designated by the Bylaws
of the corporate shareholder or, in the absence of any applicable provision in
such Bylaws, by a person or persons designated by the Board of Directors of
the corporate shareholder. In the absence of any such designation or, in the
case of conflicting designation by the corporate shareholder, the Chairman of
the Board, the President, any Vice President, the Secretary, and the Treasurer
of the corporate shareholder, in that order, shall be presumed to be fully
authorized to vote the shares.
(c) Shares held by an administrator, executor, guardian, personal
representative, or conservator may be voted by him or her, either in person or
by proxy, without a transfer of such shares into his or her name. Shares
standing in the name of a trustee may be voted by him or her, either in person
or by proxy, but no trustee shall be entitled to vote shares held by him or her
without a transfer of such shares into his or her name or the name of his or
her nominee.
(d) Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be
voted by such person without the transfer into his or her name.
(e) If shares stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in
common, tenants by the entirety, or otherwise, or if two or more persons have
the same fiduciary relationship respecting the same shares, unless the
Secretary of the Corporation is given notice to the contrary and is furnished
with a copy of the instrument or order appointing them or creating the
relationship wherein it is so provided, then acts with respect to voting shall
have the following effect: if only one (1) votes, in person or by proxy, that
act binds all; if more than one (1) vote, in person or by proxy, the act of the
majority so voting binds all; if more than one (1) votes, in person or by
proxy, but the vote is evenly split on any particular matter, each fraction is
entitled to vote the share or shares in question proportionally; or if the
instrument or order so filed shows that any such tenancy is
-4-
<PAGE> 5
BYLAWS OF MAXXIM INVESTMENT MANAGEMENT, INC.
held in unequal interest, a majority or a vote evenly split for purposes hereof
shall be a majority or a vote evenly split in interest. The principles of this
Section 1.10 shall apply, insofar as possible, to execution of proxies,
waivers, consents, or objections and for the purpose of ascertaining the
presence of a quorum.
1.11 Proxies.
(a) Any shareholder of the Corporation, other persons entitled to
vote on behalf of a shareholder pursuant to Nevada law, or attorney-in-fact
for such persons, may vote the shareholder's shares in person or by proxy. Any
shareholder may appoint a proxy to vote or otherwise act for him or her by
signing an appointment form, either personally or by an attorney-in-fact. An
executed telegram or cablegram appearing to have been transmitted by such
person, or a photographic, photostatic, or equivalent reproduction of an
appointment form, shall be deemed a sufficient appointment form.
(b) An appointment of a proxy is effective when received by the
Secretary of the Corporation or such other officer or agent authorized to
tabulate votes, and shall be valid for up to eleven (11) months, unless a
longer period is expressly provided in the appointment form.
(c) The death or incapacity of the shareholder appointing a proxy
does not affect the right of the Corporation to accept the proxy's authority
unless notice of the death or incapacity is received by the Secretary or other
officer or agent authorized to tabulate votes before the proxy exercises
authority under the appointment.
(d) An appointment of a proxy is revocable by the shareholder unless
the appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest.
1.12 Quorum.
(a) Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares exists with
respect to that matter. Except as otherwise provided in the Articles of
Incorporation or Bylaws, a majority of the shares entitled to vote on the
matter by each voting group, represented in person or by proxy, shall
constitute a quorum at any meeting of shareholders, but in no event shall a
quorum consist of less than one third (1/3) of the shares of each voting group
entitled to vote. If less than a majority of outstanding shares entitled to
vote are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. After a quorum
has been established at any shareholders' meeting, the subsequent withdrawal
of shareholders, so as to reduce the number of shares entitled to vote at the
meeting below the number required for
-5-
<PAGE> 6
BYLAWS OF MAXXIM INVESTMENT MANAGEMENT, INC.
a quorum, shall not affect the validity of any action taken at the meeting or
any adjournment thereof.
(b) Once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
1.13. Manner of Action. If a quorum is present, action on a matter (other
than the election of Directors) by a voting group is approved if the votes cast
within the voting group favoring the action exceed the votes case opposing the
action, unless a greater or lesser number of affirmative votes is required by
the Articles of Incorporation or Bylaws.
1.14 Voting for Directors. Unless otherwise provided in the Articles of
Incorporation, Directors will be elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present.
1.15 Inspectors of Election. Before each shareholders' meeting, the Board
of Directors or President may appoint one or more Inspectors of Election. Upon
appointment, each inspector shall take and sign an oath faithfully to execute
the duties of Inspector at the meeting with strict impartiality and to the
best of his or her ability. Inspectors shall determine the number of shares
outstanding, the number of shares present at the meeting, and whether a quorum
is present. The Inspectors shall receive votes and ballots and determine all
challenges and questions as to the right to vote. The Inspectors shall count
and tabulate all votes and ballots and determine the result. Inspectors shall
perform other duties as are proper to conduct elections of Directors and votes
on other matters with fairness to all shareholders. Inspectors shall make a
certificate of the results of elections of Directors and votes on other
matters. No Inspector shall be a candidate for election as a Director of the
Corporation.
ARTICLE TWO - BOARD OF DIRECTORS
2.01 General Powers. Except as provided in the Articles of Incorporation
and Bylaws, all corporate powers shall be exercised by or under the authority
of, and the business and affairs of the Corporation shall be managed under the
direction of, its Board of Directors.
2.02 Number, Terms, Classifications, and Qualification. The Board of
Directors of the Corporation shall consist of one (1) or more persons. The
number of Directors may at any time and from time to time be increased or
decreased by action of either the shareholders or the Board of Directors, by no
decrease in the number of Directors shall have effect of shortening the term of
any incumbent Director. A Director must be a natural person at least eighteen
(18) years of age, but need not be a citizen of United States of America, a
resident of the State of
-6-
<PAGE> 7
BYLAWS OF MAXXIM INVESTMENT MANAGEMENT, INC.
Nevada, or a shareholder of the Corporation. Each Director shall hold office
until a successor has been elected and qualified or until an earlier
resignation, removal from office, or death.
2.03 Regular Meetings. An annual regular meeting of the Board of Directors
shall be held without notice immediately after, and at the same place as, the
annual meeting of the shareholders and at such other time and place as may be
determined by the Board of Directors. The Board of Directors may, at any time
and from time to time, provide by resolution the time and place, either within
or without the State of Nevada, for the holding of the annual regular meeting
or additional regular meeting of the Board of Directors without other notice
than the resolution.
2.04 Special Meetings.
(a) Special meetings of the Board of Directors may be called by the
Chairperson of the Board, the President, or any two Directors.
(b) The person or persons authorized to call special meetings of the
Board of Directors may designate any place, either within or without the State
of Nevada, as the place for holding any special meeting of the Board of
Directors called by them. If no designation is made, the place of the meeting
shall be the principal office of the Corporation in Nevada.
(c) Notice of any special meeting of the Board of Directors may be
given by any reasonable means, oral or written, and at any reasonable time
before the meeting. The reasonableness of notice given in connection with any
special meeting of the Board of Directors shall be determined in light of all
pertinent circumstances. It shall be presumed that notice of any special
meeting given at least two (2) days before the meeting either orally (by
telephone or in person), or by written notice delivered personally or mailed to
each Director at his or her business or residence address, is reasonable. If
mailed, the notice of any special meeting shall be deemed to be delivered on
the second day after it is deposited in the United States mail, so addressed,
with postage prepaid. If notice is given by telegram, it shall be deemed to be
delivered when the telegram is delivered to the telegraph company. Neither the
business to be transacted at, nor the purpose or purposes of, any special
meeting need be specified in the notice or in any written waiver of notice of
the meeting.
2.05 Waiver of Notice of Meeting. Notice of a meeting of the Board of
Directors need not be given to any Director who signs a written waiver of
notice before, during or after the meeting. Attendance of a Director at a
meeting shall constitute a waiver of notice of the meeting and a waiver of any
and all objections to the place of the meeting, the time of the meeting, and
the manner in which it has been called or convened, except when a Director
states, at the beginning of the meeting or promptly upon arrival at the
meeting, any objection to the transaction of business because the meeting is
not lawfully called or convened.
-7-
<PAGE> 8
BYLAWS OF MAXXIM INVESTMENT MANAGEMENT, INC.
2.06 Quorum. A majority of the number of Directors fixed by, or in the
manner provided in, those Bylaws shall constitute a quorum for the transaction
of business; provided, however, that whenever, for any reason, a vacancy occurs
in the Board of Directors, a quorum shall consist of a majority of the remaining
Directors until the vacancy has been filled.
2.07 Manner of Action. The act of a majority of the Directors present at
a meeting at which a quorum is present when the vote is taken shall be the act
of the Board of Directors.
2.08 Presumption of Assent. A Director of the Corporation who is present
at a meeting of the Board of Directors or a committee of the Board of Directors
when corporate action is taken shall be presumed to have assented to the action
taken, unless he or she objects at the beginning of the meeting, or promptly
upon arrival, to holding the meeting or transaction specific business at the
meeting, or he or she votes against or abstains from the action taken.
2.09 Action Without a Meeting. Any action required or permitted to be
taken at a meeting of the Board of Directors or a committee thereof may be taken
without a meeting if a consent in writing, stating the action so taken, is
signed by all the Directors or all the members of the committee, as the case may
be. Action taken under this Section 2.11 is effective when the last Director or
committee member signs the consent, unless the consent specifies a different
effective date. A consent signed under this Section 2.11 shall have the effect
of a meeting vote and may be described as such in any document.
2.10 Meetings by Means of Conference Telephone Call or Similar Electronic
Equipment. Members of the Board of Directors or a committee thereof may
participate in a meeting of the Board of Directors or such committee by means of
a conference telephone call or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Participation
by such means constitutes presence in person at a meeting.
2.11 Resignation. Any Director may resign at any time by giving written
notice to the Corporation, the Board of Directors, or its Chairperson. The
resignation of any Director shall take effect when the notice is delivered
unless the notice specifies a later effective date, in which event the Board of
Directors may fill the pending vacancy before the effective date if they provide
that the successor does not take office until the effective date.
2.12 Removal. Any Director, or the entire Board of Directors, may be
removed at any time, with or without cause, by action of the shareholders,
unless the Articles of Incorporation provide that Directors may be removed only
for cause. If a Director was elected by a voting group of shareholders, only
the shareholders of that voting group may participate in the vote to remove
the Director. The notice of the meeting at which a vote is taken to remove a
Director must state that the purpose or one of the purposes of the meeting is
the removal of the Director or Directors.
-8-
<PAGE> 9
BYLAWS OF MAXXIM INVESTMENT MANAGEMENT, INC.
2.13 Vacancies. Any vacancy in the Board of Directors, including any
vacancy created by reason of an increase in the number of Directors, may be
filled by the affirmative vote of a majority of the remaining Directors through
less than a quorum of the Board of Directors, or by the shareholders.
2.14 Compensation. Each Director may be paid the expenses, if any, of
attendance at each meeting of the Board of Directors, and may be paid a stated
salary as a Director or a fixed sum for attendance at each meeting of the Board
of Directors or both, as may from time to time be determined by action of the
Board of Directors. No such payment shall preclude any Director from serving
the Corporation in any other capacity and receiving compensation therefor.
ARTICLE THREE - COMMITTEES OF THE BOARD OF DIRECTORS
3.01 Establishment. The Board of Directors, by resolution adopted by a
majority of the full Board of Directors, may designate from among its members
an Executive Committee and one or more other committees each of which, to the
extent provided in the resolution, shall have and may exercise all the
authority of the Board of Directors, except as prohibited by Nevada Law.
3.02 Membership. Each committee must have two or more members who serve at
the pleasure of the Board of Directors. The Board of Directors, by resolution
adopted in accordance with this Article Three, may designate one or more
Directors as alternate members of any committee, who may act in the place and
stead of any absent member or members at any meeting of the committee.
ARTICLE FOUR - OFFICERS
4.01 Officers. The officers of the Corporation shall be a President, a
Secretary, a Treasurer and as many Vice Presidents and any other officers and
assistant officers as may be deemed necessary, and as shall be approved, by the
Board of Directors. Any two or more offices may be held by the same person.
4.02 Appointment and Term of Office. The officers of the Corporation shall
be appointed annually by the Board of Directors at the first meeting of the
Board of Directors held after the shareholders' annual meeting. If the
appointment of officers does not occur at the meeting, the appointment shall
occur as soon thereafter as practicable. Each officer shall hold office until a
successor has been duly appointed and qualified, or until an earlier
resignation, removal from office, or death.
-9-
<PAGE> 10
BYLAWS OF MAXXIM INVESTMENT MANAGEMENT, INC.
4.03 Resignation. Any officer of the Corporation may resign from his or
her respective office or position by delivering notice to the Corporation. The
resignation is effective when delivered unless the notice specifies a later
effective date. If a resignation is made effective at a later date and the
Corporation accepts the future effective date, the Board of Directors may fill
the pending vacancy before the effective date if the Board of Directors provides
that the successor does not take office until the effective date.
4.04 Removal. Any officer of the Corporation may be removed from his or
her respective office or position at any time, with or without cause, by the
Board of Directors.
4.05 President. The President shall be the Chief Executive Officer of the
Corporation and shall, subject to the control of the Board of Directors,
generally supervise and control all of the business and affairs of the
Corporation, and preside at all meetings of the shareholders, the Board of
Directors, and all committees of the Board of Directors on which he or she may
serve. In addition, the President shall possess, and may exercise, such power
and authority, and shall perform such duties, as may from time to time be
assigned to him or her by the Board of Directors, and as are incident to the
offices of President and Chief Executive Officer.
4.06 Vice Presidents. Each Vice President shall possess, and may exercise,
such power and authority, and shall perform such duties, as may from time to
time be assigned to him or her by the Board of Directors.
4.07 Secretary. The Secretary shall keep the minutes of the proceedings of
the shareholders and of the Board of Directors in one or more books provided for
that purpose; see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law; be custodian of the corporate
records and of the seal of the Corporation, if any; and keep a register of the
post office address of each shareholder of the Corporation. In addition, the
Secretary shall possess, and may exercise, such power and authority, and shall
perform such duties, as may from time to time be assigned to him or her by the
Board of Directors and as are incident to the office of Secretary.
4.08 Treasurer. The Treasurer shall have charge and custody of, and be
responsible for, all funds and securities of the Corporation; receive and give
receipts for money due and payable to the Corporation from any source
whatsoever; and deposit all such money in the name of the Corporation in such
banks, trust companies, or other depositaries as shall be used by the
Corporation. In addition, the Treasurer shall possess, and may exercise such
power and authority, and shall perform such duties, as may from time to time be
assigned to him or her by the Board of Directors and as are incident to the
office of Treasurer.
-10-
<PAGE> 11
BYLAWS OF MAXXIM INVESTMENT MANAGEMENT, INC.
4.09 Other Officers, Employees, and Agents. Each and every other officer,
employee and agent of the Corporation shall possess, and may exercise, such
power and authority, and shall perform such duties, as may from time to time be
assigned to him or her by the Board of Directors, the officer appointing him or
her, and such officer or officers who may from time to time be designated by the
Board of Directors to exercise supervisory authority.
4.10 Compensation. The compensation of the officers of the Corporation
shall be fixed from time to time by the Board of Directors.
ARTICLE FIVE - CERTIFICATES OF STOCK
5.01 Certificates for Shares. The Board of Directors shall determine
whether shares of the Corporation shall be uncertificated or certificated. If
certificated shares are issued, certificates representing shares in the
Corporation shall be signed (either manually or by facsimile) by the President
or Vice President and the Secretary or an Assistant Secretary and may be sealed
with the seal of the Corporation or a facsimile thereof. A certificate that has
been signed by an officer or officers who later ceases to be such officer shall
be valid.
5.02 Transfer of Shares: Ownership of Shares. Transfers of shares of stock
of the Corporation shall be made only on the stock transfer books of the
Corporation, and only after the surrender of the Corporation of the certificates
representing such shares. Except as provided by Nevada law, the person in whose
name shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes, and the Corporation shall
not be bound to recognize any equitable or other claim to, or interest in, such
shares on the part of any other person, whether or not it shall have express or
other notice thereof.
5.03 Lost Certificates. The Corporation shall issue a new stock
certificate in the place of any certificate previously issued if the holder of
record of the certificate (a) makes proof in affidavit form that the certificate
has been lost, destroyed, or wrongfully taken; (b) requests the issuance of a
new certificate before the Corporation has notice that the lost, destroyed, or
wrongfully taken certificate has been acquired by a purchaser for value in good
faith and without notice of any adverse claim; (c) at the discretion of the
Board of Directors, gives bond in such form and amount as the Corporation may
direct, or indemnify the Corporation, the transfer agent, and registrar against
any claim that may be made on account of the alleged loss, destruction, or theft
of a certificate; and (d) satisfies any other reasonable requirements imposed by
the Corporation.
-11-
<PAGE> 12
BYLAWS OF MAXXIM INVESTMENT MANAGEMENT, INC.
ARTICLE SIX - ACTIONS WITH RESPECT
TO SECURITIES OF OTHER CORPORATIONS
6.01 Voting Shares of Another Corporation. Unless otherwise directed by
the Board of Directors, the President or a designee of the President shall have
power to vote and otherwise act on behalf of the Corporation, in person or by
proxy, at any meeting of shareholders of, or with respect to any action of
shareholders of, any other corporation in which this Corporation may hold
securities and to otherwise exercise any and all rights and powers that the
Corporation may possess by reason of its ownership of securities in other
corporations.
ARTICLE SEVEN - AMENDMENTS
7.01 Amendments. These Bylaws may be altered, amended, or repealed, and
new Bylaws may be adopted, by action of the Board of Directors, subject to the
limitations of Nevada law. The shareholders of the Corporation may alter, amend
or repeal these Bylaws or adopt new Bylaws even though these Bylaws may also be
amended or replaced by the Board of Directors.
ARTICLE EIGHT - CORPORATE SEAL
8.01 Corporate Seal. The Board of Directors may adopt a Corporate Seal,
which, if adopted, shall be circular and shall have the name of the Corporation,
the year of its incorporation, and the state of incorporation inscribed on it.
- END OF BYLAWS -
-12-
<PAGE> 1
EXHIBIT 3.9
ARTICLES OF INCORPORATION
OF
FABRITEK LA ROMANA, INC.
--------
FIRST. The name of the corporation is
FABRITEK LA ROMANA, INC.
SECOND. The address of its registered office in the state of Mississippi
is 503 Yorkville Industrial Park South, in the City of Columbus, County of
Lowndes. The name of its registered agent at such address is Billy W. Daffron.
THIRD. The nature of the business or purposes to be conducted or
promoted is:
(a) To manufacture medical and surgical supplies and products, and
(b) To possess and exercise all the powers and privileges granted by the
Mississippi Business Corporation Act or by any other law of Mississippi or by
this certificate of incorporation together with any powers incidental thereto,
so far as such powers and privileges are necessary or convenient to the
conduct, promotion or attainment of the business or purposes of the corporation.
FOURTH. All such shares are to have a par value and are
<PAGE> 2
2
classified as one thousand (1,000) shares of Common Stock and the par value of
each such share of such class is One Dollar ($1.00). There shall be no
preferred stock.
The designations and the powers and relative, participating, optional or
other special rights, and qualification, limitations and restrictions thereof,
of the class of stock of the corporation are as follows:
No stockholder shall be entitled, as a matter of right, to subscribe for,
purchase or receive any shares of the capital stock of this corporation, or any
warrants, options or other rights to purchase or subscribe for any such shares,
which the corporation may issue or sell, or the bonds, debentures, notes or
other securities which the corporation may issue or sell, that shall be
convertible into or exchangeable for any such shares, whether in any manner the
shares are presently or hereafter authorized or held in the corporation's
treasury or otherwise, but any and all of the foregoing may be issued or
disposed of by the Board of Directors to such persons, firms or corporations,
and upon such terms, as they in their absolute discretion may deem advisable.
The designations and powers, rights, and the qualifications, limitations
or restrictions of said stock shall be stated and expressed in the resolution
or resolutions by the Board of Directors pursuant to authority hereby vested in
the Board of Directors.
<PAGE> 3
3
FIFTH. The name and mailing address of each incorporator is as follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
---- ---------------
<S> <C>
Sandra P. DePriest 503 Yorkville, Industrial Park South
Columbus, Mississippi 39702
Billy W. Daffron 503 Yorkville, Industrial Park South
Columbus, Mississippi 39702
Donald R. DePriest 503 Yorkville, Industrial Park South
Columbus, Mississippi 39702
</TABLE>
SIXTH. The period of duration of this corporation is and shall be for
ninety-nine (99) years.
SEVENTH. The number of Directors constituting the initial Board of
Directors of the Corporation is three (3) and the names and addresses of the
persons who are to serve as the Directors until the first (1st) annual meeting
of shareholders or until their successors are elected and shall qualify are:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
---- ---------------
<S> <C>
Donald R. DePriest 503 Yorkville, Industrial Park South
Columbus, Mississippi 39702
Henry T. DeHart 503 Yorkville, Industrial Park South
Columbus, Mississippi 39702
Sandra P. DePriest 503 Yorkville, Industrial Park South
Columbus, Mississippi 39702
</TABLE>
<PAGE> 4
4
We, THE UNDERSIGNED, being the incorporators hereintofore named, for the
purpose of forming a corporation pursuant to the Mississippi Business
Corporation Law do make this certificate, hereby declaring and certifying that
this is our act and deed and the facts herein stated are true, and accordingly
have hereunto set our hand this 30th day of November, 1988.
Sandra P. DePriest
------------------------------
SANDRA P. DEPRIEST
Billy W. Daffron
------------------------------
BILLY W. DAFFRON
Donald R. DePriest
------------------------------
DONALD R. DEPRIEST
STATE OF MISSISSIPPI)
)
COUNTY OF LOWNDES )
This day personally appeared before me, the undersigned authority Sandra
P. DePriest, Billy W. Daffron, Donald R. DePriest incorporators of the
corporation known as Fabritek La Romana, Inc. who acknowledged that they signed
and executed the above and foregoing Articles of Incorporation as their act and
deed on this the 30th day of November, 1988.
Donna Gunnels
------------------------------
NOTARY PUBLIC
MY COMMISSION EXPIRES:
4/7/92
- ----------------------
<PAGE> 1
EXHIBIT 3.10
BY-LAWS OF
FABRITEK LA ROMANA, INC.
ARTICLE I - NAME
This corporation shall be known as Fabritek La Romana, Inc., but may carry
on and conduct business under such other trade name or names as the Board of
Directors may direct.
ARTICLE II - PLACE OF BUSINESS
The principal place of business shall be at the corporation's registered
office, but the same may be changed to, and business may also be conducted at,
such other places as the Directors may from time to time determine. The
registered office of the corporation shall be at Industrial Park South, Post
Office Box 2425, Columbus, Mississippi, 39703.
ARTICLE III - DIRECTORS
Section 1. The control of this company shall be vested in the Board of
Directors, composed of three (3) members; provided, however, that a majority of
the full Board may, by resolution, appoint two or more members of said Board as
an Executive Committee, to manage the business of the corporation during the
interim between meetings of the Board. A director need not be a stockholder.
Section 2. All Directors shall be elected by the stockholders, and shall
serve one (1) year, and until their successors are elected and qualified.
Section 3. The Directors shall have general control of the property and
business of the corporation; they shall elect from
<PAGE> 2
their number the following officers of the company, to serve one (1) year, and
until their successors are chosen: President, Vice-President, Secretary, and
Treasurer; provided, that more than one office may be held by the same person.
The Directors may appoint such managers of branch offices and departments as
may from time to time become necessary.
Section 4. Meetings of Directors shall be held annually immediately after
the annual stockholders' meetings. At such meeting the Directors shall elect
officers for the ensuing year, receive reports of officers, and transact such
other business as may come before them. A majority of the Directors shall
constitute a quorum, and the votes of a majority of those present shall
constitute a binding act of the corporation. Meetings of the Directors may be
held either at the principal place of business or at any branch office. No
notice need be given of the regular annual meeting of Directors. Special
meetings of Directors may be called at any time by the President or Secretary
upon written request of two Directors, and notice thereof in writing must be
mailed to each Director at least five days in advance of such meeting;
provided, that said notice may be waived by the written assent of any or all of
the Directors.
Section 5. The compensation, if any, of the officers shall be fixed by
the Directors; vacancies in the Board of Directors shall be filled by an
election at an annual meeting of the stockholders or a special meeting called
for that purpose. The Board shall have the power to remove an officer by a
majority vote of the Directors.
<PAGE> 3
Section 6. Directors, as such, shall not receive any stated salary for
their services, but by resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board; provided, that nothing herein contained shall be
construed to preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 7. In addition to the powers and authorities by these By-Laws
expressly conferred upon them, the Board may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
ARTICLE IV - STOCKHOLDERS' MEETINGS
The annual meeting of the stockholders shall be held during the month of
November of each year. Meetings shall be held at the principal place of
business or such other places as the Directors may from time to time
determine. Written notice of meetings must be mailed to each stockholder by
the Secretary at least ten (10) days prior to such meetings; special meetings
of the stockholders may be called by the President, the Board of Directors, or
the holders of not less than one tenth of all the shares entitled to vote at
the meeting; provided, that the notices provided for may be waived by the
written assent of all the stockholders. At all meetings a majority of the
issued and outstanding shares entitled to vote thereat exclusively of treasury
shares, if any, shall be necessary to constitute a quorum. When a quorum is
present at any
<PAGE> 4
meeting, a majority of the shares represented thereat and entitled to vote
thereat shall decide any question brought before such meeting. In the absence of
a quorum those present may adjourn the meeting from time to time until a quorum
is obtained, but until a quorum is obtained may transact no business. The
stockholders having a right to vote shall elect the Board of Directors at the
annual meeting and a majority of the issued and outstanding shares entitled to
vote shall be necessary to elect said Board. Each stockholder with voting power
shall be entitled to one vote for each share of stock standing in his or her
name on the books of the company ten (10) days prior to such meeting.
ARTICLE V - OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Directors, and shall be a President, Vice-President, Secretary and Treasurer;
more than one office may be held by the same person, and the Directors, in their
discretion, may also elect an Assistant Secretary to act in the absence of the
Secretary.
Section 2. The Board of Directors, at its first meeting after each annual
meeting of stockholders, shall choose a President, Vice-President, Secretary,
and Treasurer from their own number. The Assistant Secretary need not be a
Director.
Section 3. The Board may appoint such other officers and agents as it
shall deem necessary, 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.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
<PAGE> 5
SECTION 5. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the entire Board of Directors.
ARTICLE VI -- PRESIDENT
SECTION 1. The President shall be the chief executive officer of the
corporation, and shall preside at all meetings of the Stockholders and
Directors; shall have general and active management of the business of the
corporation, and shall see that all orders and resolutions of the Board are
carried into effect.
SECTION 2. The President shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation.
SECTION 3. The President shall be ex officio a member of all standing
committees and shall have the general powers and duties of supervision and
management usually vested in the office of president of a corporation.
ARTICLE VII -- VICE-PRESIDENT
The Vice-President shall, in the absence or disability of the President,
perform the duties and exercise the powers of the President, and shall perform
such other duties as the Board of Directors shall prescribe.
ARTICLE VIII -- SECRETARY
The Secretary shall be present at all meetings of Stockholders and
Directors, and take and keep full minutes thereof; shall keep a stock book in
which shall be entered all transfers of stock;
<PAGE> 6
shall have charge of all records of the corporation, together with the seal and
charter, and shall have authority to affix the seal. The Secretary shall give
notice of all meetings of Stockholders and Directors as herein provided; shall
attest all certificates of stock, deeds, and contracts executed by the
corporation and shall have such other duties as may be determined by the
Directors.
ARTICLE IX -- ASSISTANT SECRETARY
In the absence of the Secretary, the Assistant Secretary shall carry out
the duties of, and act as, the Secretary.
ARTICLE X -- TREASURER
SECTION 1. The Treasurer 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.
SECTION 2. The Treasurer shall disburse the funds of the corporation as
may be ordered by the Board, taking proper vouchers for such disbursements, and
shall render to the President and Directors, at the regular meeting of the
Board, or whenever they may require it, an account of all transactions as
Treasurer and of the financial condition of the corporation.
SECTION 3. The Treasurer shall give the corporation a bond if required by
the Board of Directors in a sum, and with one or more sureties satisfactory to
the Board, for the faithful performance of the duties of said office, and for
the restoration to the corporation, in case of his death, resignation,
retirement, or
<PAGE> 7
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.
ARTICLE XI - REPORTS OF OFFICERS
All officers shall render written and detailed reports of the business
transacted by them at the annual stockholders' meeting only if requested to do
so by the Board of Directors pursuant to written resolution of the Board of
Directors. Any annual report which any law may require the Board of Directors to
send to shareholders after the close of the fiscal year is hereby expressly
dispensed with and the Board of Directors shall not be required to send such
annual report to the shareholders of this corporation.
ARTICLE XII - VACANCIES
Section 1. If the office of any Director becomes vacant, by reason of
death, resignation, retirement, disqualification, removal from office, or
otherwise, the vacancy shall be filled for the unexpired term by an election at
an annual meeting of the shareholders or a special meeting of the shareholders
called for that purpose.
Section 2. If the position of any officer shall become vacant for any of
the above reasons, then the Directors may choose a successor or successors.
ARTICLE XIII - CERTIFICATES OF STOCK
The certificates of stock of the corporation shall be numbered and shall
be entered in the books of the corporation as they are issued. They shall
exhibit the holder's name and number of shares
<PAGE> 8
and shall be signed by the President and the Secretary.
ARTICLE XIV - RESTRICTIONS UPON TRANSFER OF STOCK
Section 1. Transfers of stock shall be made on the books of the
corporation only by the person named in the Certificate or by attorney,
lawfully constituted in writing, and upon surrender of the certificate therefor.
Section 2. All stock of the corporation shall be sold or transferred to
such person, persons or entities only after consent and approval by the
Directors. No share of stock in the corporation shall be transferred by any
stockholder to any person who has not been first approved by the Board of
Directors, and if any transfer of any share or shares shall be made or attempted
to be made to any person who has not been so approved, the same shall be null
and void. The Directors may in their discretion and without assigning any
reason therefor refuse to approve the transfer of any share to any person or
entity.
Section 3. All stock so sold pursuant to approval and consent by the Board
of Directors is sold subject to the following restrictions and options, to-wit:
(a) In the event the owner of said stock,
(hereinafter referred to as OWNER) desires to
sell, give or transfer said shares in amy manner
to anyone else; or
(b) In the event of death of owner; or
(c) In the event said shares shall pass by
bankruptcy, receivership, execution or by
operation of law in any manner into the hands of
any other person; or
(d) In the event of the execution of an
agreement by the corporation or its stockholders
to merge or consolidate with another corporation,
or an agreement to sell all, or substantially all,
<PAGE> 9
or its assets or an agreement by the other stockholders to sell a
majority interest in said corporation;
Then, upon the occurrence of any one of such events, the corporation, or its
assignee, shall have the exclusive right, privilege and option to purchase all
or any part of said share, at and for the book value of said shares as of the
end of the month immediately preceding the events causing this option to become
effective. The book value shall be determined by the Certified Public
Accountant for the corporation from the books and records of the corporation in
accordance with the regular method of accounting used by the corporation.
Section 4. The aforesaid option to purchase shall be for a period of
ninety (90) days after notice to the corporation or the corporation's assignee
of the occurrence of any one or more of the events set forth above and should
the corporation or its assignee fail to purchase said shares within ninety (90)
days after such notice, said shares shall be released from any restriction as to
the transfer contemplated or effected by the occurrence of said event; PROVIDED,
HOWEVER, that the election by the corporation or its assignee not to purchase
said stock upon the occurrence of any one or more of the aforesaid events, shall
not terminate or in anywise affect the corporation or its assignee's subsequent
options to purchase said stock, it being understood and agreed that the options
herein granted shall be preemptive and continuing and shall be binding upon
Owner and all subsequent record owners of said stock and the heirs, devisees,
legal representatives, successors and assigns of owner until released by the
corporation
<PAGE> 10
or its assignee in writing.
Section 5. This By-Law shall cover and the option to purchase and
restriction upon transfer shall be effective not only as to the shares of stock
described above, but also any stock in said corporation hereafter acquired by a
purchaser by virtue of any split of said stock, stock dividend or other
increase or increment of said shares heretofore mentioned, except that the cash
dividends, if any, paid on said stock shall be separate property of the party
in whose name said stock is standing on the date said dividend is declared.
Section 6. A stockholder of the corporation may not mortgage, pledge,
hypothecate, assign, or otherwise encumber or dispose of any of the stock of the
corporation owned by him, without the prior written consent of the Directors of
the corporation.
Section 7. The restrictions and conditions set forth in this Article
regarding the transfer of stock of this corporation shall be binding upon, and
the benefits and advantages hereof, shall inure to the benefit of, the heirs,
executors, administrators, successors and assigns of the corporation and the
stockholder (also referred herein as OWNER).
ARTICLE XV - CLOSING OF TRANSFER BOOKS
The Board of Directors shall have the power to close the share transfer
books of the corporation for a period not exceeding thirty days (but not less
than ten days) preceding the date of any meeting of shareholders or the date of
payment of any dividend, or the date of payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange
<PAGE> 11
of capital shares of stock shall go into effect. While the share transfer books
of the company are closed no transfer of shares shall be made thereon. The Board
of Directors, in lieu of closing the share transfer books as aforesaid, may fix
in advance a date not exceeding thirty days preceding the date of any meeting of
shareholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital shares of stock shall go into effect as a record date for the
determination of the shareholders entitled to notice and to vote at any such
meeting or entitled to receive payment of any such dividend, or to any such
allotment of rights or to exercise the rights in respect of any such change,
conversion or exchange of capital shares of stock and in such case only such
shareholders as shall be shareholders of record on the date so fixed shall be
entitled to such notice of and to vote at such meeting or to receive payment of
such dividend or to receive such allotment rights and to exercise such rights,
as the case may be, notwithstanding any transfer of any shares on the books of
the corporation after any such record date fixed as aforesaid.
ARTICLE XVI - LOST CERTIFICATE
Any person claiming a certificate of stock to be lost or destroyed shall
make an affidavit or affirmation of that fact and advertise the same in such
manner as the Board of Directors may require, and shall, if the Directors so
require, give the corporation a bond of indemnity, in form and with one or more
sureties satisfactory to the Board, in at least double the value of the stock
represented by said certificate, whereupon a new
<PAGE> 12
certificate may be issued of the same tenor and for the same number of shares as
the one alleged to be lost or destroyed.
ARTICLE XVII - CHECKS
All checks or demands for money and notes of the corporation shall be
signed by the President or Secretary or such other officer or officers as the
Board of Directors may from time to time designate.
ARTICLE XVIII - DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, when
earned, may be declared by the Board of Directors at any regular or special
meetings.
Section 2. Before payment of any dividend or making any distribution of
profits, there may be set aside out of the surplus or net profits of the
corporation such sum or sums as the Directors from time to time, in their
absolute discretion, think proper as a reserve fund to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purposes as Directors shall think conducive to
the interests for the corporation.
ARTICLE XIX - AMENDMENTS
These By-Laws may be altered or amended by the affirmative vote of a
majority of the Board of Directors at any regular or special meeting.
<PAGE> 1
EXHIBIT 4.1
===============================================================================
MAXXIM MEDICAL GROUP, INC.
Senior Subordinated Discount Notes due 2009
---------------------
INDENTURE
Dated as of November 12, 1999
---------------------
THE BANK OF NEW YORK,
as Trustee
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 1.03. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . 27
SECTION 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 2
THE NOTES
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.02. Execution and Authentication. . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.03. Registrar and Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.04. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . 29
SECTION 2.05. Holder Lists. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.07. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.08. Outstanding Notes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.09. Temporary Notes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.10. Cancelation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.11. Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.12. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.02. Selection of Notes To Be Redeemed . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.03. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.04. Effect of Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.06. Notes Redeemed in Part. . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.02. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.03. Limitation on Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.04. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. . . . . . . . . . . . 47
SECTION 4.07. Limitation on Transactions with Affiliates. . . . . . . . . . . . . . . . 51
SECTION 4.08. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.09. Compliance Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.10. Further Instruments and Acts. . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.11. Future Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.12. Limitation on Lines of Business . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.14. Calculation of Original Issue Discount. . . . . . . . . . . . . . . . . . 55
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.01. When Company May Merge or Transfer Assets . . . . . . . . . . . . . . . . 56
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.02. Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.03. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 6.07. Rights of Holders to Receive Payment. . . . . . . . . . . . . . . . . . . 62
SECTION 6.08. Collection Suit by Trustee. . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.09. Trustee May File Proofs of Claim. . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.10. Priorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.12. Waiver of Stay or Extension Laws. . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 7.03. Individual Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 7.05. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.07. Compensation and Indemnity. . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.08. Replacement of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.09. Successor Trustee by Merger . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . 69
ARTICLE 8
DISCHARGE OF INDENTURE, DEFEASANCE
SECTION 8.01. Discharge of Liability on Notes; Defeasance . . . . . . . . . . . . . . . 69
SECTION 8.02. Conditions to Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 8.03. Application of Trust Money. . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 8.04. Repayment to Company. . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 8.05. Indemnity for Government Obligations. . . . . . . . . . . . . . . . . . . 72
SECTION 8.06. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.02. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 9.03 Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . 75
SECTION 9.04. Revocation and Effect of Consents and Waivers . . . . . . . . . . . . . . 75
SECTION 9.05. Notation on or Exchange of Notes. . . . . . . . . . . . . . . . . . . . . 76
SECTION 9.06. Trustee to Sign Amendments. . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE 10
SUBORDINATION
SECTION 10.01. Agreement to Subordinate. . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. . . . . . . . . . . . . . . . . . . 77
SECTION 10.03. Default on Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.04. Acceleration of Payment of Notes. . . . . . . . . . . . . . . . . . . . . 79
SECTION 10.05. When Distribution Must Be Paid Over . . . . . . . . . . . . . . . . . . . 79
SECTION 10.06. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 10.07. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 10.08. Subrogation May Not Be Impaired by Company. . . . . . . . . . . . . . . . 80
SECTION 10.09. Rights of Trustee and Payment Agent . . . . . . . . . . . . . . . . . . . 80
SECTION 10.10. Distribution or Notice to Representative. . . . . . . . . . . . . . . . . 81
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit
Right to Accelerate . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 10.12. Trust Monies Not Subordinated . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 10.13 Trustee Entitled to Rely. . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 10.14. Trustee to Effectuate Subordination . . . . . . . . . . . . . . . . . . . 81
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 10.17. Trustee's Compensation Not Prejudiced . . . . . . . . . . . . . . . . . . 82
ARTICLE 11
GUARANTEES
SECTION 11.01. Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 11.02. Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 11.03. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 11.04. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 11.05. Modification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 11.06. Execution of Supplemental Indenture for Future Guarantors . . . . . . . . 86
SECTION 11.07 Non-Impairment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
ARTICLE 12
SUBORDINATION OF THE GUARANTEES
SECTION 12.01 Agreement to Subordinate. . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. . . . . . . . . . . . . . . . . . . 88
SECTION 12.03. Default on Designated Senior Indebtedness of a Guarantor. . . . . . . . . 88
SECTION 12.04. Demand for Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 12.05. When Distribution Must Be Paid Over . . . . . . . . . . . . . . . . . . . 90
SECTION 12.06. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 12.07. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 12.08. Subordination May Not Be Impaired by a Guarantor. . . . . . . . . . . . . 91
SECTION 12.09. Rights of Trustee and Paying Agent. . . . . . . . . . . . . . . . . . . . 91
SECTION 12.10. Distribution or Notice to Representative. . . . . . . . . . . . . . . . . 91
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit
Right To Accelerate . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 12.12. Trustee Entitled to Rely. . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 12.13. Trustee To Effectuate Subordination . . . . . . . . . . . . . . . . . . . 92
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness
of a Guarantor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 12.15. Reliance by Holders of Senior Indebtedness of a
Guarantor on Subordination Provisions . . . . . . . . . . . . . . . . . 93
SECTION 12.16 Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls. . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 13.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 13.03. Communication by Holders with Other Holders . . . . . . . . . . . . . . . 94
SECTION 13.04. Certificate and Opinion as to Conditions Precedent. . . . . . . . . . . . 94
SECTION 13.05. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . 95
SECTION 13.06. When Notes Disregarded. . . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. . . . . . . . . . . . . . . 95
SECTION 13.08. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 13.09. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 13.10. No Recourse Against Others. . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 13.11. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 13.12. Multiple Originals. . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 13.13. Table of Contents; Headings . . . . . . . . . . . . . . . . . . . . . . . 96
Appendix A Provisions Relating to Initial Notes and Exchange Notes
Exhibit A - Form of Initial Definitive Note
Exhibit B - Form of Exchange Note
Exhibit C- Form of Supplemental Indenture
</TABLE>
<PAGE> 7
INDENTURE dated as of November 12, 1999,
among MAXXIM MEDICAL GROUP, INC., a Delaware
corporation (the "Company"), as issuer, MAXXIM
MEDICAL, INC., a Texas corporation and the parent
of the Company ("Holdings"), MAXXIM MEDICAL,
INC., a Delaware corporation, FABRITEK LA ROMANA,
INC., a Mississippi corporation, and MAXXIM
INVESTMENT MANAGEMENT, INC., a Nevada
corporation, as guarantors (together with
Holdings, the "Guarantors"), and THE BANK OF NEW
YORK, a New York banking corporation, as trustee
(the "Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of (a) the Company's Senior
Subordinated Discount Notes due 2009 issued on the date hereof (the "Initial
Notes") and (b) if and when issued as provided in the Registration Agreement
(as defined in Appendix A hereto (the "Appendix")) or in this Indenture, the
Company's Senior Subordinated Discount Notes due 2009 issued in the Registered
Exchange Offer in exchange for any Initial Notes or otherwise as provided in
this Indenture (the "Exchange Notes" and together with the Initial Notes issued
hereunder, the "Notes"). Except as otherwise provided herein, the Notes shall
be limited to $144,552,000 in aggregate principal amount at maturity.
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Accreted Value" means, as of any date (the "Specified Date"), the
amount provided below for each $1,000 principal amount at maturity of Notes:
(a) if the Specified Date occurs on one of the following dates (each,
a "Semi-Annual Accrual Date"), the Accreted Value shall equal the amount
set forth below under the "Accreted Value" column for such Semi-Annual
Accrual Date:
<TABLE>
<CAPTION>
Semi-Annual Accrual Date Accreted Value
------------------------ --------------
<S> <C>
Issue Date $ 761.000
May 15, 2000 $ 771.464
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
Semi-Annual Accrual Date Accreted Value
------------------------ --------------
<S> <C>
November 15, 2000 $ 782.071
May 15, 2001 $ 792.824
November 15, 2001 $ 803.725
May 15, 2002 $ 814.776
November 15, 2002 $ 825.979
May 15, 2003 $ 837.337
November 15, 2003 $ 848.850
May 15, 2004 $ 860.521
November 15, 2004 $ 872.353
May 15, 2005 $ 884.348
November 15, 2005 $ 896.507
May 15, 2006 $ 908.834
November 15, 2006 $ 921.330
May 15, 2007 $ 933.998
November 15, 2007 $ 946.841
May 15, 2008 $ 959.860
November 15, 2008 $ 973.057
May 15, 2009 $ 986.437
November 15, 2009 $ 1,000.000
</TABLE>
; or
(b) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the Accreted Value shall equal the sum of (i) the Accreted Value
for the Semi-Annual Accrual Date immediately preceding such Specified
Date and (ii) an amount equal to the product of (1) the Accreted Value
for the immediately following Semi-Annual Accrual Date less the Accreted
Value for the immediately preceding Semi-Annual Accrual Date multiplied
by (2) a fraction, the numerator of which is the number of days elapsed
from the immediately preceding Semi-Annual Accrual Date to the Specified
Date, using a 360-day year of twelve 30-day months, and the denominator
of which is 180 (or, if the Semi-Annual Accrual Date immediately
preceding the Specified Date is the Issue Date, the denominator of which
is 182). In the event the Trustee is required to take any action which
requires the calculation described in the preceding sentence, upon
request by the Trustee, the Company shall calculate such Accreted Value
and set forth such amount in an Officers' Certificate.
"Additional Amounts" means any liquidated damages payable pursuant to
the Registration Agreement.
"Additional Assets" means (a) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in
2
<PAGE> 9
a Permitted Business; (b) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; or (c) Capital Stock
constituting a minority interest in any Person that at such time is a
Restricted Subsidiary; provided, however, that any such Restricted Subsidiary
described in clauses (b) or (c) above is primarily engaged in a Permitted
Business.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of shares representing 10% or more of the total voting power
of the Voting Stock (on a fully diluted basis) of Holdings or the Company or of
rights or warrants to purchase such Voting Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of (a) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares or
shares required by applicable law to be held by a Person other than the Company
or a Restricted Subsidiary), (b) all or substantially all the assets of any
division or line of business of the Company or any Restricted Subsidiary or (c)
any other assets of the Company or any Restricted Subsidiary outside of the
ordinary course of business of the Company or such Restricted Subsidiary; other
than, in the case of (a), (b) and (c) above, (i) a disposition by a Restricted
Subsidiary to the Company or by the Company or a Restricted Subsidiary to a
Wholly Owned Subsidiary, (ii) for purposes of Section 4.06 only, a disposition
subject to Section 4.04, (iii) a disposition of assets with a Fair Market Value
of less than $100,000, (iv) a disposition of Temporary Cash Investments or
obsolete equipment or other obsolete assets in the course of business
consistent with past practices of the Company and (v) the disposition of all or
substantially all of the assets of the Company in a manner permitted in Section
5.01 or any disposition that constitutes a Change of Control; provided that
Section 5.01 or Section 4.08, as the case may be, is complied with.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at 13.64% (the
yield to maturity of the Notes), compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period for which
such lease has been extended).
3
<PAGE> 10
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (a) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness
or redemption or similar payment with respect to such Preferred Stock
multiplied by the amount of such payment by (b) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in
respect of the Credit Agreement and the collateral documents relating thereto
and any Refinancing Indebtedness with respect thereto, as amended from time to
time, including principal, premium, if any, interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not a claim for post-filing
interest is allowed in such proceedings), fees, charges, expenses,
reimbursement obligations and all other amounts payable thereunder or in
respect thereof.
"Board of Directors" means the Board of Directors of the Company or
Holdings, as applicable, or any committee thereof duly authorized to act on
behalf of the Board of Directors of the Company or Holdings, as applicable.
"Business Day" means each day that is not a Legal Holiday.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of
or interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be prepaid by the
lessee without payment of a penalty.
"Circon Note" means a promissory note that may be issued in connection
with, or prior to consummation of, the Transactions by Circon to the Company or
a Restricted Subsidiary as a dividend payment.
"Change of Control" means the occurrence of any of the following
events:
(a) prior to the earlier to occur of (i) the first public offering of
common stock of Holdings or (ii) the first public offering of common
stock of the
4
<PAGE> 11
Company, the Permitted Holders, taken together, cease to be the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of a majority in the aggregate of
the total voting power of the Voting Stock of Holdings or the Company,
whether as a result of the issuance of securities of Holdings or the
Company, any merger, consolidation, liquidation or dissolution of
Holdings or the Company, any direct or indirect transfer of securities by
any Permitted Holder or otherwise (for purposes of this clause (a) and
clause (b) below, the Permitted Holders shall be deemed to beneficially
own any Voting Stock of an entity (the "specified entity") held by any
other entity (the "parent entity") so long as the Permitted Holders
beneficially own, directly or indirectly, in the aggregate a majority of
the voting power of the Voting Stock of the parent entity);
(b) (i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in clause (a) above, except that
for purposes of this clause (b) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right
to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of the
total voting power of the Voting Stock of Holdings or the Company and
(ii) the Permitted Holders "beneficially own" (as defined in clause (a)
above), directly or indirectly, in the aggregate a lesser percentage of
the total voting power of the Voting Stock of Holdings or the Company
than such other person and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of Holdings or the Company, as the
case may be (for the purposes of this clause (b), such other person shall
be deemed to beneficially own any Voting Stock of a specified entity held
by a parent entity, if such other person is the beneficial owner (as
defined in this clause (b)), directly or indirectly, of more than 35% of
the voting power of the Voting Stock of such parent entity and the
Permitted Holders "beneficially own" (as defined in clause (a) above),
directly or indirectly, in the aggregate a lesser percentage of the
voting power of the Voting Stock of such parent entity and do not have
the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such
parent entity);
(c) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the
Company or Holdings, as the case may be (together with any new directors
(i) whose election by such Board of Directors of Holdings
5
<PAGE> 12
or the Company, as the case may be, or whose nomination for election by
the shareholders of Holdings or the Company, as the case may be, was
approved by a majority vote of the directors of Holdings or the Company,
as the case may be, then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved or (ii) who are designees of the Permitted Holders
or were nominated by the Permitted Holders) cease for any reason to
constitute a majority of the Board of Directors of the Company or
Holdings, as the case may be, then in office;
(d) the adoption of a plan relating to the liquidation or dissolution
of Holdings or the Company; or
(e) the merger or consolidation of Holdings or the Company with or
into another Person or the merger of another Person with or into Holdings
or the Company, or the sale of all or substantially all the assets of
Holdings or the Company to another Person (other than a Person that is
controlled by the Permitted Holders), and, in the case of any such merger
or consolidation, the securities of Holdings or the Company that are
outstanding immediately prior to such transaction and that represent 100%
of the aggregate voting power of the Voting Stock of Holdings or the
Company are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving Person or transferee that represent immediately after such
transaction, at least a majority of the aggregate voting power of the
Voting Stock of the surviving Person or transferee.
"Closing Date" means the original date of this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"Consolidated Coverage Ratio" means, as of any date of determination,
the ratio of (a) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at the end of the most recent
fiscal quarter for which financial statements are publicly available, to (b)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that (i) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding on
such date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect
6
<PAGE> 13
on a pro forma basis to such Indebtedness as if such Indebtedness had been
Incurred on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the
first day of such period, (ii) if the Company or any Restricted Subsidiary has
repaid, repurchased, defeased or otherwise discharged any Indebtedness since
the beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged on the date of the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA
and Consolidated Interest Expense for such period shall be calculated on a pro
forma basis as if such discharge had occurred on the first day of such period
and as if the Company or such Restricted Subsidiary has not earned the interest
income actually earned during such period in respect of cash or Temporary Cash
Investments used to repay, repurchase, defease or otherwise discharge such
Indebtedness, (iii) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets that are the subject of such Asset
Disposition for such period or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness of
such Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after such
sale), (iv) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any Restricted Subsidiary
since the beginning of such period) or an acquisition of assets (including by
acquisition of the Capital Stock of an entity that becomes a Restricted
Subsidiary), including any acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, which constitutes all
or substantially all of an operating unit of a business, a product line or a
line of business, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or acquisition occurred
on the first day of such period and (v) if since the beginning of such period
any Person (that subsequently became a Restricted Subsidiary or was merged with
or into the Company or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition or any Investment or acquisition
of assets that would have required an adjustment pursuant to clause (iii) or
(iv) above if made by the Company or a Restricted Subsidiary during
7
<PAGE> 14
such period, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset Disposition,
Investment or acquisition of assets occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be
given to an Investment, acquisition of assets or Capital Stock or Asset
Disposition under clauses (iii), (iv) or (v) above, the pro forma calculations
shall be determined in good faith by a responsible financial or accounting
Officer of the Company and shall include those adjustments permitted in
accordance with GAAP and/or Article XI of Regulation S-X (or any successor
thereto) promulgated by the SEC. Notwithstanding the foregoing, with respect to
any Investment or acquisition of assets or Capital Stock (in each case, by
merger or otherwise), any such pro forma calculations may include the
annualized amount of operating expense reductions (net of any annualized
expenses (including interest expense) incurred to achieve such operating
expense reductions) for such period resulting from the acquisition or other
transaction which is being given pro forma effect that have been realized or
for which the steps necessary for realization have been taken or are reasonably
expected to be taken within six months following any such acquisition or other
transaction, including but not limited to, the execution or termination of any
contracts, the termination of any personnel or the closing (or approval by the
Board of Directors of the Company of the closing) of any facility, as
applicable. In addition, and notwithstanding the foregoing, for purposes of
calculating the Consolidated Coverage Ratio, as of any date of determination,
pro forma effect may be given to the annualized amount of operating expense
reductions (net of any annualized expenses (including interest expense)
incurred to achieve such operating expense reductions) resulting from any
acquisitions or other transactions occurring in either of the two fiscal
quarters prior to the four quarter reference period for which the Consolidated
Coverage Ratio is being calculated, provided that (1) such acquisition or other
transaction would have been given pro forma effect under clause (iv) or (v)
above had it occurred in the four quarter reference period for which the
Consolidated Coverage Ratio is being calculated and (2) such operating expense
reductions have been realized, or the steps necessary for realization have been
taken or are reasonably expected to be taken within six months following any
such acquisition or other transaction, including the steps described in the
immediately preceding sentence. In connection with any pro forma adjustment or
adjustments made pursuant to either of the two immediately preceding sentences,
such adjustment or adjustments shall be set forth in an Officers' Certificate
signed by the Company's Chief Financial Officer and another Officer which
states (x) the amount of such adjustment or adjustments, (y) that such
adjustment or adjustments are based on the reasonable good faith beliefs of the
Officers executing such Officers' Certificate at the time of such execution and
(z) that any related Incurrence of Indebtedness is permitted pursuant to this
Indenture.
8
<PAGE> 15
If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term as at the date of determination in excess of twelve months). In
addition, for purposes of the computations referred to in clauses (i) and (ii)
above, interest expense on any Indebtedness under any revolving credit facility
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period.
"Consolidated Current Liabilities" as of any date of determination
means the aggregate amount of liabilities of the Company and its Consolidated
Restricted Subsidiaries which may properly be classified as current liabilities
(including taxes accrued as estimated), on a Consolidated basis, after
eliminating: (a) all intercompany items between the Company and any Restricted
Subsidiary; and (b) all current maturities of long-term Indebtedness, all as
determined in accordance with GAAP consistently applied.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its Consolidated Restricted Subsidiaries to
the extent such interest expense was deducted in computing Consolidated Net
Income plus, to the extent Incurred by the Company and its Consolidated
Restricted Subsidiaries in such period but not included in such interest
expense, (a) interest expense attributable to Capitalized Lease Obligations and
interest expense attributable to leases constituting part of a Sale/Leaseback
Transaction; (b) amortization of debt discount and debt issuance costs (other
than (i) debt issuance costs incurred in connection with the Transactions and
(ii) any other debt issuance costs incurred in amounts, and on terms, that are
customary and reasonable in light of then prevailing market conditions); (c)
capitalized interest; (d) noncash interest expense; (e) amortization of, or
other charges for, commissions, discounts and other fees and charges
attributable to letters of credit and bankers' acceptance financing; (f)
interest accruing on any Indebtedness of any other Person to the extent such
Indebtedness is guaranteed by the Company or any Restricted Subsidiary; (g)
amortization of net costs associated with Hedging Obligations (including
amortization of fees); (h) dividends in respect of all Disqualified Stock of
the Company and all Preferred Stock of any of the Subsidiaries of the Company,
to the extent held by Persons other than the Company or a Wholly Owned
Subsidiary; (i) interest Incurred in connection with investments in
discontinued operations; and (j) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or trust.
9
<PAGE> 16
"Consolidated Net Income" means, for any period, the net income of the
Company and its Consolidated Subsidiaries for such period; provided, however,
that there shall not be included in such Consolidated Net Income:
(a) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that (i) subject to the
limitations contained in clause (d) below, the Company's equity in the
net income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash or the Fair
Market Value of other assets actually distributed by such Person during
such period to the Company or a Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other
distribution made to a Restricted Subsidiary, to the limitations
contained in clause (c) below) and (ii) the Company's equity in a net
loss of any such Person for such period shall be included in determining
such Consolidated Net Income (but only to the extent (cumulative of such
losses) of the Company's Investment in such Person);
(b) any net income (or loss) of any Person acquired by the Company or
a Subsidiary of the Company in a pooling of interests transaction for any
period prior to the date of such acquisition;
(c) any net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of its net income is not, at the date of
determination, permitted without any prior governmental approval (which
has not been obtained) or, directly or indirectly, by the operation of
the terms of its charter, or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, unless such restrictions with
respect to the payment of dividends or similar distributions have been
legally waived, except that the net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(d) any gain (but not loss) realized upon the sale or other
disposition of any asset of the Company or its Consolidated Subsidiaries
(including pursuant to any Sale/Leaseback Transaction) that is not sold
or otherwise disposed of in the ordinary course of business and any gain
(but not loss) realized upon the sale or other disposition of any Capital
Stock of any Person;
(e) any extraordinary or otherwise nonrecurring gain or loss; and
(f) the cumulative effect of a change in accounting principles.
10
<PAGE> 17
Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Company or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under Section 4.04(a)(iv)(3)(E)(x).
"Consolidated Net Tangible Assets" as of any date of determination
means the total amount of assets (less accumulated depreciation and
amortization, allowances for doubtful receivables, other applicable reserves
and other properly deductible items) which would appear on a consolidated
balance sheet of the Company and its Consolidated Restricted Subsidiaries,
determined on a Consolidated basis in accordance with GAAP, and after giving
effect to purchase accounting and after deducting therefrom Consolidated
Current Liabilities and, to the extent otherwise included, the amounts of: (a)
minority interests in Consolidated Subsidiaries held by Persons other than the
Company or a Restricted Subsidiary; (b) excess of cost over fair value of
assets of businesses acquired, as determined in good faith by the Board of
Directors of the Company; (c) any revaluation or other write-up in book value
of assets subsequent to the Closing Date as a result of a change in the method
of valuation in accordance with GAAP consistently applied; (d) unamortized debt
discount and expenses and other unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights, licenses,
organization or developmental expenses and other intangible items; (e) treasury
stock; (f) cash set apart and held in a sinking or other analogous fund
established for the purpose of redemption or other retirement of Capital Stock
to the extent such obligation is not reflected in Consolidated Current
Liabilities; and (g) Investments in and assets of Unrestricted Subsidiaries.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" shall not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary shall
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Agreement" means the credit agreement dated as of November 12,
1999 among the Company, Holdings, The Chase Manhattan Bank, as administrative
agent and collateral agent, Bankers Trust Company, as co-syndication agent,
Merrill Lynch Capital Corporation, as co-syndication agent, Credit Suisse First
Boston, as co-documentation agent, and the lenders party thereto, as amended,
waived or otherwise modified from time to time (except to the extent that any
such amendment, waiver or other modification thereto would be prohibited by the
terms of this Indenture, unless otherwise agreed to by the Holders of at least
a majority in aggregate principal amount at maturity of Notes at the time
outstanding).
11
<PAGE> 18
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement to which such Person is a party or of which it is a beneficiary.
"Debt Tender Offer" means the debt tender offer to acquire up to
$100.0 million of Existing Notes in connection with the Transactions.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Designated Noncash Consideration" means noncash consideration
received by the Company or a Restricted Subsidiary in connection with an Asset
Disposition that is so designated as Designated Noncash Consideration pursuant
to an Officers' Certificate that sets forth the basis for valuing such
Designated Noncash Consideration.
"Designated Senior Indebtedness" of the Company or a Guarantor means
(a) Bank Indebtedness or a guarantee thereof of the Company or such Guarantor,
as applicable; and (b) any other Senior Indebtedness of the Company or such
Guarantor that, at the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $15.0 million and is specifically
designated by the Company or such Guarantor in the instrument evidencing or
governing such Senior Indebtedness as "Designated Senior Indebtedness" for
purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event: (a) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise; (b) is convertible or exchangeable for
Indebtedness or Disqualified Stock (excluding Capital Stock convertible or
exchangeable solely at the option of the Company or a Restricted Subsidiary,
provided that any such conversion or exchange shall be deemed an issuance of
Indebtedness or Disqualified Stock, as applicable); or (c) is redeemable at the
option of the holder thereof, in whole or in part, in the case of each of
clauses (a), (b) and (c) on or prior to the first anniversary of the Stated
Maturity of the Notes; provided, however, that any Capital Stock that would not
constitute Disqualified Stock but for provisions thereof giving holders thereof
the right to require such Person to repurchase or redeem such Capital Stock
upon the occurrence of an "asset sale" or "change of control" occurring prior
to the first anniversary of the Stated Maturity of the Notes shall not
constitute Disqualified Stock if the "asset sale" or "change of control"
provisions applicable to such
12
<PAGE> 19
Capital Stock are not more favorable to the holders of such Capital Stock than
the provisions of Sections 4.06 and 4.08.
"Domestic Subsidiary" means any Restricted Subsidiary of the Company
other than a Foreign Subsidiary.
"EBITDA" for any period means the Consolidated Net Income for such
period, plus, without duplication, the following to the extent deducted in
calculating such Consolidated Net Income: (a) income tax expense of the Company
and its Consolidated Restricted Subsidiaries, (b) Consolidated Interest
Expense, (c) depreciation expense of the Company and its Consolidated
Restricted Subsidiaries, (d) amortization expense of the Company and its
Consolidated Restricted Subsidiaries (excluding amortization expense
attributable to a prepaid cash item that was paid in a prior period) and (e)
all other noncash charges of the Company and its Consolidated Restricted
Subsidiaries (excluding any such noncash charge to the extent it represents an
accrual of or reserve for cash expenditures in any future period, but that will
not be expensed in such future periods) less all noncash items of income of the
Company and its Consolidated Restricted Subsidiaries (other than noncash items
representing an accrual or reserve for cash to be received in any future period
but that will not be treated as income in such future periods), in each case
for such period. Notwithstanding the foregoing, the provision for taxes based
on the income or profits of, and the depreciation and amortization and noncash
charges less all noncash items of income of, a Restricted Subsidiary of the
Company shall be added to Consolidated Net Income to compute EBITDA only to the
extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders.
"Equity Offering" means any public or private sale of Capital Stock
(other than Disqualified Stock) of the Company or Holdings, other than
offerings of the Company or Holdings of the type that can be registered on Form
S-8 (or any successor form) pursuant to the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Notes" means the 10 1/2% Senior Subordinated Notes due 2006
of Holdings prior to the Closing Date and of the Company from and after the
Closing Date.
13
<PAGE> 20
"Fair Market Value" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length 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. Except as required by
the next sentence, Fair Market Value will be determined in good faith by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a resolution of the Board of Directors of the Company. For
purposes of the definition of "Consolidated Net Income" and Section 4.06, the
Fair Market Value of assets or property, other than cash, which involves an
aggregate amount in excess of $10.0 million, shall have been determined in
writing by a nationally recognized appraisal, accounting or investment banking
firm.
"Foreign Coverage Ratio" has the same meaning as Consolidated Coverage
Ratio except that all references (in the definition of Consolidated Coverage
Ratio and in the definitions used therein) to (a) the "Company" shall be deemed
to be references to the Foreign Subsidiaries and (b) "Restricted Subsidiaries"
shall be deemed to be references only to the Foreign Subsidiaries.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company
that is not organized under the laws of the United States of America or any
state thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, including those set
forth in (a) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants, (b) statements and
pronouncements of the Financial Accounting Standards Board, (c) such other
statements by such other entities as approved by a significant segment of the
accounting profession and (d) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
All ratios and computations based on GAAP contained in this Indenture shall be
computed in conformity with GAAP, except as specifically provided herein.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and any obligation, direct or indirect, contingent or
otherwise, of any Person (a) 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 (b)
entered into for purposes of assuring in any other manner the obligee of
14
<PAGE> 21
such Indebtedness or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided,
however, that the term "guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "guarantee"
used as a verb has a corresponding meaning. The term "guarantor" shall mean any
Person guaranteeing any obligation.
"Guarantee" means each guarantee of the obligations with respect to
the Notes issued by a Guarantor pursuant to the terms of this Indenture.
"Guarantor" means Holdings and any Subsidiary of the Company that has
provided a guarantee of the obligations with respect to the Notes.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" means the Person in whose name a Note is registered on the
registrar's books.
"Holdings" means Maxxim Medical, Inc., a Texas corporation, and parent
of the Company, until a successor replaces it and thereafter, means the
successor.
"Incur" means issue, assume, guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person is merged or consolidated with another
Person or becomes a Subsidiary (whether by merger, consolidation, acquisition
or otherwise) shall be deemed to be Incurred by such Person at the time of such
merger or consolidation or at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. The
accretion of principal of a noncash interest bearing or other discount security
or addition of interest to principal on a pay-in-kind security shall not be
deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination, without duplication:
(a) the principal of and premium (if any) in respect of indebtedness
of such Person for borrowed money;
(b) the principal of and premium (if any) in respect of obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments;
(c) all obligations of such Person in respect of letters of credit or
other similar instruments (including reimbursement obligations with
respect thereto);
15
<PAGE> 22
(d) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables and
contingent obligations to pay earn-outs), which purchase price is due
more than six months after the date of placing such property in service
or taking delivery and title thereto or the completion of such services;
(e) all Capitalized Lease Obligations and all Attributable Debt of
such Person;
(f) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends);
(g) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of Indebtedness of such Person
shall be the lesser of (i) the Fair Market Value of such asset at such
date of determination and (ii) the amount of such Indebtedness of such
other Persons;
(h) to the extent not otherwise included in this definition, Hedging
Obligations of such Person; and
(i) all obligations of the type referred to in clauses (a) through (h)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
guarantee.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
except as provided above, the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at
such date.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Interest Rate Agreement" means, with respect to any Person, any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.
16
<PAGE> 23
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extension of credit (including by way of guarantee or similar arrangement) 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 of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and Section 4.04, (a) "Investment" shall include the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the Fair Market Value of the net assets of any Subsidiary of the Company at the
time that such Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(i) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (ii) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the Fair Market Value of the net assets of such
Subsidiary at the time of such redesignation; and (b) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value
at the time of such transfer.
"Issue Date" means the date on which the Initial Notes are originally
issued.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Management Group" means the group consisting of current and former
directors and executive officers of the Company and Holdings.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and
proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to the properties or assets that are
the subject of such Asset Disposition or received in any other noncash form)
therefrom, in each case net of (a) all legal fees and expenses, title and
recording tax expenses, commissions and other fees and expenses incurred
(including any out-of-pocket expenses relating to the relocation of assets or
personnel, any severance or other personnel costs, and any other out-of-pocket
expenses of a similar nature, in each case incurred within twelve months of
such Asset Disposition), and all federal, state,
17
<PAGE> 24
provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (b) all
payments, including any prepayment premiums or penalties, made on any
Indebtedness that is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon or other security agreement of
any kind with respect to such assets, or which must by its terms, or in order
to obtain a necessary consent to such Asset Disposition, or by applicable law
be repaid out of the proceeds from such Asset Disposition, (c) all
distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (d) appropriate amounts to be provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the property or
other assets disposed of in such Asset Disposition and retained by the Company
or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees and expenses actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the Chief Financial Officer, the President, any Vice President, the
Treasurer or the Secretary of the Company. "Officer" of a Guarantor has a
correlative meaning.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel. The
counsel may be an employee of or counsel to the Company or a Guarantor.
"Permitted Business" means any business engaged in by the Company or
any Restricted Subsidiary on the Closing Date and any Related Business.
"Permitted Holders" means Fox Paine Capital Fund, L.P. and its
Affiliates, FPC Investors, L.P., Maxxim Coinvestment Fund I, LLC, Maxxim
Coinvestment Fund II, LLC, Maxxim Coinvestment Fund III, LLC, Maxxim
Coinvestment Fund IV, LLC, Maxxim Coinvestment Fund V, LLC, the Management
Group and any Person acting in the capacity of an underwriter in connection
with a public or private offering of Holding's or the Company's Capital Stock.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (a) the Company, a Restricted Subsidiary or a Person
that will, upon the making of such Investment (including the purchase of its
Capital Stock),
18
<PAGE> 25
become a Restricted Subsidiary; provided, however, that the primary business of
such Restricted Subsidiary is a Permitted Business; (b) another Person if as a
result of such Investment such other Person is merged or consolidated with or
into, or transfers or conveys all or substantially all its assets to, the
Company or a Restricted Subsidiary; provided, however, that such Person's
primary business is a Permitted Business; (c) Temporary Cash Investments; (d)
receivables owing to the Company or any Restricted Subsidiary if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that such trade terms
may include such concessionary trade terms as the Company or any such
Restricted Subsidiary deems reasonable under the circumstances; (e) payroll,
travel and similar advances to cover matters that are expected at the time of
such advances ultimately to be treated as expenses for accounting purposes and
that are made in the ordinary course of business; (f) any loans or advances to
employees or consultants made in the ordinary course of business consistent
with past practices of the Company or such Restricted Subsidiary and not
exceeding, when aggregated with amounts loaned or advanced under Section
4.04(b)(vi)(4), $5.0 million in the aggregate outstanding at any one time; (g)
stock, obligations or securities received in settlement of (or foreclosure with
respect to) debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments; (h) any
Person to the extent such Investment represents the noncash or deemed cash
portion of the consideration received for an Asset Disposition that was made
pursuant to and in compliance with Section 4.06; (i) (x) any Investment
existing on the Closing Date and (y) in the case of loans and advances made to
employees or consultants and existing on the Closing Date, such loans and
advances and any extensions or Refinancings thereof; (j) Hedging Obligations
permitted under Section 4.03(b)(vii); (k) guarantees of Indebtedness permitted
under Section 4.03; (l) the Circon Note; (m) Investments which are made
exclusively with Capital Stock of Holdings or the Company (other than
Disqualified Stock); and (n) additional Investments having an aggregate Fair
Market Value, taken together with all other Investments made pursuant to this
clause (n) that are at the time outstanding, not to exceed $10.0 million at the
time of such Investment (with the Fair Market Value of each Investment being
measured at the time made and without giving effect to subsequent changes in
value).
"Permitted Junior Securities" means debt or equity securities of the
Company or any successor corporation issued pursuant to a plan of
reorganization or readjustment of the Company that are subordinated to the
payment of all then-outstanding Senior Indebtedness of the Company at least to
the same extent that the Notes are subordinated to the payment of all Senior
Indebtedness of the Company on the Closing Date, so long as to the extent that
any Senior Indebtedness of the Company outstanding on the date of consummation
of any such plan of reorganization or readjustment is not paid in full in cash
or cash equivalents on such date, the holders of any such Senior
19
<PAGE> 26
Indebtedness not so paid in full in cash or cash equivalents have consented to
the terms of such plan of reorganization or readjustment.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.
"principal" of a Note means the Accreted Value of the Note plus the
premium, if any, payable on the Note which is due or overdue or is to become
due at the relevant time.
"Private Placement Memorandum" means the Private Placement Memorandum
dated November 12, 1999, relating to the Notes.
"Public Equity Offering" means an underwritten primary public offering
of common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Purchase Money Indebtedness" means Indebtedness (a) consisting of the
deferred purchase price of an asset or Capital Stock, conditional sale
obligations, obligations under any title retention agreement and other purchase
money obligations, in each case where the maturity of such Indebtedness does
not exceed the anticipated useful life of the asset being financed, and (b)
incurred to finance the acquisition by the Company or a Restricted Subsidiary
of such asset or Capital Stock, including additions and improvements; provided,
however, that such Indebtedness is incurred within 180 days before or after the
acquisition by the Company or such Restricted Subsidiary of such asset.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, replace, prepay, redeem, defease or retire, or to
issue other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, repay, redeem, retire, renew, repay or extend
(including pursuant to
20
<PAGE> 27
any defeasance or discharge mechanism) any Indebtedness of the Company or any
Restricted Subsidiary existing on the Closing Date or Incurred in compliance
with this Indenture (including Indebtedness of the Company that Refinances
Refinancing Indebtedness); provided, however, that (a) other than with respect
to Senior Indebtedness, the Refinancing Indebtedness has a Stated Maturity no
earlier than the Stated Maturity of the Indebtedness being Refinanced; (b)
other than with respect to Senior Indebtedness, the Refinancing Indebtedness
has an Average Life at the time such Refinancing Indebtedness is Incurred that
is equal to or greater than the Average Life of the Indebtedness being
Refinanced; (c) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an aggregate issue
price) that is equal to or less than the aggregate principal amount (or if
issued with original issue discount, the aggregate accreted value) then
outstanding of the Indebtedness being Refinanced (or, in the case of Bank
Indebtedness, in an aggregate principal amount of commitments or loans
thereunder of up to $310.0 million less the aggregate amount of prepayments of
Bank Indebtedness pursuant to Section 4.06); and (d) if the Indebtedness being
Refinanced is subordinated in right of payment to the Notes, such Refinancing
Indebtedness is subordinated in right of payment to the Notes at least to the
same extent as the Indebtedness being Refinanced; provided further, however,
that Refinancing Indebtedness shall not include (i) Indebtedness of a
Restricted Subsidiary that Refinances Indebtedness of the Company or (ii)
Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"Related Assets" means (a) assets used or useful in a Permitted
Business or (b) equity interests representing a majority of the Voting Stock of
Persons engaged in a Permitted Business.
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Closing Date.
"Representative" means the trustee, agent or representative (if any)
for an issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired by the Company or a Restricted Subsidiary
whereby the Company or a Restricted Subsidiary transfers such property to a
Person and the Company or such Restricted Subsidiary leases it from such
Person, other than leases between the Company and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries.
21
<PAGE> 28
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company or any
Guarantor, as applicable, secured by a Lien.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" of the Company or any Guarantor means the
principal of, premium (if any) and accrued and unpaid interest on (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization of the Company or such Guarantor, as applicable, regardless of
whether or not a claim for post-filing interest is allowed in such
proceedings), and fees and other amounts (including expenses, reimbursement
obligations under letters of credit and indemnities) owing in respect of, Bank
Indebtedness and guarantees thereof and all other Indebtedness of the Company
or such Guarantor, as applicable, whether outstanding on the Closing Date or
thereafter Incurred, unless in the instrument creating or evidencing the same
or pursuant to which the same is outstanding it is provided that such
obligations are not superior in right of payment to the Notes or such
Guarantor's Guarantee, as applicable; provided, however, that Senior
Indebtedness of the Company or any Guarantor shall not include (a) (i) in the
case of the Company, any obligation of the Company to Holdings or any
Subsidiary of the Company or (ii) in the case of such Guarantor, any obligation
of such Guarantor to the Company, Holdings or any Subsidiary of the Company,
(b) any liability for Federal, state, local or other taxes owed or owing by the
Company or such Guarantor, as applicable, (c) any accounts payable or other
liability to trade creditors arising in the ordinary course of business of the
Company or such Guarantor, as applicable (including guarantees thereof or
instruments evidencing such liabilities), (d) any Indebtedness or obligation of
the Company or such Guarantor, as applicable, (and any accrued and unpaid
interest in respect thereof) that is subordinate or junior in any respect to
any other Indebtedness or obligation of the Company or such Guarantor, as
applicable, including any Senior Subordinated Indebtedness of the Company or
such Guarantor, as applicable, and any Subordinated Obligations of the Company
or such Guarantor, as applicable, (e) any obligations of the Company or such
Guarantor, as applicable, with respect to any Capital Stock or (f) any
Indebtedness of the Company or such Guarantor, as applicable, Incurred in
violation of this Indenture. If any Senior Indebtedness is disallowed, avoided
or subordinated pursuant to the provisions of Section 548 of Title 11 of the
United States Bankruptcy Code or any applicable state fraudulent conveyance
law, such Senior Indebtedness nevertheless shall constitute Senior
Indebtedness.
"Senior Subordinated Indebtedness" of the Company or any Guarantor
means the Notes or such Guarantor's Guarantee, as applicable, and any other
Indebtedness of the Company, including the Existing Notes, or such Guarantor,
including its guarantee of the Existing Notes, as applicable, that specifically
provides that such
22
<PAGE> 29
Indebtedness is to rank pari passu with the Notes or such Guarantor's
Guarantee, as applicable, in right of payment and is not subordinated by its
terms in right of payment to any Indebtedness or other obligation of the
Company or such Guarantor which is not Senior Indebtedness of the Company or
such Guarantor, as applicable.
"Services Agreement" means the Services Agreement to be entered into
by Circon, its parent entity, the Company and Holdings in connection with the
Transactions.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer thereof unless
such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company or any
Guarantor, as applicable, (whether outstanding on the Closing Date or
thereafter Incurred) that is subordinate or junior in right of payment to the
Notes or such Guarantor's Guarantee, as applicable, pursuant to a written
agreement.
"Subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as
any other corporation, limited liability company, partnership, association or
other entity: (a) of which securities or other ownership interests representing
more than 50% of the equity or more than 50% of the ordinary voting power or,
in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held; or (b) that is, as
of such date, otherwise controlled by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent.
"Subsidiary Guarantors" means the Subsidiaries of the Company that are
Guarantors.
"Temporary Cash Investments" means any of the following: (a) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof,
23
<PAGE> 30
(b) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company that is organized under the laws of the
United States of America, any state thereof or any foreign country recognized
by the United States of America having capital, surplus and undivided profits
aggregating in excess of $250.0 million (or the foreign currency equivalent
thereof) and whose long-term debt is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act), (c) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (a) above entered into with a bank meeting the
qualifications described in clause (b) above, (d) investments in commercial
paper, maturing not more than 90 days after the date of acquisition, issued by
a corporation (other than an Affiliate of the Company) organized and in
existence under the laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the time as of
which any investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. ("Moody's") or "A-1" (or higher) according to Standard
and Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc.
("S&P"), and (e) investments in securities with maturities of six months or
less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by S&P or "A"
by Moody's.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-
77bbbb) as in effect on the Closing Date.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Transactions" has the meaning set forth in the Private Placement
Memorandum relating to the sale of the Notes.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means any vice president, any assistant vice
president, any secretary, any assistant treasurer or any other trust officer of
the Trustee assigned by the Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
24
<PAGE> 31
"Unrestricted Subsidiary" means (a) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors of the Company in the manner provided below and (b) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless
such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or owns or holds any Lien on any property of, the Company or
any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary
to be so designated; provided, however, that either (i) the Subsidiary to be so
designated has total Consolidated assets of $1,000 or less or (ii) if such
Subsidiary has Consolidated assets greater than $1,000, then such designation
would be permitted under Section 4.04. The Board of Directors of the Company
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided, however, that immediately after giving effect to such designation (i)
the Company could Incur $1.00 of additional Indebtedness under Section 4.03(a)
and (ii) no Default shall have occurred and be continuing. Any such designation
of a Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary by the
Board of Directors of the Company shall be evidenced to the Trustee by promptly
filing with the Trustee a 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 provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and that are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company
all the Capital Stock of which (other than directors' qualifying shares) is
owned by the Company or another Wholly Owned Subsidiary.
25
<PAGE> 32
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . . . 4.07(a)
"Appendix" . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Bankruptcy Law". . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"beneficially own". . . . . . . . . . . . . . . . . . . . . . . . 1.01
"Blockage Notice" . . . . . . . . . . . . . . . . . . . . . . . . 10.03
"Change of Control Offer" . . . . . . . . . . . . . . . . . . . . 4.08(b)
"covenant defeasance option". . . . . . . . . . . . . . . . . . . 8.01(b)
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Definitive Note" . . . . . . . . . . . . . . . . . . . . . . . . Appendix A
"Event of Default". . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Exchange Notes". . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"Global Exchange Notes" . . . . . . . . . . . . . . . . . . . . . Appendix A
"Guarantee Blockage Notice" . . . . . . . . . . . . . . . . . . . 12.03
"Guaranteed Obligations". . . . . . . . . . . . . . . . . . . . . 11.01
"Guaranteed Payment Blockage Period". . . . . . . . . . . . . . . 12.03
"incorporated provision". . . . . . . . . . . . . . . . . . . . . 13.01
"Initial Notes" . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
"legal defeasance option" . . . . . . . . . . . . . . . . . . . . 8.01(b)
"Legal Holiday" . . . . . . . . . . . . . . . . . . . . . . . . . 13.08
"Notes Custodian" . . . . . . . . . . . . . . . . . . . . . . . . Appendix A
"Notice of Default" . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.06(b)
"Offer Amount". . . . . . . . . . . . . . . . . . . . . . . . . . 4.06(c)(ii)
"Offer Period". . . . . . . . . . . . . . . . . . . . . . . . . . 4.06(c)(ii)
"pay its Guarantee" . . . . . . . . . . . . . . . . . . . . . . . 12.03
"pay the Notes" . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
"Paying Agent". . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Payment Blockage Period" . . . . . . . . . . . . . . . . . . . . 10.03
"protected purchaser" . . . . . . . . . . . . . . . . . . . . . . 2.07
"Purchase Date" . . . . . . . . . . . . . . . . . . . . . . . . . 4.06(c)(i)
"Registered Exchange Offer" . . . . . . . . . . . . . . . . . . . Appendix A
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Registration Agreement". . . . . . . . . . . . . . . . . . . . . Appendix A
"Restricted Payment". . . . . . . . . . . . . . . . . . . . . . . 4.04(a)
"Successor Company" . . . . . . . . . . . . . . . . . . . . . . . 5.01(a)
</TABLE>
26
<PAGE> 33
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes and the Guarantees.
"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, the
Guarantors and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) "including" means including without limitation;
(e) words in the singular include the plural and words in the plural
include the singular;
(f) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as
unsecured Indebtedness;
(g) the principal amount of any noninterest bearing or other discount
security (other than the Notes) at any date shall be the principal amount
thereof
27
<PAGE> 34
that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP; and
(h) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE 2
The Notes
SECTION 2.01. Form and Dating. Provisions relating to the Initial
Notes and the Exchange Notes are set forth in the Appendix, which is hereby
incorporated in and expressly made a part of this Indenture. The Initial Notes
and the Trustee's certificate of authentication shall each be substantially in
the form of Exhibit A hereto, which is hereby incorporated in and expressly
made a part of this Indenture. The Exchange Notes and the Trustee's certificate
of authentication shall be substantially in the form of Exhibit B hereto, which
is hereby incorporated in and expressly made a part of this Indenture. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company or any Guarantor is subject, if
any, or usage (provided that any such notation, legend or endorsement is in a
form acceptable to the Company). Each Note shall be dated the date of its
authentication. The Notes shall be issuable only in registered form without
interest coupons and only in denominations of $1,000 (in principal amount at
maturity) and integral multiples thereof.
SECTION 2.02. Execution and Authentication. One Officer shall sign the
Notes for the Company by manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee authenticates the Note, the Note shall be valid
nevertheless.
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 and make available for delivery Notes
as set forth in the Appendix.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Notes. Any such appointment shall be
evidenced by an instrument signed by a Trust Officer, a copy of which shall be
furnished to the Company.
28
<PAGE> 35
Unless limited by the terms of such 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
agent. An authenticating agent has the same rights as any Registrar, Paying
Agent or agent for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. (a) The Company shall
maintain an office or agency, which shall be located in the Borough of
Manhattan, The City of New York, where Notes may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Notes may be presented for payment (the "Paying Agent"). 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.
The term "Paying Agent" includes any additional paying agent, and the term
"Registrar" includes any co-registrars. The Company initially appoints the
Trustee as (i) Registrar and Paying Agent in connection with the Notes and (ii)
the Notes Custodian with respect to the Global Exchange Notes.
(b) The Company shall enter into an appropriate agency agreement with
any Registrar or Paying Agent not a party to this Indenture, which shall
incorporate the terms of the TIA. The agreement shall 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 fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall
be entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any of its domestically organized Wholly Owned Subsidiaries may act
as Paying Agent or Registrar.
(c) The Company may remove any Registrar or Paying Agent upon written
notice to such Registrar or Paying Agent and to the Trustee; provided, however,
that no such removal shall become effective until (i) acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered
into by the Company and such successor Registrar or Paying Agent, as the case
may be, and delivered to the Trustee or (ii) notification to the Trustee that
the Trustee shall serve as Registrar or Paying Agent until the appointment of a
successor in accordance with clause (i) above. The Registrar or Paying Agent
may resign at any time upon written notice to the Company and the Trustee;
provided, however, that the Trustee may resign as Paying Agent or Registrar
only if the Trustee also resigns as Trustee in accordance with Section 7.08.
SECTION 2.04. Paying Agent to Hold Money in Trust. Prior to 10:00 a.m.
on each due date of the principal of and interest on any Note, the Company
shall deposit with the Paying Agent (or if the Company or a Subsidiary is
acting as Paying Agent, segregate and hold in trust for the benefit of the
Persons entitled thereto) a
29
<PAGE> 36
sum sufficient to pay such principal and interest when so becoming due. The
Company shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of Holders or
the Trustee all money held by the Paying Agent for the payment of principal of
or interest on the Notes and shall notify the Trustee, in accordance with
Section 13.02, of any default by the Company in making any such payment. If the
Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate
the money held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section 2.04, the Paying Agent shall have no further
liability for the money delivered to and received by the Trustee.
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 Holders. If the Trustee is not the Registrar, the
Company shall furnish, or cause the Registrar to furnish, to the Trustee, in
writing at least five Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and
addresses of Holders.
SECTION 2.06. Transfer and Exchange. The Notes shall be issued in
registered form and shall be transferable only upon the surrender of a Note for
registration of transfer and in compliance with the Appendix. When a Note is
presented to the Registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if its requirements therefor are met.
When Notes are presented to the Registrar with a request to exchange them for
an equal principal amount at maturity of Notes of other denominations, the
Registrar shall make the exchange as requested if the same requirements are
met. To permit registration of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Notes at the Registrar's request.
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with any transfer or
exchange pursuant to this Section 2.06. The Company shall not be required to
make and the Registrar need not register transfers or exchanges of Notes
selected for redemption (except, in the case of Notes to be redeemed in part,
the portion thereof not to be redeemed) or any Notes for a period of 15 days
before a selection of Notes to be redeemed.
Prior to the due presentation for registration of transfer of any
Note, the Company, the Guarantors, the Trustee, the Paying Agent and the
Registrar may deem and treat the Person in whose name a Note is registered as
the absolute owner of such Note for the purpose of receiving payment of
principal of and (subject to paragraph 2 of the Notes) interest, if any, on
such Note and for all other purposes whatsoever, whether or not
30
<PAGE> 37
such Note is overdue, and none of the Company, any Guarantor, the Paying Agent,
the Trustee or the Registrar shall be affected by notice to the contrary.
Any Holder of a Global Exchange Note shall, by acceptance of such
Global Exchange Note, agree that transfers of beneficial interest in such
Global Exchange Note may be effected only through a book-entry system
maintained by (a) the Holder of such Global Exchange Note (or its agent) or (b)
any Holder of a beneficial interest in such Global Exchange Note, and that
ownership of a beneficial interest in such Global Exchange Note shall be
required to be reflected in a book entry.
All Notes issued upon any transfer or exchange pursuant to the terms
of this Indenture shall evidence the same debt and shall be entitled to the
same benefits under this Indenture as the Notes surrendered upon such transfer
or exchange.
SECTION 2.07. Replacement Notes. If a mutilated Note is surrendered to
the Registrar 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 if the requirements of Section 8-405 of the
Uniform Commercial Code are met, such that the Holder (a) satisfies the Company
or the Trustee within a reasonable time after such Holder has notice of such
loss, destruction or wrongful taking and the Registrar does not register a
transfer prior to receiving such notification, (b) makes such request to the
Company or the Trustee prior to the Note being acquired by a protected
purchaser as defined in Section 8-303 of the Uniform Commercial Code (a
"protected purchaser") and (c) satisfies any other reasonable requirements of
the Trustee. If required by the Trustee or the Company, such Holder shall
furnish an indemnity bond satisfactory to each of the Company, the Trustee, the
Paying Agent and the Registrar to protect each from any loss that any of them
may suffer if a Note is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Note. In the event any such mutilated,
lost, destroyed or wrongfully taken Note has become or is about to become due
and payable, the Company in its discretion may pay such Note instead of issuing
a new Note in replacement thereof.
Every replacement Note is an additional obligation of the Company.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes.
SECTION 2.08. Outstanding Notes. Notes outstanding at any time are all
Notes authenticated by the Trustee except for those canceled by it, those
delivered to it for cancelation and those described in this Section 2.08 as not
outstanding. Subject to
31
<PAGE> 38
Section 13.06, a Note does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Note is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and interest and Additional Amounts, if any, payable on that date
with respect to the Notes (or portions thereof) to be redeemed or maturing, as
the case may be, and the Paying Agent is not prohibited from paying such money
to the Holders on that date pursuant to the terms of this Indenture, then on
and after that date such Notes (or portions thereof) cease to be outstanding
and interest on them ceases to accrue.
SECTION 2.09. Temporary Notes. Until Definitive Notes are ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Notes. Temporary Notes shall be substantially in the form of Definitive Notes
but may have variations that the Company considers appropriate for temporary
Notes. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate Definitive Notes and deliver them in exchange for temporary
Notes upon surrender of such temporary Notes at the office or agency of the
Company, without charge to the Holder.
SECTION 2.10. Cancelation. The Company at any time may deliver Notes
to the Trustee for cancelation. The Registrar and the Paying Agent shall
forward to the Trustee any Notes surrendered to them for registration of
transfer, exchange or payment. The Trustee and no one else shall cancel all
Notes surrendered for registration of transfer, exchange, payment or
cancelation and shall deliver canceled Notes to the Company pursuant to written
direction by an Officer. The Company may not issue new Notes to replace Notes
it has redeemed, paid or delivered to the Trustee for cancelation. The Trustee
shall not authenticate Notes in place of canceled Notes other than pursuant to
the terms of this Indenture.
SECTION 2.11. Defaulted Interest. If the Company defaults in a payment
of interest on the Notes, the Company shall pay the defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Company may pay the defaulted interest to the Persons who are Holders on a
subsequent special record date. The Company shall fix or cause to be fixed any
such special record date and payment date to the reasonable satisfaction of the
Trustee and shall promptly mail or cause to be mailed to each Holder a notice
that states the special record date, the payment date and the amount of
defaulted interest to be paid.
32
<PAGE> 39
SECTION 2.12. CUSIP Numbers. The Company in issuing the Notes may use
"CUSIP" or "Private Placement" numbers (as applicable) and, if so, the Trustee
shall use "CUSIP" or "Private Placement" numbers (as applicable) in notices of
redemption as a convenience to Holders; provided, however, that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of a redemption
and that reliance may be placed only on the other identification numbers
printed on the Notes, and any such redemption shall not be affected by any
defect in or omission of such numbers. The Company will promptly notify the
Trustee of any change in the "CUSIP" or "Private Placement" numbers (as
applicable).
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Notes pursuant to Section 4.08(e) or paragraph 5 of the Notes, it shall notify
the Trustee in writing of the redemption date and the principal amount at
maturity of Notes to be redeemed.
The Company shall give each notice to the Trustee provided for in this
Section 3.01 at least 40 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate specifying the Accreted Value as of the redemption date, calculated
as described in this Indenture, and an Opinion of Counsel from the Company to
the effect that such redemption will comply with the conditions herein. If
fewer than all the Notes are to be redeemed, the record date relating to such
redemption shall be selected by the Company and given to the Trustee, which
record date shall be not fewer than 15 days after the date of notice to the
Trustee. Any such notice may be canceled at any time prior to notice of such
redemption being mailed to any Holder and shall thereby be void and of no
effect.
SECTION 3.02. Selection of Notes To Be Redeemed. If fewer than all the
Notes are to be redeemed, the Trustee shall select the Notes to be redeemed pro
rata or by lot or by a method that the Trustee shall deem to be fair and
appropriate (and in such manner as complies with applicable legal
requirements). The Trustee shall make the selection from outstanding Notes not
previously called for redemption. The Trustee may select for redemption
portions of the principal amount at maturity of Notes that have denominations
larger than $1,000. Notes and portions thereof that the Trustee selects shall
be in principal amounts at maturity of $1,000 or a whole multiple thereof.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of
33
<PAGE> 40
Notes called for redemption. The Trustee shall notify the Company promptly of
the Notes or portions of Notes to be redeemed.
SECTION 3.03. Notice of Redemption. (a) At least 30 days but not more
than 60 days before a date for redemption of Notes, 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 such Holder's registered address.
The notice shall identify the Notes to be redeemed and shall state:
(i) the redemption date;
(ii) the redemption price and the amount of accrued interest to the
redemption date;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(v) that if any Note is being redeemed in part, after the
redemption date and surrender of such Note, a new Note or Notes in
principal amount at maturity equal to the unredeemed portion shall be
issued to the Holder;
(vi) if fewer than all the outstanding Notes are to be redeemed, the
certificate numbers and principal amount at maturity of the particular
Notes to be redeemed;
(vii) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, Accreted Value of Notes (or
portion thereof) called for redemption ceases to accrete and interest on
Notes (or portion thereof) called for redemption ceases to accrue on and
after the redemption date;
(viii) the CUSIP or Private Placement number, if any, printed on the
Notes being redeemed;
(ix) that no representation is made as to the correctness or accuracy
of the CUSIP or Private Placement number, if any, listed in such notice
or printed on the Notes; and
(x) the paragraph of the Notes and the Section of the Indenture
pursuant to which the Notes are being redeemed.
34
<PAGE> 41
(b) At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense; provided,
however, that the Company shall have delivered to the Trustee notice as
specified in Section 3.01 of this Indenture with the information set forth in
this Section 3.03. In such event, the Company shall provide the Trustee with
the information required by this Section 3.03.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Notes shall be paid at the redemption price
stated in the notice, plus accrued interest and Additional Amounts, if any, to
the redemption date; provided, however, that if the redemption date is after a
regular record date and on or prior to the interest payment date, the accrued
interest and Additional Amounts, if any, shall be payable to the Holder of the
redeemed Notes registered on the relevant record date. Failure to give notice
or any defect in the notice to any Holder shall not affect the validity of the
notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m. on the
redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest and
Additional Amounts, if any, on all Notes to be redeemed on that date other than
Notes or portions of Notes called for redemption that have been delivered by
the Company to the Trustee for cancelation. On and after the redemption date,
the Accreted Value of Notes (or portion thereof) called for redemption shall
cease to accrete and interest shall cease to accrue on Notes or portions
thereof called for redemption so long as the Company has deposited with the
Paying Agent funds sufficient to pay the principal of, plus accrued and unpaid
interest and Additional Amounts, if any, on, the Notes to be redeemed, unless
the Paying Agent is prohibited from making such payment pursuant to the terms
of this Indenture.
SECTION 3.06. Notes Redeemed in Part. Upon surrender of a Note that is
redeemed in part, the Company shall execute and the Trustee shall authenticate
for the Holder (at the Company's expense) a new Note equal in principal amount
at maturity to the unredeemed portion of the Note surrendered.
35
<PAGE> 42
ARTICLE 4
Covenants
SECTION 4.01. Payment of Notes. (a) The Company shall promptly pay the
principal of and interest on the Notes on the dates and in the manner provided
in the Notes and in this Indenture. Principal of and interest on the Notes
shall be considered paid on the date due if on such date the Trustee or the
Paying Agent holds in accordance with this Indenture money sufficient to pay
all principal of and interest on the Notes then due and the Trustee or the
Paying Agent, as the case may be, is not prohibited from paying such money to
the Holders on that date pursuant to the terms of this Indenture.
(b) The Company shall pay interest on overdue principal of the Notes
at the rate specified therefor in the Notes and shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the SEC, and provide the Trustee, Holders and
prospective Holders (upon request) within 15 days after it files them with the
SEC, copies of its annual report and the information, documents and other
reports that are specified in Section 13 and 15(d) of the Exchange Act. In the
event that the rules and regulations promulgated under the Exchange Act or the
interpretations of the SEC thereof would permit the Company, if it were subject
to the reporting requirements of Section 13 or 15(d) of the Exchange Act, to
cease to file separate reports pursuant thereto based on the inclusion of
financial or other information with respect to the Company in the reports and
other information filed with the SEC or otherwise, Holdings may file with the
SEC copies of its annual report and the information, documents and other
reports that are specified in Section 13 and 15(d) of the Exchange Act
(including such information as would be required to so permit the Company to
cease to file separate reports) and provide them to the Trustee and Holders and
prospective Holders (upon request) within 15 days after it files them with the
SEC, in which case the Company shall be relieved of its obligations under the
previous sentence. In addition, following a Public Equity Offering, the Company
shall furnish to the Trustee and the Holders, promptly upon their becoming
available, copies of the annual report to shareholders and any other
information provided by the Company or Holdings to its public shareholders
generally. The Company also shall comply with the other provisions of TIA ss.
314(a).
SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not,
and shall not permit any Restricted Subsidiary to, Incur any Indebtedness;
provided, however, that the Company or any Restricted Subsidiary (other than
any Foreign Subsidiary that is not a Guarantor) may Incur Indebtedness if on
the date of such
36
<PAGE> 43
Incurrence and after giving effect thereto the Consolidated Coverage Ratio
would be greater than 2:1 if such Indebtedness is Incurred on or prior to
November 12, 2002 or 2.25:1 if such Indebtedness is Incurred thereafter.
(b) Notwithstanding Section 4.03(a), the Company and the Restricted
Subsidiaries may Incur the following Indebtedness:
(i) Bank Indebtedness of the Company in an aggregate principal
amount not to exceed $310.0 million less the aggregate amount of all
prepayments of principal of such Indebtedness pursuant to Section 4.06;
(ii) Indebtedness of the Company owed to and held by any Wholly
Owned Subsidiary or Indebtedness of a Restricted Subsidiary owed to and
held by the Company or any Wholly Owned Subsidiary; provided, however,
that (1) any subsequent issuance or transfer of any Capital Stock or any
other event that results in any such Wholly Owned Subsidiary ceasing to
be a Wholly Owned Subsidiary or any subsequent transfer of any such
Indebtedness (except to the Company or a Wholly Owned Subsidiary) shall
be deemed, in each case, to constitute the Incurrence of such
Indebtedness by the issuer thereof; (2) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash or cash equivalents of all obligations with
respect to the Notes; and (3) if a Restricted Subsidiary that is a
Guarantor is the obligor on such Indebtedness and such Indebtedness is
owed to and held by a Wholly Owned Subsidiary that is not a Guarantor,
such Indebtedness is expressly subordinated to the prior payment in full
in cash or cash equivalents of all obligations of such Restricted
Subsidiary with respect to its Guarantee;
(iii) Indebtedness (1) represented by the Notes and the Guarantees,
(2) outstanding on the Closing Date (other than the Indebtedness
described in clauses (i) and (ii) above), (3) consisting of Refinancing
Indebtedness Incurred in respect of any Indebtedness described in this
clause (iii) (including Indebtedness that is Refinancing Indebtedness) or
Section 4.03(a) or (4) consisting of guarantees of any Indebtedness
permitted under this Section 4.03 (other than guarantees of Indebtedness
of Subsidiaries that are not Guarantors);
(iv) (1) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted Subsidiary
was acquired by the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Subsidiary of or was otherwise acquired by the Company); provided,
however, that if $10.0 million in the aggregate of Indebtedness Incurred
37
<PAGE> 44
by Restricted Subsidiaries and/or other Persons pursuant to this clause
(iv)(1) and clause (viii)(1) of this Section 4.03(b) remains outstanding,
Indebtedness may be Incurred under this clause (iv)(1) only if, on the
date that such Restricted Subsidiary is acquired by the Company, the
Company would have been able to Incur $1.00 of additional Indebtedness
pursuant to Section 4.03(a) after giving effect to the Incurrence of such
Indebtedness pursuant to this clause (iv)(1) and (2) Refinancing
Indebtedness Incurred by the Company or a Restricted Subsidiary in
respect of Indebtedness Incurred pursuant to this clause (iv)(1);
(v) Indebtedness in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by the
Company and the Restricted Subsidiaries in the ordinary course of their
business;
(vi) Indebtedness (including Capitalized Lease Obligations and
Attributable Debt) Incurred by the Company or any Restricted Subsidiary
to finance the purchase, lease or improvement of property (real or
personal) or equipment (whether through the direct purchase of assets or
Capital Stock of any Person owning such assets that becomes a Wholly
Owned Subsidiary) in an aggregate principal amount, which when aggregated
with the principal amount of all other Indebtedness then outstanding and
Incurred pursuant to this clause (vi), does not exceed $20.0 million;
(vii) Hedging Obligations of the Company or any Guarantor entered into
in the ordinary course of business for the purpose of fixing or hedging
interest rate risk or currency fluctuations;
(viii) (1) Indebtedness of another Person Incurred and outstanding on
or prior to the date on which such Person consolidates with or merges
with or into the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Person consolidates with or merges
with or into the Company); provided, however, that (a) such transaction
complies with Section 5.01 and (b) if $10.0 million in the aggregate of
Indebtedness Incurred by any Persons and/or Restricted Subsidiaries
pursuant to this clause (viii)(1) and clause (iv)(1) of this Section
4.03(b) remains outstanding, Indebtedness may be Incurred under this
clause (viii)(1) only if, on the date that such transaction is
consummated, the Company would have been able to Incur $1.00 of
additional Indebtedness pursuant to Section 4.03(a) after giving effect
to the Incurrence of such Indebtedness pursuant to this clause (viii)(1)
and (2) Refinancing Indebtedness Incurred by the Company or the Successor
Company in respect of Indebtedness Incurred pursuant to subclause (1) of
this clause (viii);
38
<PAGE> 45
(ix) (1)Indebtedness of a Foreign Subsidiary that is not a Guarantor;
provided, however, that, on the date that such Foreign Subsidiary Incurs
such Indebtedness, (A) the Company would have been able to Incur $1.00 of
additional Indebtedness pursuant to Section 4.03(a) after giving effect
to the Incurrence of such Indebtedness pursuant to this clause (ix)(1),
and (B) the Foreign Coverage Ratio would be greater than 2.5:1.0 after
giving effect to the Incurrence of such Indebtedness pursuant to this
clause (ix)(1), and (2) Refinancing Indebtedness Incurred by such Foreign
Subsidiary in respect of Indebtedness Incurred pursuant to subclause (1)
of this clause (ix); or
(x) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to Section 4.03(a) or any other clause of this Section 4.03(b))
in an aggregate principal amount on the date of Incurrence that, when
added to all other Indebtedness Incurred pursuant to this clause (x) and
then outstanding, shall not exceed $10.0 million.
(c) Notwithstanding the foregoing, a Domestic Subsidiary that is not a
Guarantor may not Incur any Indebtedness pursuant to Section 4.03(a) or 4.03(b)
(except pursuant to clauses (ii) and (iii) of Section 4.03(b)) if such
Subsidiary, together with all other Domestic Subsidiaries that are not
Guarantors, (x) generated in excess of 10% of the EBITDA of the Company and its
Domestic Subsidiaries on a consolidated basis for the period of the most recent
four consecutive fiscal quarters ending at the end of the most recent fiscal
quarter for which financial statements are publicly available or (y) had assets
representing more than 10% of the Consolidated Net Tangible Assets of the
Company and its Domestic Subsidiaries on a consolidated basis as of the end of
the fiscal quarter for which financial statements are publicly available.
(d) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to Section 4.03(b) above if the proceeds thereof are
used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund
or Refinance any Subordinated Obligations unless such Indebtedness shall be
subordinated to the Notes to at least the same extent as such Subordinated
Obligations. The Company shall not Incur any Indebtedness if such Indebtedness
is subordinate or junior in ranking in any respect to any Senior Indebtedness
unless such Indebtedness is Senior Subordinated Indebtedness or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness. In
addition, the Company shall not Incur any Secured Indebtedness which is not
Senior Indebtedness unless contemporaneously therewith effective provision is
made to secure the Notes equally and ratably with (or on a senior basis to, in
the case of Indebtedness subordinated in right of payment to the Notes) such
Secured Indebtedness for so long as such Secured Indebtedness is secured by a
Lien. A Guarantor shall not Incur any Indebtedness if such Indebtedness is by
its terms expressly subordinate or junior in ranking in any respect to any
Senior Indebtedness of such Guarantor unless such
39
<PAGE> 46
Indebtedness is Senior Subordinated Indebtedness of such Guarantor or is
expressly subordinated in right of payment to Senior Subordinated Indebtedness
of such Guarantor. In addition, a Guarantor shall not Incur any Secured
Indebtedness that is not Senior Indebtedness of such Guarantor unless
contemporaneously therewith effective provision is made to secure the Guarantee
of such Guarantor equally and ratably with (or on a senior basis to, in the
case of Indebtedness subordinated in right of payment to such Guarantee) such
Secured Indebtedness for as long as such Secured Indebtedness is secured by a
Lien.
(e) Notwithstanding any other provision of this Section 4.03, an
increase in the dollar amount of Indebtedness of the Company or any Restricted
Subsidiary that comes about solely as a result of fluctuations in the exchange
rates of currencies shall not be deemed to be the Incurrence by the Company or
such Restricted Subsidiary of additional Indebtedness.
(f) For purposes of determining the outstanding principal amount of
any particular Indebtedness Incurred pursuant to this Section 4.03, (i)
Indebtedness Incurred pursuant to the Credit Agreement prior to or on the
Closing Date shall be treated as Incurred pursuant to Section 4.03(b)(i), (ii)
Indebtedness permitted by this Section 4.03 need not be permitted solely by
reference to one provision permitting such Indebtedness but may be permitted in
part by one such provision and in part by one or more other provisions of this
Section 4.03 permitting such Indebtedness and (iii) in the event that
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in this Section 4.03, the Company, in its sole discretion, shall
classify such Indebtedness and only be required to include the amount of such
Indebtedness in one of such clauses.
40
<PAGE> 47
SECTION 4.04. Limitation on Restricted Payments. (a) The Company shall
not, and shall not permit any Restricted Subsidiary, directly or indirectly, to
(i) declare or pay any dividend, make any distribution on or in respect of its
Capital Stock or make any similar payment (including any payment in connection
with any merger or consolidation involving the Company) to the holders of its
Capital Stock except (1) dividends or distributions payable solely in its
Capital Stock (other than Disqualified Stock) and (2) dividends or
distributions payable to the Company or another Restricted Subsidiary (and, if
such Restricted Subsidiary has shareholders other than the Company or other
Restricted Subsidiaries, to its other shareholders on a pro rata basis), (ii)
purchase, repurchase, redeem or otherwise acquire or retire for value any
Capital Stock of Holdings, the Company or any Restricted Subsidiary held by
Persons other than the Company or another Restricted Subsidiary, (iii)
purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment any Subordinated Obligations (other than the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value of
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within
one year of the date of acquisition or payment) or (iv) make any Investment
(other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment referred to in clauses (i) through (iv) of this
Section 4.04(a) being herein referred to as a "Restricted Payment"), if at the
time the Company or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company could not Incur at least $1.00 of additional
Indebtedness under Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a resolution of the
Board of Directors of the Company) declared or made subsequent to the
Closing Date would exceed the sum, without duplication, of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which the
Closing Date occurs to the end of the most recent fiscal quarter for
which financial statements are publicly available (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit); plus
41
<PAGE> 48
(B) the aggregate Net Cash Proceeds received by the Company from
the issue or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Closing Date (other than (x) an issuance or sale to
a Subsidiary of the Company, (y) an issuance or sale to an employee
stock ownership plan or other trust established by the Company or any
of its Subsidiaries or (z) to the extent used in accordance with
Section 4.04(b)(v)(b) or Section 4.04(b)(vi)(3)(B)); plus
(C) the aggregate Net Cash Proceeds received by the Company or a
Restricted Subsidiary from the sale or other disposition (other than
to (x) the Company or a Subsidiary of the Company or (y) an employee
stock ownership plan or other trust established by the Company or any
of its Subsidiaries) of any Investments previously made by the Company
or a Restricted Subsidiary and treated as a Restricted Payment;
provided that the amount added pursuant to this clause (C) shall not
(x) exceed the amount of such Investments previously made by the
Company or any Restricted Subsidiary, which amount was included in the
calculation of the amount of Restricted Payments and (y) include any
amounts from such sale or disposition previously included in Section
4.04(a)(iv)(3); plus
(D) the amount by which Indebtedness of the Company or the
Restricted Subsidiaries is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary of the Company)
subsequent to the Closing Date of any Indebtedness of the Company or
the Restricted Subsidiaries issued after the Closing Date which is
convertible or exchangeable for Capital Stock (other than Disqualified
Stock) of the Company (less the amount of any cash or the Fair Market
Value of other property distributed by the Company or any Restricted
Subsidiary upon such conversion or exchange); plus
(E) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (x) payments of dividends,
repayments of the principal of loans or advances or other transfers of
assets to the Company or any Restricted Subsidiary from Unrestricted
Subsidiaries or (y) the redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the
definition of "Investment") not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made by
the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary, which amount was included in the calculation of the amount
of Restricted Payments; plus
42
<PAGE> 49
(F) $5.0 million.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of the proceeds
of the substantially concurrent sale of, Capital Stock of the Company
(other than Disqualified Stock and other than Capital Stock issued or
sold to a Subsidiary of the Company or an employee stock ownership plan
or other trust established by the Company or any of its Subsidiaries);
provided, however, that (1) such purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value will be excluded
in the calculation of the amount of Restricted Payments; and (2) the Net
Cash Proceeds from such sale applied in the manner set forth in this
clause (i) will be excluded from the calculation of amounts under Section
4.04(a)(iv)(3)(B);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness of the Company that is permitted to be
Incurred pursuant to Section 4.03(b); provided, however, that such
purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount
of Restricted Payments;
(iii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of the
Company or any Guarantor (other than Holdings) from Net Available Cash to
the extent permitted by Section 4.06; provided, however, that such
purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount
of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividends would have complied
with Section 4.04; provided, however, that such dividends shall be
included in the calculation of the amount of Restricted Payments;
(v) any purchase, repurchase, redemption or other acquisition or
retirement for value of shares of, or options to purchase shares of,
common stock of the Company or any of its Subsidiaries from employees,
former employees, consultants, former consultants, directors or former
directors of the Company or any of its Subsidiaries (or permitted
transferees of such employees, former employees, consultants, former
consultants, directors or former directors),
43
<PAGE> 50
pursuant to the terms of agreements (including employment agreements) or
plans (or amendments thereto) approved by the Board of Directors of the
Company under which such individuals purchase or sell, or are granted the
option to purchase or sell, such shares of common stock or such options;
provided, however, that the aggregate amount of such purchases,
repurchases, redemptions and other acquisitions or retirements for value,
together with any amounts or other distributions to Holdings under
Section 4.04(b)(vi)(3), shall not exceed in any calendar year the sum of
(a) $5.0 million plus (b) the Net Cash Proceeds (1) received since the
Closing Date by the Company or received by Holdings and contributed to
the Company from the sale of Capital Stock to employees, consultants and
directors of Holdings or the Company and (2) not previously credited to
any purchase, repurchase, redemption or retirement for value or other
acquisition of such shares or options to purchase shares of common stock
pursuant to this Section 4.04(b)(v)(b) or Section 4.04(b)(vi)(3)(B)
below; provided, further, however, that such purchase, repurchase,
redemption or other acquisition or retirement for value shall be included
in the calculation of the amount of Restricted Payments (unless made with
Net Cash Proceeds excluded pursuant to Section 4.04(a)(iv)(3)(B)(z));
(vi) any payment of dividends, other distributions or other amounts
by the Company solely for the purposes set forth in clauses (1) through
(4) below; provided, however, that any such dividend, distribution or
other amount set forth in clauses (1), (3) (unless made with Net Cash
Proceeds excluded pursuant to Section 4.04(a)(iv)(3)(B)(z)) and (4) (but
not clause (2)) shall be included in the calculation of the amount of
Restricted Payments for the purposes of Section 4.04(a):
(1) to Holdings to provide for operating costs in an aggregate
amount not to exceed $1.0 million per fiscal year;
(2) to Holdings in amounts equal to amounts required for Holdings
to pay U.S. federal, state and local income or foreign income taxes to
the extent such income taxes are attributable to the income of the
Company and the Restricted Subsidiaries (and, to the extent of amounts
actually received from its Unrestricted Subsidiaries, in amounts
required to pay such taxes to the extent attributable to the income of
such Unrestricted Subsidiaries);
(3) to Holdings in amounts equal to amounts expended by Holdings
to purchase, repurchase, redeem or otherwise acquire or retire for
value shares of, or options to purchase shares of, common stock of
Holdings from employees, former employees, consultants, former
44
<PAGE> 51
consultants, directors or former directors of Holdings, the Company or
any of the Company's Subsidiaries (or permitted transferees of such
employees, former employees, consultants, former consultants,
directors or former directors), pursuant to the terms of agreements
(including employment agreements) or plans (or amendments thereto)
approved by the Board of Directors of Holdings under which such
individuals purchase or sell, or are granted the option to purchase or
sell, such shares of common stock of Holdings or such options;
provided, however, that the aggregate amount paid, loaned or advanced
to Holdings pursuant to this Section 4.04(b)(vi)(3), together with the
amounts of any repurchases or other acquisitions under Section
4.04(b)(v), shall not exceed in any calendar year the sum of (A) $5.0
million plus (B) the Net Cash Proceeds (1) received since the Closing
Date by the Company or received by Holdings and contributed to the
Company from the sale of Capital Stock to employees, consultants and
directors of Holdings or the Company and (2) not previously credited
to any purchase, repurchase, redemption or other acquisition or
retirement for value of such shares or options to purchase shares of
common stock pursuant to this Section 4.04(b)(vi)(3)(B) or Section
4.04(b)(v)(b); and
(4) to Holdings in amounts equal to amounts necessary for Holdings
to make loans or advances to employees in the ordinary course of
business in accordance with past practices of the Company, but in any
event not to exceed, when aggregated with amounts loaned or advanced
under clause (f) of the definition of "Permitted Investments," $5.0
million in the aggregate outstanding at any one time; and
(vii) any payment of dividends from the Company to Holdings on or
prior to the Closing Date in order to consummate the Transactions (as
defined and described in the Private Placement Memorandum), provided,
however, that any such dividend shall be excluded in the calculation of
the amount of Restricted Payments.
45
<PAGE> 52
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or restriction on the ability of
any Restricted Subsidiary to (a) pay dividends or make any other distributions
on its Capital Stock or pay any Indebtedness or other obligations owed to the
Company or any of the Restricted Subsidiaries, (b) make any loans or advances
to the Company or any of the Restricted Subsidiaries or (c) transfer any of its
property or assets to the Company or any of the Restricted Subsidiaries,
except:
(i) any encumbrance or restriction pursuant to applicable law or an
agreement in effect at or entered into on the Closing Date;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness Incurred
as consideration in, in contemplation of, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Restricted Subsidiary became a Restricted Subsidiary or was otherwise
acquired by the Company) and outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this Section 4.05 or this clause
(iii) or contained in any amendment to an agreement referred to in clause
(i) or (ii) of this Section 4.05 or this clause (iii); provided, however,
that the encumbrances and restrictions contained in any such Refinancing
agreement or amendment are no less favorable to the Holders than the
encumbrances and restrictions contained in such predecessor agreements;
(iv) in the case of clause (c), any encumbrance or restriction (1)
that restricts in a customary manner the subletting, assignment or
transfer of any property or asset that is subject to a lease, license or
similar contract or (2) contained in security agreements securing
Indebtedness of a Restricted Subsidiary to the extent such encumbrance or
restriction restricts the transfer of the property subject to such
security agreements;
(v) with respect to a Restricted Subsidiary, any restriction
imposed pursuant to an agreement entered into for the sale or disposition
of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or disposition;
46
<PAGE> 53
(vi) any encumbrance or restriction relating to Purchase Money
Indebtedness or Capitalized Lease Obligations for property acquired in
the ordinary course of business that imposes restrictions on the ability
of the Company or a Restricted Subsidiary to sell, lease or transfer the
acquired property to the Company or the Restricted Subsidiaries;
(vii) restrictions on cash or other deposits imposed by customers
under contracts entered into in the ordinary course of business; and
(viii) any encumbrance or restriction contained in joint venture
agreements and other similar agreements entered into in the ordinary
course of business and customary for such types of agreements.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. (a)
The Company shall not, and shall not permit any Restricted Subsidiary to, make
any Asset Disposition unless (i) the Company or such Restricted Subsidiary
receives consideration (including by way of relief from, or by any other Person
assuming sole responsibility for, any liabilities, contingent or otherwise) at
the time of such Asset Disposition at least equal to the Fair Market Value of
the shares and assets subject to such Asset Disposition, (ii) at least 75% of
the consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash; provided that the following shall be deemed
to be cash for purposes of this clause (ii) (but not for purposes of the
definition of Net Available Cash): (1) the amount of any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet or
in the notes thereto) of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes or the
Guarantees) that are assumed by the transferee of any such assets, (2) the
amount of any securities received by the Company or such Restricted Subsidiary
from such transferee that are converted or scheduled to be converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received or scheduled to be received) within 90 days following the closing of
such Asset Disposition, (3) the Fair Market Value of any Related Assets
received by the Company or such Restricted Subsidiary in such Asset Disposition
and (4) any Designated Noncash Consideration received by the Company or such
Restricted Subsidiary in such Asset Disposition having an aggregate Fair Market
Value, taken together with all other Designated Noncash Consideration received
pursuant to this clause (4) that has not been converted into cash or cash
equivalents, not to exceed 10% of Consolidated Net Tangible Assets as of the
end of the most recent fiscal quarter for which financial statements are
publicly available at the time such Designated Noncash Consideration is
received (with the Fair Market Value of each item of Designated Noncash
Consideration being measured at the time received and without giving effect to
subsequent changes in value); and
47
<PAGE> 54
(iii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted Subsidiary, as the
case may be) (1) first, to the extent the Company elects (or is required by the
terms of any Indebtedness), to prepay, repay, redeem, purchase, repurchase,
defease or otherwise acquire or retire for value Senior Indebtedness of the
Company or Indebtedness (other than obligations in respect of any Preferred
Stock) of a Wholly Owned Subsidiary (in each case, other than Indebtedness owed
to the Company or an Affiliate of the Company and other than obligations in
respect of any Disqualified Stock) within 360 days of the later of the date of
such Asset Disposition or the receipt of such Net Available Cash; (2) second,
to the extent of the balance of Net Available Cash after application in
accordance with clause (1) of this Section 4.06(a)(iii), to the extent the
Company or such Restricted Subsidiary elects to, or enters into a binding
agreement to, reinvest in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with cash in an
amount equal to the amount of Net Available Cash received by, or to be received
by, the Company or another Restricted Subsidiary) within 360 days of the later
of such Asset Disposition or the receipt of such Net Available Cash; and (3)
third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (1) and (2) of this Section
4.06(a)(iii), to make an Offer to purchase Notes pursuant to and subject to the
conditions set forth in Section 4.06(b); provided, however, that if the Company
elects (or is required by the terms of any other Senior Subordinated
Indebtedness), such Offer may be made ratably to purchase the Notes and other
Senior Subordinated Indebtedness of the Company; provided, however that, in
connection with any prepayment, repayment, purchase, repurchase, defeasance or
other acquisition or retirement for value of Indebtedness pursuant to clauses
(1) or (3) of this Section 4.06(a)(iii), the Company or such Restricted
Subsidiary shall retire such Indebtedness and shall cause the related loan
commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid, purchased, repurchased, defeased or
otherwise acquired or retired for value.
Upon completion of any Offer, the amount of Net Available Cash shall
be reset at zero and the Company shall be entitled to use any remaining
proceeds for any corporate purposes to the extent permitted under this
Indenture.
Notwithstanding the foregoing provisions of this Section 4.06, the
Company and the Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this Section 4.06 except to the extent that
the aggregate Net Available Cash from all Asset Dispositions that is not
applied in accordance with this Section 4.06 exceeds $10.0 million.
(b) In the event of an Asset Disposition that requires the purchase of
Notes pursuant to Section 4.06(a)(iii)(3), the Company shall be required to
offer to purchase Notes tendered pursuant to an offer by the Company for the
Notes (an "Offer")
48
<PAGE> 55
at a purchase price of 100% of their Accreted Value plus accrued and unpaid
interest thereon and Additional Amounts in respect thereof, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date) in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in Section 4.06(c) and to purchase other Senior
Subordinated Indebtedness on the terms and to the extent contemplated thereby.
The Company shall not be required to make an Offer for Notes pursuant to this
Section 4.06 if the Net Available Cash available therefor (after application of
the proceeds as provided in Sections 4.06(a)(iii)(1) and 4.06(a)(iii)(2)) is
less than $10.0 million for any particular Asset Disposition (which lesser
amount shall be carried forward for purposes of determining whether an Offer is
required with respect to the Net Available Cash from any subsequent Asset
Disposition).
(c) (i) Promptly, and in any event within 10 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver
to the Trustee and send, by first-class mail to each Holder, a written notice
stating that the Holder may elect to have his Notes purchased by the Company
either in whole or in part (subject to prorating as hereinafter described in
the event the Offer is oversubscribed) in integral multiples of $1,000 of
principal amount at maturity, at the applicable purchase price. The notice
shall specify a purchase date not less than 30 days nor more than 60 days after
the date of such notice (the "Purchase Date") and shall contain such
information concerning the business of the Company which the Company in good
faith believes will enable such Holders to make an informed decision (which at
a minimum shall include (1) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the Company, the most
recent subsequently filed Quarterly Report on Form 10-Q and any Current Report
on Form 8-K of the Company filed subsequent to such Quarterly Report, other
than Current Reports describing Asset Dispositions otherwise described in the
offering materials (or corresponding successor reports), in each case, if any,
(2) a description of material developments in the Company's business subsequent
to the date of the latest of such reports, and (3) if material, appropriate pro
forma financial information) and all instructions and materials necessary to
tender Notes pursuant to the Offer, together with the address referred to in
clause (iii)).
(ii) Not later than the date upon which written notice of an Offer
is delivered to the Trustee as provided above, the Company shall deliver to the
Trustee an Officers' Certificate as to (1) the amount of the Offer (the "Offer
Amount"), (2) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (3) the compliance
of such allocation with the provisions of Section 4.06(a). On such date, the
Company shall also irrevocably deposit with the Trustee or with a paying agent
(or, if the Company is acting as its own paying agent, segregate and hold in
trust) an amount equal to the Offer Amount to be invested in Temporary Cash
Investments and to be held for payment in accordance with the provisions of
this Section 4.06. Upon the expiration of the period for which the Offer
49
<PAGE> 56
remains open (the "Offer Period"), the Company shall deliver to the Trustee for
cancelation the Notes or portions thereof that have been properly tendered to
and are to be accepted by the Company. The Trustee (or the Paying Agent, if not
the Trustee) shall, on the date of purchase, mail or deliver payment to each
tendering Holder in the amount of the purchase price. In the event that the
Offer Amount delivered by the Company to the Trustee is greater than the
purchase price of the Notes (and other Senior Subordinated Indebtedness)
tendered, the Trustee shall deliver the excess to the Company immediately after
the expiration of the Offer Period for application in accordance with this
Section 4.06.
(iii) Holders electing to have a Note purchased shall be required to
surrender the Note, with an appropriate form duly completed, to the Company at
the address specified in the notice at least three Business Days prior to the
Purchase Date. Holders shall be entitled to withdraw their election if the
Trustee or the Company receives not later than one Business Day prior to the
Purchase Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount at maturity of the Note
which was delivered by the Holder for purchase and a statement that such Holder
is withdrawing his election to have such Note purchased. If at the expiration
of the Offer Period the aggregate principal of the Notes and the aggregate
principal amount (or if noninterest bearing or issued at discount, the accreted
value) of any other Senior Subordinated Indebtedness included in the Offer
surrendered by holders thereof exceeds the Offer Amount, the Company shall
select the Notes and other Senior Subordinated Indebtedness to be purchased on
a pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes and other Senior Subordinated Indebtedness in
denominations of $1,000 (principal at maturity), or integral multiples thereof,
are purchased). Holders whose Notes are purchased only in part shall be issued
new Notes equal in principal amount at maturity to the unpurchased portion of
the Notes surrendered.
(iv) At the time the Company delivers Notes to the Trustee which are
to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Notes are to be accepted by the Company pursuant
to and in accordance with the terms of this Section 4.06. A Note shall be
deemed to have been accepted for purchase at the time the Trustee, directly or
through an agent, mails or delivers payment therefor to the surrendering
Holder.
(v) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 4.06. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.06, the Company shall
comply with the applicable securities laws and
50
<PAGE> 57
regulations and shall not be deemed to have breached its obligations under this
Section 4.06 by virtue thereof.
SECTION 4.07. Limitation on Transactions with Affiliates. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, enter into or conduct any transaction or series of related
transactions (including the purchase, sale, lease or exchange of any property
or the rendering of any service) with any Affiliate of the Company (an
"Affiliate Transaction") unless such Affiliate Transaction is on terms (i) that
are no less favorable to the Company or such Restricted Subsidiary, as the case
may be, than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate, (ii) that, in
the event that such Affiliate Transaction involves an aggregate amount in
excess of $10.0 million, (1) are set forth in writing and (2) have been
approved by a majority of the members of the Board of Directors of the Company
having no personal stake, other than as a holder of Capital Stock of Holdings,
the Company or such Restricted Subsidiary, in such Affiliate Transaction and
(iii) that, in the event that such Affiliate Transaction involves an amount in
excess of $25.0 million or does not comply with Section 4.07(a)(ii), have been
determined by a nationally recognized appraisal, accounting or investment
banking firm to be fair, from a financial standpoint, to the Company and the
Restricted Subsidiaries.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors of the
Company, (iii) the grant of stock options or similar rights to employees,
consultants and directors of Holdings, the Company or the Subsidiaries of the
Company pursuant to plans approved by the Board of Directors of Holdings or the
Company, (iv) (A) extensions and Refinancings of loans or advances existing on
the Closing Date that were made to employees or consultants and (B) loans or
advances to employees in the ordinary course of business in accordance with
past practices of Holdings, but in any event in the case of this clause (B) not
to exceed $10.0 million in the aggregate outstanding at any one time, (v) the
payment of reasonable fees to directors of Holdings, the Company and the
Subsidiaries of the Company who are not employees of Holdings, the Company or
such Subsidiaries, (vi) any transaction between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries; (vii) customary indemnification
and insurance arrangements in favor of officers, directors, employees and
consultants of Holdings, the Company or any of the Restricted Subsidiaries;
(viii) the purchase and sale of inventory in the ordinary course of business on
an arm's-length basis consistent with customary market pricing; (ix) marketing
and/or distribution arrangements on arm's-length terms; (x) payments by the
Company or any of the Restricted Subsidiaries to Fox Paine and its Affiliates
for any financial advisory,
51
<PAGE> 58
management, financing, underwriting or other placement services or in respect
of other investment banking activities, including, without limitation, in
connection with acquisitions or divestitures which payments are approved by a
majority of the members of the Board of Directors of the Company referred to in
Section 4.07(a)(ii)(2) in good faith; (xi) the existence of, or the performance
by the Company or any Restricted Subsidiary of the obligations under the terms
of, any stockholders' agreements (including any registration rights agreement
or purchase agreement related thereto) to which any of them is a party as of
the Closing Date, as such agreements may be amended from time to time pursuant
to the terms thereof; provided, however, that the terms of any such amendment
are no less favorable to the Holders than the terms of any such agreements in
effect as of the Closing Date; (xii) the issuance of Capital Stock (other than
Disqualified Stock) of the Company for cash to any Permitted Holder; (xiii) any
transaction between Circon and the Company or a Restricted Subsidiary in
respect of the Circon Note in connection with the Transactions; and (xiv) the
performance of the Services Agreement as in effect on the Closing Date (or any
addition or deletion of services thereunder on substantially similar terms) or
any other amendment or modification thereto or replacement thereof so long as
any such other amendment, modification or replacement agreement is not
materially more disadvantageous to the Holders than the original agreement as
in effect on the Closing Date.
SECTION 4.08. Change of Control. (a) Upon the occurrence of a Change
of Control, each Holder shall have the right to require that the Company
repurchase all or any part of such Holder's Notes at a purchase price in cash
equal to 101% of the Accreted Value thereof, plus accrued and unpaid interest
thereon and Additional Amounts, if any, in respect thereof to the date of
repurchase (subject to the right of Holders of record on the relevant record
date to receive interest and Additional Amounts, if any, due on the relevant
interest payment date), in accordance with the terms contemplated in Section
4.08(b); provided, however, that notwithstanding the occurrence of a Change of
Control, the Company shall not be obligated to repurchase the Notes pursuant to
this Section 4.08 in the event that it has exercised its right to redeem all
the Notes pursuant to Section 4.08(e) or paragraph 5 of the Notes.
In the event that at the time of such Change of Control the terms of
the Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to
this Section 4.08, then prior to the mailing of the notice to Holders provided
for in Section 4.08(b) below, but in any event within 30 days following any
Change of Control, the Company shall (i) repay in full all Bank Indebtedness
or, if doing so will allow the repurchase of Notes, offer to repay in full all
Bank Indebtedness and repay the Bank Indebtedness of each lender who has
accepted such offer or (ii) obtain the requisite consent under the agreements
governing the Bank Indebtedness to permit the repurchase of the Notes as
provided for in Section 4.08(b).
52
<PAGE> 59
(b) Within 30 days following any Change of Control (except as provided
in the proviso to the first sentence of Section 4.08(a)), the Company shall
mail a notice to each Holder with a copy to the Trustee (the "Change of Control
Offer") stating:
(i) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase all or a portion of such
Holder's Notes at a purchase price in cash equal to 101% of the Accreted
Value thereof, plus accrued and unpaid interest thereon and Additional
Amounts in respect thereof, if any, to the date of purchase (subject to
the right of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date);
(ii) the circumstances and relevant facts and financial information
regarding such Change of Control;
(iii) the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(iv) the instructions determined by the Company, consistent with this
Section 4.08, that a Holder must follow in order to have its Notes
purchased.
(c) Holders electing to have a Note purchased shall be required to
surrender the Note, with an appropriate form duly completed, to the Company at
the address specified in the notice at least three Business Days prior to the
purchase date. Holders shall be entitled to withdraw their election if the
Trustee or the Company receives not later than one Business Day prior to the
purchase date a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount at maturity of the Note which was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Note purchased. Holders whose Notes are
purchased only in part will be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered.
(d) On the purchase date, all Notes purchased by the Company under
this Section 4.08 shall be delivered to the Trustee for cancelation, and the
Company shall pay the purchase price plus accrued and unpaid interest, if any,
to the Holders entitled thereto (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date).
(e) In the event that Holders of not less than 98% of the principal
amount at maturity of the outstanding Notes accept a Change of Control Offer
and the Company purchases all of the Notes held by such Holders, the Company
shall have the right, on not less than 30 nor more than 60 days' prior notice,
given not more than 30 days following the purchase pursuant to the Change of
Control Offer, to redeem all the Notes that remain
53
<PAGE> 60
outstanding following such purchase at the purchase price specified in the
Change of Control Offer plus, to the extent not included in the purchase price
specified in the Change of Control Offer, accrued and unpaid interest thereon
and Additional Amounts in respect thereof, if any, to the date of redemption
(subject to the right of Holders of record on the relevant record date to
receive interest on the relevant interest payment date).
(f) Notwithstanding the foregoing provisions of this Section 4.08, the
Company will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in
Section 4.08(b) applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
(g) At the time the Company delivers Notes to the Trustee which are to
be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Notes are to be accepted by the Company pursuant
to and in accordance with the terms of this Section 4.08. A Note shall be
deemed to have been accepted for purchase at the time the Trustee, directly or
through an agent, mails or delivers payment therefor to the surrendering
Holder.
(h) Prior to any Change of Control Offer, the Company shall deliver to
the Trustee an Officers' Certificate and Opinion of Counsel stating that all
conditions precedent contained herein to the right of the Company to make such
offer have been complied with.
(i) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 4.08. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.08, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.08 by virtue
thereof.
SECTION 4.09. Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default
that occurred during such period. If they do, the certificate shall describe
the Default, its status and what action the Company is taking or proposes to
take with respect thereto. The Company also shall comply with Section 314(a)(4)
of the TIA.
54
<PAGE> 61
SECTION 4.10. Further Instruments and Acts. Upon request of the
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.11. Future Guarantors. Subject to Section 11.02(b), the
Company shall cause (i) each Domestic Subsidiary that is acquired or formed
after the Closing Date, and (ii) each Foreign Subsidiary (whether previously
existing or newly acquired or formed) that guarantees any Indebtedness of the
Company (other than the Existing Notes) or a Domestic Subsidiary after the
Closing Date, to become a Guarantor, and, if applicable to execute and deliver
to the Trustee a supplemental indenture in the form of Exhibit C pursuant to
which such Subsidiary will guarantee payment of the Notes.
SECTION 4.12. Limitation on Lines of Business. The Company shall not,
and shall not permit any Restricted Subsidiary to, engage in any business,
other than a Permitted Business.
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries. The Company shall not sell or otherwise dispose of any
shares of Capital Stock of a Restricted Subsidiary, and shall not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any shares of its Capital Stock except: (a) to the Company or a
Wholly Owned Subsidiary; (b) if, immediately after giving effect to such
issuance, sale or other disposition, neither the Company nor any of its
Subsidiaries owns any Capital Stock of such Restricted Subsidiary or (c) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any
Investment in such Person remaining after giving effect thereto would have been
permitted to be made under Section 4.04 if made on the date of such issuance,
sale or other disposition. The cash proceeds of any sale of such Capital Stock
permitted hereby shall be treated as cash proceeds from an Asset Disposition
and shall be applied in accordance with Section 4.06.
SECTION 4.14. Calculation of Original Issue Discount. The Company
shall file with the Paying Agent promptly at the end of each calendar year (a)
a written notice specifying the amount of original issue discount (including
daily rates and accrual periods) accrued on outstanding Notes as of the end of
such year and (b) such other specific information relating to such original
issue discount as may then be required under the Internal Revenue Code of 1986,
as amended from time to time.
55
<PAGE> 62
ARTICLE 5
Successor Company
SECTION 5.01. (a) When Company May Merge or Transfer Assets. The
Company shall not consolidate with or merge with or into, or convey, transfer
or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) shall expressly
assume, by a supplemental indenture hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the
Company under the Notes and this Indenture;
(ii) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or
any Restricted Subsidiary as a result of such transaction as having been
Incurred by the Successor Company or such Restricted Subsidiary at the
time of such transaction), no Default shall have occurred and be
continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
(iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture; and
(v) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Holders will not recognize income, gain or
loss for Federal income tax purposes as a result of such transaction 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
transaction had not occurred.
Notwithstanding the foregoing Sections 5.01(a)(ii) and 5.01(a)(iii),
the Company may merge with an Affiliate incorporated or formed solely for the
purpose of reincorporating the Company in another jurisdiction.
56
<PAGE> 63
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture, but
the predecessor Company in the case of a conveyance, transfer or lease of all
or substantially all its assets shall not be released from the obligation to
pay the principal of and interest on the Notes.
(b) The Company shall not permit any Subsidiary Guarantor to
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all of its assets to any Person unless: (i) the resulting,
surviving or transferee Person (the "Successor Guarantor") will be a
corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia, and such Successor
Guarantor (if not such Guarantor) shall expressly assume, by a supplemental
indenture to this Indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of such Guarantor under its
Guarantee; (ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Guarantor or any Restricted Subsidiary as a result of such transaction as
having been Incurred by such Successor Guarantor or any Restricted Subsidiary
at the time of such transaction), no Default shall have occurred and be
continuing; and (iii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
(c) Notwithstanding Sections 5.01(a)(ii), 5.01(a)(iii) and
5.01(b)(ii), any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Company or another
Restricted Subsidiary. In addition, Section 5.01(b) shall not apply to any
consolidation with, merger with or into, or conveyance, transfer or lease to,
any Person if the resulting, surviving or transferee Person shall not be a
Subsidiary of the Company and the other terms of this Indenture, including
Section 4.06, are complied with.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in any payment of interest on, or Additional
Amounts in respect of, any Note when the same becomes due and payable
whether or not such payment shall be prohibited by Article 10, and such
default continues for a period of 30 days;
57
<PAGE> 64
(b) the Company (i) defaults in the payment of the principal of any
Note when the same becomes due and payable at its Stated Maturity, upon
required redemption or repurchase, upon declaration or otherwise, whether
or not such payment shall be prohibited by Article 10 or (ii) fails to
redeem or purchase Notes when required pursuant to this Indenture or the
Notes, whether or not such redemption or purchase shall be prohibited by
Article 10;
(c) the Company fails to comply with Section 5.01;
(d) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, 4.08, 4.11, 4.12 or 4.13 (other than a failure to purchase
Notes when required under Section 4.06 or 4.08) and such failure
continues for 30 days after the notice to the Company and the Trustee
specified below;
(e) the Company or any Guarantor fails to comply with any of its
agreements in the Notes or this Indenture (other than those referred to
in (a), (b), (c) or (d) above) and such failure continues for 60 days
after the notice to the Company and the Trustee specified below;
(f) Indebtedness of the Company or any Subsidiary (other than
Indebtedness owing to the Company or a Subsidiary of the Company) is not
paid within any applicable grace period after final maturity or the
acceleration of any such Indebtedness by the holders thereof because of a
default if the total amount of such Indebtedness unpaid or accelerated
exceeds $5.0 million or its foreign currency equivalent at the time and
such failure continues for 10 days after the notice to the Company and
the Trustee specified below;
(g) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in an
involuntary case;
(iii) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(iv) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
58
<PAGE> 65
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property; or
(iii) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days;
(i) any judgment or decree for the payment of money in excess of $5.0
million or its foreign currency equivalent is rendered against the
Company or any Restricted Subsidiary, to the extent such judgment or
decree is not covered by insurance or is in excess of insurance coverage,
if there is a period of 60 days following the entry of such judgment or
decree during which such judgment or decree is not discharged, waived or
the execution thereof stayed; or
(j) any Guarantee ceases to be in full force and effect (except as
contemplated by the terms of this Indenture) or any Guarantor or Person
acting by or on behalf of such Guarantor denies or disaffirms its
obligations under this Indenture or any Guarantee and such Default
continues for 10 days after the notice to the Company and the Trustee
specified below.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar
official under any Bankruptcy Law.
A Default under clause (d), (e) or (f) above is not an Event of
Default until the Trustee or the Holders of at least 25% in aggregate principal
amount at maturity of the outstanding Notes notify the Company and the Trustee
of the Default and the Company or the Guarantor, as applicable, does not cure
such Default within the time specified after
59
<PAGE> 66
receipt of such notice. Such notice must specify the Default, demand that it be
remedied and state that such notice is a "Notice of Default."
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (f) or (j) and any event which, with the
giving of notice or the lapse of time, would become an Event of Default under
clause (d), (e) or (i), its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(g) or (h) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company or the
Holders of at least 25% in aggregate principal amount at maturity of the
outstanding Notes by notice to the Company and the Trustee, may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest will be due and
payable immediately. If an Event of Default specified in Section 6.01(g) or (h)
with respect to the Company occurs, the principal of and interest on all the
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 Holders. The Holders
of a majority in aggregate principal amount at maturity of the outstanding
Notes by notice to the Trustee may rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except nonpayment of
principal of or interest on Notes that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.03. Other Remedies. Notwithstanding any other provision of
this Indenture, if an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal of or
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding in its own name and as trustee
of an express trust 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.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount at maturity of the Notes by notice to the Trustee
may waive an existing Default and its consequences except (a) a Default in the
payment of principal of or interest on a Note, (b) a Default arising from the
failure to redeem or purchase any
60
<PAGE> 67
Note when required pursuant to the terms of this Indenture or (c) a Default in
respect of a provision that under Section 9.02 cannot be amended without the
consent of each Holder affected. When a Default is waived, it is deemed cured,
but no such waiver shall extend to any subsequent or other Default or impair
any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in
aggregate principal amount at maturity of the outstanding Notes may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or of exercising any trust or power conferred on the Trustee.
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture or, subject to Section 7.01, that the Trustee determines is
unduly prejudicial to the rights of other Holders or would involve the Trustee
in personal liability; provided, however, that the Trustee may take any other
action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. (a) Except to enforce the right to
receive payment of principal of or interest on the Notes when due, no Holder
may pursue any remedy with respect to this Indenture or the Notes unless:
(i) the Holder has previously given to the Trustee written notice
stating that an Event of Default is continuing;
(ii) the Holders of at least 25% in aggregate principal amount at
maturity of the outstanding Notes make a written request to the Trustee
to pursue the remedy;
(iii) such Holder or Holders offer to the Trustee security or
indemnity reasonably acceptable to the Trustee against any loss,
liability, fees and expenses, including reasonable fees and expenses of
legal counsel;
(iv) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(v) the Holders of a majority in aggregate principal amount at
maturity of the outstanding Notes do not give the Trustee a direction
inconsistent with the request during such 60-day period.
(b) A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
61
<PAGE> 68
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and Additional Amounts and interest on the Notes held
by such Holder, on or after the respective due dates expressed or provided for
in the Notes, or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default speci
fied in Section 6.01(a) or (b) 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 then due and
owing (together with interest on overdue principal and (to the extent lawful)
on any unpaid interest at the rate provided for in the Notes) and the amounts
provided for in Section 7.07.
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 and the Holders allowed in
any judicial proceedings relative to the Company, any Subsidiary or Guarantor,
their creditors or their property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Holders of Senior Indebtedness of the Company to the extent
required by Article 10;
THIRD: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, and any Additional Amounts without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, any Additional Amounts and interest,
respectively; and
FOURTH: to the Company.
62
<PAGE> 69
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.10. At least 15 days before such record
date, the Trustee shall mail to each Holder and the Company a notice that
states the record date, the payment date and amount to be paid.
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 in its discretion may
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 a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in aggregate principal amount at maturity of the Notes.
SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Company
nor any Guarantor (to the extent it may lawfully do so) shall at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company and each Guarantor (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
63
<PAGE> 70
(ii) 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, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(i) this paragraph does not limit the effect of Section 7.01(b);
(ii) 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; and
(iii) 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 6.05.
(iv) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in
the performance of any of its duties hereunder or in the exercise of any
of its rights or powers.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to Sections 7.01(a), 7.01(b) and 7.01(c).
(e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01 and to the provisions of the
TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel and indemnification to its
reasonable
64
<PAGE> 71
satisfaction. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on the Officers' Certificate
or Opinion of Counsel.
(c) The Trustee may act through 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 it takes or omits
to take in good faith which it believes to be authorized or within its rights
or powers; provided, however, that the Trustee's conduct does not constitute
wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the Notes
shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
note or other paper or document or as to whether or not an Event of Default
shall have occurred unless requested in writing to do so by the Holders of not
less than a majority in aggregate principal amount at maturity of the Notes at
the time outstanding, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney.
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 or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Registrar or co-paying
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, any Guarantee or the Notes, 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 or any Guarantor in this Indenture or in any
document issued in connection with the sale of the Notes or in the Notes other
than the Trustee's certificate of authentication. The Trustee shall not be
responsible for any conduct or omission by the Company or any Guarantor or the
occurrence of any Event of Default.
65
<PAGE> 72
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to a Trust Officer, the Trustee shall mail to
each Holder notice of the Default within the earlier of 90 days after it occurs
or 30 days after it is known to a Trust Officer or written notice of it is
received by a Trust Officer. Except in the case of a Default in payment of
principal of or interest on any Note (including payments pursuant to the
mandatory redemption provisions of such Note, if any), the Trustee may withhold
the notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Holders. The
Trustee shall not be deemed to have notice of a Default unless a Trust Officer
shall have actual knowledge thereof or shall have received written notice
thereof from any Holder.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with May 15, 2000, the Trustee shall
mail to each Holder a brief report dated as of such May 15 that complies with
Section 313(a) of the TIA. The Trustee shall also comply with Section 313(b) of
the TIA.
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each stock exchange (if any) on which the Notes are
listed. The Company agrees to notify promptly the Trustee whenever the Notes
become listed on any stock exchange and of any delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time such compensation for its services as the parties
shall agree from time to time. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts. The Company and each Guarantor, jointly and
severally shall indemnify the Trustee and each of its officers, directors,
attorneys-in-fact and agents for, and hold harmless against, any and all loss,
liability claim, demand or expense (including reasonable attorneys' fees)
incurred by or in connection with the administration of this trust and the
performance of its duties hereunder. The Trustee shall notify the Company of
any claim for which it may seek indemnity promptly upon obtaining actual
knowledge thereof; provided, however, that any failure so to notify the Company
shall not relieve the Company or any Guarantor of its indemnity obligations
hereunder. The Company shall defend the claim and the indemnified party shall
provide reasonable cooperation at the Company's expense in the defense. Such
indemnified parties may have separate counsel and the Company and the
Guarantors, as applicable shall pay the fees and expenses of such counsel;
provided, however, that the Company shall not be required to pay such fees and
expenses if it assumes such indemnified parties' defense and, in such
indemnified parties' reasonable
66
<PAGE> 73
judgment, there is no conflict of interest between the Company and the
Guarantors, as applicable, and such parties in connection with such defense.
The Company need not reimburse any expense or indemnify against any loss,
liability or expense incurred by an indemnified party through such party's own
wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee other than money or property held in trust to pay
principal of and interest and any Additional Amounts, if any, on particular
Notes.
The Company's obligations pursuant to this Section 7.07 shall survive
the satisfaction or discharge of this Indenture, any rejection or termination
of this Indenture under any bankruptcy law or the resignation or removal of the
Trustee. Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses after the occurrence of a
Default specified in Section 6.01(g) or (h) with respect to the Company, the
expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. (a) The Trustee may resign at
any time by so notifying the Company in writing in accordance with the
provisions of Section 13.02. Any resignation of the Trustee shall be effective
immediately upon receipt by the Company of such notice (unless such notice
shall specify a later time as the effective time of such resignation, in which
case such later time shall be the effective time), and the resignation of the
Trustee shall not prejudice any rights of the Trustee to receive any
compensation, any reimbursement of any expenses or any indemnity or right to
being defended and held harmless under this Indenture. The Holders of a
majority in aggregate principal amount at maturity of the Notes may remove the
Trustee by so notifying the Trustee and may appoint a successor Trustee. The
Company shall remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Trustee
or its property; or
(iv) the Trustee otherwise becomes incapable of acting.
(b) If the Trustee resigns, is removed by the Company or by the
Holders of a majority in aggregate principal amount at maturity of the Notes
and such Holders do not reasonably promptly appoint a successor Trustee, or if
a vacancy exists in the office
67
<PAGE> 74
of Trustee for any reason (the Trustee in such event being referred to herein
as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
(c) A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon 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 a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
(d) If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee or the Holders
of 10% in aggregate principal amount at maturity of the Notes may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(e) If the Trustee fails to comply with Section 7.10, unless the
Trustee's duty to resign is stayed as provided in TIA ss. 310(b), any Holder
who has been a bona fide Holder of a Note for at least six months may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(f) Notwithstanding the 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. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Notes so authenticated; and in case
at that time any of the Notes shall not have been authenticated, any successor
to the Trustee may authenticate such Notes either in the name of any
predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Notes or in this Indenture provided that the certificate of the Trustee
shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined
68
<PAGE> 75
capital and surplus of at least $100.0 million as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA ss.
310(b), subject to its right to apply for a stay of its duty to resign under
the penultimate paragraph of TIA ss. 310(b); provided, however, that there
shall be excluded from the operation of TIA ss. 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 ss. 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Notes; Defeasance. (a) When
(i) all outstanding Notes (other than Notes replaced or paid pursuant to
Section 2.07) have been canceled or delivered to the Trustee for cancelation or
(ii) all outstanding Notes have become due and payable, whether at maturity or
as a result of the mailing of a notice of redemption pursuant to Article 3
hereof, and the Company irrevocably deposits with the Trustee funds in an
amount sufficient, or U.S. Government Obligations, the principal of and
interest on which will be sufficient, or a combination thereof sufficient, in
the written opinion of a nationally recognized firm of independent public
accountants delivered to the Trustee (which delivery shall only be required if
U.S. Government Obligations have been so deposited), to pay the principal of
and interest on the outstanding Notes when due at maturity or upon redemption
of all outstanding Notes, including interest thereon to maturity or such
redemption date (other than Notes replaced or paid pursuant to Section 2.07),
and Additional Amounts, if any, and if in either case the Company pays all
other sums payable hereunder by the Company, then this Indenture shall, subject
to Section 8.01(c), cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel and
at the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may
terminate (i) all of its obligations under the Notes and this Indenture ("legal
defeasance option") or (ii) its obligations under Sections 4.02, 4.03, 4.04,
4.05, 4.06, 4.07, 4.08, 4.09, 4.11, 4.12 and 4.13 and the operation of Section
5.01(a)(iii), 6.01(d), 6.01(f), 6.01(g) (with respect to Significant
Subsidiaries only), 6.01(h) (with respect to Significant
69
<PAGE> 76
Subsidiaries only) and 6.01(i) ("covenant defeasance option"). The Company may
exercise its legal defeasance option notwithstanding its prior exercise of its
covenant defeasance option. In the event that the Company terminates all of its
obligations under the Notes and this Indenture by exercising its legal
defeasance option or its covenant defeasance option, the obligations under the
Guarantees shall each be terminated simultaneously with the termination of such
obligations.
If the Company exercises its legal defeasance option, payment of the
Notes may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Notes may not be
accelerated because of an Event of Default specified in Section 6.01(d),
6.01(f), 6.01(g) (with respect to Significant Subsidiaries only), 6.01(h) (with
respect to Significant Subsidiaries only) or 6.01(i) or because of the failure
of the Company to comply with Section 5.01(a)(iii).
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07, 7.08 and in
this Article 8 shall survive until the Notes have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
SECTION 8.02. (a) Conditions to Defeasance. The Company may exercise
its legal defeasance option or its covenant defeasance option only if:
(i) the Company irrevocably deposits in trust with the Trustee
money in an amount sufficient, or U.S. Government Obligations the
principal of and interest on which will be sufficient, or a combination
thereof sufficient, to pay the principal of and interest on the Notes
when due at maturity or redemption, as the case may be, including
interest thereon to maturity or such redemption date and Additional
Amounts, if any;
(ii) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Notes to maturity or redemption, as the case may be;
70
<PAGE> 77
(iii) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 6.01(g) or (h) with respect to the
Company occurs which is continuing at the end of the period;
(iv) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;
(v) the Company delivers to the Trustee an Opinion of Counsel to
the effect that the trust resulting from the deposit does not constitute,
or is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(vi) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (1) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (2) 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 tax purposes as a result of such 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 defeasance had not
occurred;
(vii) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
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; and
(viii) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
the defeasance and discharge of the Notes as contemplated by this Article
8 have been complied with.
(b) Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Notes at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of
71
<PAGE> 78
principal of and interest on the Notes. Money and securities so held in trust
are not subject to Article 10 or 12.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any money or U.S.
Government Obligations held by it as provided in this Article which, in the
written opinion of a nationally recognized firm of independent public
accountants delivered to the Trustee (which delivery shall only be required if
U.S. Government Obligations have been so deposited), are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent discharge or defeasance in accordance with this Article.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon written request any money held by
them for the payment of principal of or interest on the Notes that remains
unclaimed for two years, and, thereafter, Holders entitled to the money must
look to the Company for payment as general creditors, and the Trustee and the
Paying Agent shall have no further liability with respect to such monies.
SECTION 8.05. Indemnity for Government Obligations. The Company shall
pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with this
Article 8 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 this Article 8 until such time as the Trustee or
Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, if the
Company has made any payment of interest on or principal of any Notes because
of the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.
72
<PAGE> 79
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. (a) The Company, the
Guarantors and the Trustee may amend this Indenture or the Notes without notice
to or consent of any Holder:
(i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to comply with Article 5;
(iii) to provide for uncertificated Notes in addition to or in place
of certificated Notes; provided, however, that the uncertificated Notes
are issued in registered form for purposes of Section 163(f) of the Code
or in a manner such that the uncertificated Notes are described in
Section 163(f)(2)(B) of the Code;
(iv) to make any change in Article 10 or Article 12 that would limit
or terminate the benefits available to any holder of Senior Indebtedness
(or any Representative therefor) under Article 10 or Article 12;
(v) to add additional Guarantees with respect to the Notes;
(vi) to secure the Notes;
(vii) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(viii) to comply with any requirement of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA;
(ix) to make any change that does not adversely affect the rights of
any Holder;
(x) to provide for the issuance of the Exchange Notes, which shall
have terms substantially identical in all material respects to the
Initial Notes (except that the transfer restrictions contained in the
Initial Notes shall be modified or eliminated, as appropriate), and which
shall be treated, together with any outstanding Initial Notes, as a
single issue of securities; or
(xi) to change the name or title of the Initial Notes or the Exchange
Notes and make any conforming changes related thereto.
73
<PAGE> 80
(b) No amendment under this Section 9.01 may make any change that
adversely affects the rights under Article 10 or Article 12 of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or Representative thereof authorized to give a
consent) consent to such change.
After an amendment under this Section 9.01 becomes effective, the
Company shall mail to Holders a notice briefly describing such amendment. The
failure to give such notice to all Holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.01.
SECTION 9.02. With Consent of Holders. (a) The Company, the Guarantors
and the Trustee may amend this Indenture or the Notes without notice to any
Holder but with the written consent of the Holders of at least a majority in
aggregate principal amount at maturity of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange for the Notes).
However, without the consent of each Holder affected, an amendment may not:
(i) reduce the principal amount at maturity of Notes whose Holders
must consent to an amendment;
(ii) reduce the rate of or extend the time for payment of interest or
any Additional Amounts on any Note;
(iii) reduce the principal of or extend the Stated Maturity of any
Note;
(iv) reduce the premium payable upon the redemption of any Note or
change the time at which any Note may be redeemed in accordance with
Article 3;
(v) make any Note payable in money other than that stated in the
Note;
(vi) make any change in Article 10 or Article 12 that adversely
affects the rights of any Holder under Article 10 or Article 12;
(vii) impair the right of any holder to receive payment of principal
of and interest or any Additional Amounts on such Holder's Notes on or
after the due dates therefor or to institute suit for the enforcement of
any payment on or with respect to such Holder's Notes;
(viii) make any change in Section 6.04 or 6.07 or the second sentence
of this Section 9.02; or
74
<PAGE> 81
(ix) modify the Guarantees in any manner adverse to the Holders.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
(b) No amendment under this Section 9.02 may make any change that
adversely affects the rights under Article 10 or Article 12 of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or Representative thereof authorized to give a
consent) consent to such change.
After an amendment under this Section 9.02 becomes effective, the
Company shall mail to Holders a notice briefly describing such amendment. The
failure to give such notice to all Holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.02.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Notes shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. (a) A
consent to an amendment or a waiver by a Holder of a Note shall bind the Holder
and every subsequent Holder of that Note or portion of the Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
or waiver is not made on the Note. However, any such Holder or subsequent
Holder may revoke the consent or waiver as to such Holder's Note or portion of
the Note if the Trustee receives the notice of revocation before the date on
which the Trustee receives an Officers' Certificate from the Company certifying
that the requisite number of consents have been received. After an amendment or
waiver becomes effective, it shall bind every Holder. An amendment or waiver
becomes effective upon the (i) receipt by the Company or the Trustee of the
requisite number of consents, (ii) satisfaction of conditions to effectiveness
as set forth in this Indenture and any indenture supplemental hereto containing
such amendment or waiver and (iii) execution of such amendment or waiver (or
supplemental indenture) by the Company and the Trustee.
(b) The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding 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 give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
75
<PAGE> 82
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. Notation on or Exchange of Notes. If an amendment
changes the terms of a Note, the Trustee may require the Holder of the Note to
deliver it to the Trustee. The Trustee may place an appropriate notation on the
Note regarding the changed terms and return it to the Holder. Alternatively, if
the Company or the Trustee so determines, the Company in exchange for the Note
shall issue and the Trustee shall authenticate a new Note that reflects the
changed terms. Failure to make the appropriate notation or to issue a new Note
shall not affect the validity of such amendment.
SECTION 9.06. Trustee to Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it
and to receive, and (subject to Section 7.01) shall be fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel stating that
such amendment is authorized or permitted by this Indenture and that such
amendment is the legal, valid and binding obligation of the Company and the
Guarantors enforceable against them in accordance with its terms, subject to
customary exceptions, and complies with the provisions hereof (including
Section 9.03).
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate. The Company agrees, and each
Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes
is subordinated in right of payment, to the extent and in the manner provided
in this Article 10, to the prior payment in full of all Senior Indebtedness of
the Company and that the subordination is for the benefit of and enforceable by
the holders of such Senior Indebtedness. The Notes shall in all respects rank
pari passu with all other Senior Subordinated Indebtedness of the Company and
only Indebtedness of the Company that is Senior Indebtedness of the Company
shall rank senior to the Notes in accordance with the provisions set forth
herein. For purposes of this Article 10, the Indebtedness evidenced by the
Notes shall be deemed to include the Additional Amounts, if any, payable
pursuant to the provisions set forth in the Notes and the Registration
Agreement. All provisions of this Article 10 shall be subject to Section 10.12.
76
<PAGE> 83
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any payment
or distribution of the assets of the Company to creditors upon a total or
partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its properties:
(a) holders of Senior Indebtedness of the Company shall be entitled to
receive payment in full in cash or cash equivalents of such Senior
Indebtedness (including interest accruing after, or that would accrue but
for, the commencement of such proceeding at the rate specified in the
applicable Senior Indebtedness, whether or not such claim for such
interest would be allowed) before the Holders shall be entitled to
receive any payment of principal of or interest on the Notes; and
(b) until the Senior Indebtedness of the Company is paid in full in
cash or cash equivalents, any payment or distribution to which Holders
would be entitled but for this Article 10 shall be made to holders of
such Senior Indebtedness as their interests may appear, except that
Holders may receive and retain (i) Permitted Junior Securities; and (ii)
payments made from the defeasance trust described under Section 8.01 so
long as, on the date or dates the respective amounts were paid into the
defeasance trust, such payments were made with respect to the Notes
without violating the subordination provisions described herein.
SECTION 10.03. Default on Senior Indebtedness. The Company may not pay
the principal of, interest on, or Additional Amounts in respect of, the Notes
or make any deposit pursuant to Section 8.01, and may not otherwise purchase,
repurchase, redeem, retire, defease or otherwise acquire for value any Notes
(collectively, "pay the Notes") if:
(a) a default in the payment of the principal of, premium, if any, or
interest on any Designated Senior Indebtedness of the Company occurs and
is continuing or any other amount owing in respect of any Designated
Senior Indebtedness of the Company is not paid when due; or
(b) any other default on Designated Senior Indebtedness of the Company
occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms
unless, in either case,
77
<PAGE> 84
(i) the default has been cured or waived and any such acceleration has
been rescinded; or
(ii) such Designated Senior Indebtedness has been paid in full in cash
or cash equivalents;
provided, however, that the Company may pay the Notes without regard to the
foregoing if the Company and the Trustee receive written notice approving such
payment from the Representative of the Designated Senior Indebtedness with
respect to which either of the events set forth in clause (a) or (b) above has
occurred and is continuing.
During the continuance of any default (other than a default described
in clause (a) or (b) of the preceding sentence) with respect to any Designated
Senior Indebtedness of the Company pursuant to which the maturity thereof may
be accelerated immediately without (x) further notice (except such notice as
may be required to effect such acceleration) or (y) the expiration of any
applicable grace periods, the Company may not pay the Notes for a period (a
"Payment Blockage Period") commencing upon the receipt by the Trustee (with a
copy to the Company) of written notice (a "Blockage Notice") of such default
from the Representative of such Designated Senior Indebtedness specifying an
election to effect a Payment Blockage Period and ending 179 days thereafter (or
earlier if such Payment Blockage Period is terminated
(a) by written notice to the Trustee and the Company from the Person
or Persons who gave such Blockage Notice;
(b) because such Designated Senior Indebtedness has been repaid in
full in cash or cash equivalents; or
(c) because the default giving rise to such Blockage Notice is no
longer continuing).
Notwithstanding the provisions described in the immediately preceding
paragraph (but subject to the provisions contained in the second preceding
paragraph and in the immediately succeeding paragraph), unless the holders of
such Designated Senior Indebtedness or the Representative of such holders shall
have accelerated the maturity of such Designated Senior Indebtedness, the
Company may resume payments on the Notes after the end of such Payment Blockage
Period.
Not more than one Blockage Notice may be given in any consecutive
360-day period, irrespective of the number of defaults with respect to
Designated Senior Indebtedness during such period; provided, however, that if
any Blockage Notice within such 360-day period is given by or on behalf of any
holders of Designated Senior
78
<PAGE> 85
Indebtedness of the Company other than the Bank Indebtedness, the
Representative of the Bank Indebtedness may give another Blockage Notice within
such period; provided further, however, that in no event may the total number
of days during which any Payment Blockage Period or Periods is in effect exceed
179 days in the aggregate during any 360 consecutive day period. For purposes
of this Section 10.03, no default or event of default that existed or was
continuing on the date of the commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period shall be, or be made, the basis of the commencement of a subsequent
Payment Blockage Period by the Representative of such Designated Senior
Indebtedness, whether or not within a period of 360 consecutive days, unless
such default or event of default shall have been cured or waived for a period
of not less than 90 consecutive days.
SECTION 10.04. Acceleration of Payment of Notes. If payment of the
Notes is accelerated because of an Event of Default, the Company or the Trustee
(provided, that the Trustee shall have received written notice from the
Company, on which notice the Trustee shall be entitled to conclusively rely)
shall promptly notify the holders of the Designated Senior Indebtedness of the
Company (or their Representative) of the acceleration. If any Designated Senior
Indebtedness of the Company is outstanding, the Company may not pay the Notes
until five Business Days after such holders or the Representative of such
Designated Senior Indebtedness receive notice of such acceleration and,
thereafter, may pay the Notes only if this Article 10 otherwise permits payment
at that time.
SECTION 10.05. When Distribution Must Be Paid Over. If a payment or
distribution is made to Holders that because of this Article 10 should not have
been made to them, the Holders who receive the distribution shall hold it in
trust for holders of Senior Indebtedness of the Company and pay it over to them
as their interests may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness of the
Company is paid in full and until the Notes are paid in full , Holders shall be
subrogated to the rights of holders of such Senior Indebtedness to receive
distributions applicable to Senior Indebtedness. A distribution made under this
Article 10 to holders of such Senior Indebtedness which otherwise would have
been made to Holders is not, as between the Company and Holders, a payment by
the Company on such Senior Indebtedness.
79
<PAGE> 86
SECTION 10.07. Relative Rights. This Article 10 defines the relative
rights of Holders and holders of Senior Indebtedness of the Company. Nothing in
this Indenture shall:
(a) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and
interest on and Additional Amounts, if any, in respect of, the Notes in
accordance with their terms; or
(b) prevent the Trustee or any Holder from exercising its available
remedies upon a Default, subject to the rights of holders of Senior
Indebtedness of the Company to receive distributions otherwise payable to
Holders.
SECTION 10.08. Subordination May Not Be Impaired by Company. No right
of any holder of Senior Indebtedness of the Company to enforce the subordination
of the Indebtedness evidenced by the Notes shall be impaired by any act or
failure to act by the Company or by its failure to comply with this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 10.03, the Trustee or Paying Agent may continue to make payments on the
Notes and shall not be charged with knowledge of the existence of facts that
would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article 10. The Company, the Registrar, the Paying Agent, a Representative or a
holder of Senior Indebtedness of the Company may give the notice; provided,
however, that, if an issue of Senior Indebtedness of the Company has a
Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Company with the same rights it would have if it were not
Trustee. The Registrar and the Paying Agent may do the same with like rights.
The Trustee shall be entitled to all the rights set forth in this Article 10
with respect to any Senior Indebtedness of the Company which may at any time be
held by it, to the same extent as any other holder of such Senior Indebtedness;
and nothing in Article 7 shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article 10 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 7.07 or any other Section of this
Indenture.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Company, the distribution may be made and the notice given to their
Representative (if any).
80
<PAGE> 87
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit
Right To Accelerate. The failure to make a payment pursuant to the Notes by
reason of any provision in this Article 10 shall not be construed as preventing
the occurrence of a Default. Nothing in this Article 10 shall have any effect
on the right of the Holders or the Trustee to accelerate the maturity of the
Notes.
SECTION 10.12. Trust Monies Not Subordinated. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds of U.S.
Government Obligations held in trust under Article 8 by the Trustee for the
payment of principal of and interest on the Notes and Additional Amounts, if
any, in respect thereof shall not be subordinated to the prior payment of any
Senior Indebtedness of the Company or subject to the restrictions set forth in
this Article 10, and none of the Holders shall be obligated to pay over any
such amount to the Company or any holder of Senior Indebtedness of the Company
or any other creditor of the Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Holders shall be
entitled to rely (a) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section
10.02 are pending, (b) upon a certificate of the liquidating trustee or agent
or other Person making such payment or distribution to the Trustee or to the
Holders or (c) upon the Representatives for the holders of Senior Indebtedness
of the Company for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of such Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article 10. In the event that the
Trustee determines, in good faith, that evidence is required with respect to
the right of any Person as a holder of Senior Indebtedness of the Company to
participate in any payment or distribution pursuant to this Article 10, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held
by such Person, the extent to which such Person is entitled to participate in
such payment or distribution and other facts pertinent to the rights of such
Person under this Article 10, 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. The provisions of Sections
7.01 and 7.02 shall be applicable to all actions or omissions of actions by the
Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination. Each Holder by
accepting a Note authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Holders and the holders of Senior Indebtedness of the
Company as provided in this Article 10 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
81
<PAGE> 88
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of the Company and shall not be liable to any
such holders if it shall mistakenly pay over or distribute to Holders or the
Company or any other Person, money or assets to which any holders of Senior
Indebtedness of the Company shall be entitled by virtue of this Article 10 or
otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Holder by accepting a Note acknowledges and
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Senior Indebtedness of
the Company, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Notes, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of such Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
SECTION 10.17. Trustee's Compensation Not Prejudiced. Nothing in this
Article shall apply to amounts due to the Trustee pursuant to other sections of
this Indenture.
ARTICLE 11
Guarantees
SECTION 11.01. Guarantees. (a) Each Guarantor hereby jointly and
severally irrevocably and unconditionally guarantees, as a primary obligor and
not merely as a surety, to each Holder and to the Trustee and its successors
and assigns (i) the full and punctual payment when due, whether at Stated
Maturity, by acceleration, by redemption or otherwise, of all obligations of
the Company under this Indenture (including obligations to the Trustee) and the
Notes, whether for payment of principal of, interest on or Additional Amounts,
if any, in respect of, the Notes and all other monetary obligations of the
Company under this Indenture and the Notes and (ii) the full and punctual
performance within applicable grace periods of all other obligations of the
Company whether for fees, expenses, indemnification or otherwise under this
Indenture and the Notes (all the foregoing being hereinafter collectively
called the "Guaranteed Obligations"). Each Guarantor further agrees that the
Guaranteed Obligations may be extended or renewed, in whole or in part, without
notice or further assent from each such Guarantor, and that each such Guarantor
shall remain bound under this Article 11 notwithstanding any extension or
renewal of any Guaranteed Obligation.
82
<PAGE> 89
(b) Each Guarantor waives presentation to, demand of, payment from and
protest to the Company of any of the Guaranteed Obligations and also waives
notice of protest for nonpayment. Each Guarantor waives notice of any default
under the Notes or the Guaranteed Obligations. The obligations of each
Guarantor hereunder shall not be affected by (i) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under this Indenture, the Notes or any
other agreement or otherwise; (ii) any extension or renewal of any thereof;
(iii) any rescission, waiver, amendment or modification of any of the terms or
provisions of this Indenture, the Notes or any other agreement; (iv) the
release of any security held by any Holder or the Trustee for the Guaranteed
Obligations or any of them; (v) the failure of any Holder or Trustee to
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations; or (vi) any change in the ownership of such Guarantor, except as
provided in Section 11.02(b).
(c) Each Guarantor hereby waives any right to which it may be entitled
to have its obligations hereunder divided among the Guarantors, such that such
Guarantor's obligations would be less than the full amount claimed. Each
Guarantor hereby waives any right to which it may be entitled to have the
assets of the Company first be used and depleted as payment of the Company's or
such Guarantor's obligations hereunder prior to any amounts being claimed from
or paid by such Guarantor hereunder. Each Guarantor hereby waives any right to
which it may be entitled to require that the Company be sued prior to an action
being initiated against such Guarantor.
(d) Each Guarantor further agrees that its Guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and
not a guarantee of collection) and waives any right to require that any resort
be had by any Holder or the Trustee to any security held for payment of the
Guaranteed Obligations.
(e) The Guarantee of each Guarantor is, to the extent and in the
manner set forth in Article 12, subordinated and subject in right of payment to
the prior payment in full of the principal of and premium, if any, and interest
on all Senior Indebtedness of the relevant Guarantor and is made subject to
such provisions of this Indenture.
(f) Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06
the obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of
the Guaranteed Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the
83
<PAGE> 90
Trustee to assert any claim or demand or to enforce any remedy under this
Indenture, the Notes or any other agreement, by any waiver or modification of
any thereof, by any default, failure or delay, wilful or otherwise, in the
performance of the obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to any
extent vary the risk of any Guarantor or would otherwise operate as a discharge
of any Guarantor as a matter of law or equity.
(g) Each Guarantor agrees that its Guarantee shall remain in full
force and effect until payment in full of all the Guaranteed Obligations. Each
Guarantor further agrees that its Guarantee herein shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Guaranteed Obligation is
rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Company or otherwise.
(h) In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of the Company to pay the
principal of or interest on any Guaranteed Obligation when and as the same
shall become due, whether at maturity, by acceleration, by redemption or
otherwise, or to perform or comply with any other Guaranteed Obligation, each
Guarantor hereby promises to and shall, upon receipt of written demand by the
Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the
Trustee an amount equal to the sum of (i) the unpaid principal amount of such
Guaranteed Obligations, (ii) accrued and unpaid interest on such Guaranteed
Obligations (but only to the extent not prohibited by law) and (iii) all other
monetary obligations of the Company to the Holders and the Trustee.
(i) Each Guarantor agrees that it shall not be entitled to any right
of subrogation in relation to the Holders in respect of any Guaranteed
Obligations guaranteed hereby until payment in full of all Guaranteed
Obligations and all obligations to which the Guaranteed Obligations are
subordinated as provided in Article 12. Each Guarantor further agrees that, as
between it, on the one hand, and the Holders and the Trustee, on the other
hand, (i) the maturity of the Guaranteed Obligations guaranteed hereby may be
accelerated as provided in Article 6 for the purposes of any Guarantee herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Guaranteed Obligations guaranteed hereby, and
(ii) in the event of any declaration of acceleration of such Guaranteed
Obligations as provided in Article 6, such Guaranteed Obligations (whether or
not due and payable) shall forthwith become due and payable by such Guarantor
for the purposes of this Section 11.01.
(j) Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by the Trustee or
any Holder in enforcing any rights under this Section 11.01.
84
<PAGE> 91
(k) Upon request of the Trustee, each Guarantor shall execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this
Indenture.
SECTION 11.02. Limitation on Liability. (a) Any term or provision of
this Indenture to the contrary notwithstanding, the maximum aggregate amount of
the Guaranteed Obligations guaranteed hereunder by any Guarantor shall not
exceed the maximum amount that can be hereby guaranteed without rendering the
Guarantee, as it relates to such Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
(b) Any Guarantee of any Subsidiary Guarantor shall terminate and be
of no further force or effect and such Subsidiary Guarantor shall be deemed to
be released from all obligations under this Article 11 upon (i) the sale or
other disposition (including through merger or consolidation) of the Capital
Stock, or all or substantially all the assets, of the applicable Subsidiary
Guarantor if such sale or other disposition is made in compliance with Section
4.06; or (ii) the applicable Subsidiary Guarantor ceasing to be a Subsidiary of
the Company as a result of any foreclosure of any pledge or security interest
securing Bank Indebtedness or other exercise of remedies in respect thereof if
such Subsidiary Guarantor is released from its guarantees of, and all pledges
and security interests granted in connection with, such Bank Indebtedness.
In addition, if any Subsidiary Guarantor is released from its
guarantee of, and all pledges and security interests granted in connection
with, or is not required to guarantee or provide security in respect of, any
Indebtedness of the Company or any Subsidiary (or in the case of a Foreign
Subsidiary, the Company or any Domestic Subsidiary) of the Company, then such
Subsidiary Guarantor's Guarantee shall be automatically released, or not
required, for so long as such Subsidiary Guarantor does not guarantee, or
provide security interests in respect of, any Indebtedness of the Company or
any Subsidiary (or in the case of a Foreign Subsidiary, the Company or any
Domestic Subsidiary) of the Company; provided, however, that if such Subsidiary
is a Domestic Subsidiary, such Subsidiary Guarantor's Guarantee shall only be
so released or not required if, after giving effect to such release or lack of
Guarantee, such Subsidiary Guarantor and all other Domestic Subsidiaries that
are not Guarantors (i) would have generated 10% or less of the EBITDA of the
Company and its Domestic Subsidiaries on a consolidated basis for the period of
the most recent four consecutive fiscal quarters ending at the end of the most
recent fiscal quarter for which financial
85
<PAGE> 92
statements are publicly available and (ii) would have had assets that
represented 10% or less of the Consolidated Net Tangible Assets of the Company
and its Domestic Subsidiaries on a consolidated basis as of the end of the most
recent fiscal quarter for which financial statements are publicly available;
provided, further, however, that once the Guarantee of a Subsidiary is released
or not required as contemplated above, the applicable Subsidiary of the Company
shall not be required to give a Guarantee unless it guarantees, or provides
security interests in respect of, any Indebtedness of the Company or any
Subsidiary (or in the case of a Foreign Subsidiary, the Company or any Domestic
Subsidiary) of the Company.
In the event that the conditions specified in this Section 11.02(b)
are satisfied and the Company delivers to the Trustee an Opinion of Counsel and
an Officers' Certificate to that effect, the Trustee shall execute and deliver
an appropriate instrument evidencing such release.
SECTION 11.03. Successors and Assigns. This Article 11 shall be
binding upon each Guarantor and its successors and assigns and shall inure to
the benefit of the successors and assigns of the Trustee and the Holders and,
in the event of any transfer or assignment of rights by any Holder or the
Trustee, the rights and privileges conferred upon that party in this Indenture
and in the Notes shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions of this Indenture.
SECTION 11.04. No Waiver. Neither a failure nor a delay on the part of
either the Trustee or the Holders in exercising any right, power or privilege
under this Article 11 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Article 11
at law, in equity, by statute or otherwise.
SECTION 11.05. Modification. No modification, amendment or waiver of
any provision of this Article 11, nor the consent to any departure by any
Guarantor therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Guarantor in any case shall entitle such Guarantor
to any other or further notice or demand in the same, similar or other
circumstances.
SECTION 11.06. Execution of Supplemental Indenture for Future
Guarantors. Each Subsidiary which is required to become a Guarantor pursuant to
Section 4.11 shall promptly execute and deliver to the Trustee a supplemental
indenture in the form of Exhibit C hereto pursuant to which such Subsidiary
shall become a Guarantor under this Article 11 and shall guarantee the
Guaranteed Obligations. Concurrently with the execution and delivery of such
supplemental indenture to this
86
<PAGE> 93
Indenture, the Company shall deliver to the Trustee an Opinion of Counsel and
an Officers' Certificate to the effect that such supplemental indenture has
been duly authorized, executed and delivered by such Subsidiary and that,
subject to the application of bankruptcy, insolvency, moratorium, fraudulent
conveyance or transfer and other similar laws relating to creditors' rights
generally and to the principles of equity, whether considered in a proceeding
at law or in equity, the Guarantee of such Guarantor is a legal, valid and
binding obligation of such Guarantor, enforceable against such Guarantor in
accordance with its terms and or to such other matters as the Trustee may
reasonably request.
SECTION 11.07. Non-Impairment. The failure to endorse a Guarantee on
any Note shall not affect or impair the validity thereof.
ARTICLE 12
Subordination of the Guarantees
SECTION 12.01. Agreement To Subordinate. Each Guarantor agrees, and
each Holder by accepting a Note agrees, that the obligations of a Guarantor
hereunder are subordinated in right of payment, to the extent and in the manner
provided in this Article 12, to the prior payment in full of all Senior
Indebtedness of such Guarantor and that the subordination is for the benefit of
and enforceable by the holders of such Senior Indebtedness of such Guarantor.
The obligations hereunder with respect to a Guarantor shall in all respects
rank pari passu with all other Senior Subordinated Indebtedness of such
Guarantor and shall rank senior to all existing and future Subordinated
Obligations of such Guarantor; and only Indebtedness of such Guarantor that is
Senior Indebtedness of such Guarantor shall rank senior to the obligations of
such Guarantor in accordance with the provisions set forth herein.
87
<PAGE> 94
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any payment
or distribution of the assets of a Guarantor to creditors upon a total or
partial liquidation or a total or partial dissolution of such Guarantor or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to such Guarantor or its properties:
(a) holders of Senior Indebtedness of such Guarantor shall be entitled
to receive payment in full in cash or cash equivalents of such Senior
Indebtedness (including interest accruing after, or that would accrue but
for, the commencement of such proceeding at the rate specified in the
applicable Senior Indebtedness, whether or not such claim for such
interest would be allowed) before the Holders shall be entitled to
receive any payment pursuant to any Guaranteed Obligations from such
Subsidiary Guarantor; and
(b) until the Senior Indebtedness of such Guarantor is paid in full in
cash or cash equivalents, any payment or distribution to which Holders
would be entitled but for this Article 12 shall be made to holders of
such Senior Indebtedness as their respective interests may appear, except
that Holders may receive and retain (i) Permitted Junior Securities; and
(ii) payments made from the defeasance trust described under Section 8.01
so long as, on the date or dates the respective amounts were paid into
the defeasance trust, such payments were made with respect to the Notes
without violating the subordination provisions described herein.
SECTION 12.03. Default on Senior Indebtedness of a Guarantor. A
Guarantor may not make any payment pursuant to any of the Guaranteed
Obligations or repurchase, redeem or otherwise acquire for value any Notes
(collectively, "pay its Guarantee") if:
(a) a default in the payment of the principal of, premium, if any, or
interest on any Designated Senior Indebtedness of such Guarantor occurs
and is continuing or any other amount owing in respect of any Designated
Senior Indebtedness of such Guarantor is not paid when due; or
(b) any other default on Designated Senior Indebtedness of such
Guarantor occurs and the maturity of such Designated Senior Indebtedness
is accelerated in accordance with its terms
unless, in either case,
(i) the default has been cured or waived and any such acceleration has
been rescinded; or
88
<PAGE> 95
(ii) such Designated Senior Indebtedness has been paid in full in cash
or cash equivalents;
provided, however, that such Guarantor may pay its Guarantee without regard to
the foregoing if such Guarantor and the Trustee receive written notice
approving such payment from the Representative of the holders of the Designated
Senior Indebtedness of such Guarantor with respect to which either of the
events in clause (a) or (b) above has occurred and is continuing.
During the continuance of any default (other than a default described
in clause (a) or (b) of the preceding sentence) with respect to any Designated
Senior Indebtedness of a Guarantor pursuant to which the maturity thereof may
be accelerated immediately (x) without further notice (except such notice as
may be required to effect such acceleration) or (y) the expiration of any
applicable grace periods, such Guarantor may not pay its Guarantee for a period
(a "Guarantee Payment Blockage Period") commencing upon the receipt by the
Trustee (with a copy to such Guarantor and the Company) of written notice (a
"Guarantee Blockage Notice") of such default from the Representative of the
holders of such Designated Senior Indebtedness specifying an election to effect
a Guarantee Payment Blockage Period and ending 179 days thereafter (or earlier
if such Guarantee Payment Blockage Period is terminated:
(a) by written notice to the Trustee (with a copy to such Guarantor
and the Company) from the Person or Persons who gave such Guarantee
Blockage Notice,
(b) because such Designated Senior Indebtedness has been repaid in
full in cash or cash equivalents or
(c) because the default giving rise to such Guarantee Blockage Notice
is no longer continuing).
Notwithstanding the provisions described in the immediately preceding
paragraph (but subject to the provisions contained in the second preceding
paragraph and in the immediately succeeding paragraph), unless the holders of
such Designated Senior Indebtedness or the Representative of such holders shall
have accelerated the maturity of such Designated Senior Indebtedness, such
Guarantor may resume paying its Guarantee after the end of such Guarantee
Payment Blockage Period.
Not more than one Guarantee Blockage Notice may be given with respect
to a Guarantor in any consecutive 360-day period, irrespective of the number of
defaults with respect to Designated Senior Indebtedness of such Guarantor
during such period; provided, however, that if any Guarantee Blockage Notice
within such 360-day period is
89
<PAGE> 96
given by or on behalf of any holders of Designated Senior Indebtedness of such
Guarantor other than the Bank Indebtedness, the Representative of the Bank
Indebtedness may give another Guarantee Blockage Notice within such period;
provided further, however, that in no event may the total number of days during
which any Guarantee Payment Blockage Period or Periods is in effect exceed 179
days in the aggregate during any 360 consecutive day period. For purposes of
this Section 12.03, no default or event of default that existed or was
continuing on the date of the commencement of any Guarantee Payment Blockage
Period with respect to the Designated Senior Indebtedness of a Guarantor
initiating such Guarantee Payment Blockage Period shall be, or be made, the
basis of the commencement of a subsequent Guarantee Payment Blockage Period by
the Representative of such Designated Senior Indebtedness, whether or not
within a period of 360 consecutive days, unless such default or event of
default shall have been cured or waived for a period of not less than 90
consecutive days.
SECTION 12.04. Demand for Payment. If payment of the Notes is
accelerated because of an Event of Default and a demand for payment is made on
a Guarantor pursuant to Article 11, the Trustee (provided that the Trustee
shall have received written notice from the Company or such Guarantor on which
notice the Trustee shall be entitled to conclusively rely) shall promptly
notify the holders of the Designated Senior Indebtedness of such Guarantor (or
the Representative of such holders) of such demand. If any Designated Senior
Indebtedness of such Guarantor is outstanding, such Guarantor may not pay its
Guarantee until five Business Days after such holders or the Representative of
the holders of the Designated Senior Indebtedness of such Guarantor receive
notice of such demand and, thereafter, may pay its Guarantee only if this
Article 12 otherwise permits payment at that time.
SECTION 12.05. When Distribution Must Be Paid Over. If a payment or
distribution is made to Holders that because of this Article 12 should not have
been made to them, the Holders who receive the payment or distribution shall
hold such payment or distribution in trust for holders of the Senior
Indebtedness of the relevant Guarantor and pay it over to them as their
respective interests may appear.
SECTION 12.06. Subrogation. After all Senior Indebtedness of a
Guarantor is paid in full and until the Notes are paid in full in cash, Holders
shall be subrogated to the rights of holders of Senior Indebtedness of such
Guarantor to receive distributions applicable to Designated Senior Indebtedness
of such Guarantor. A distribution made under this Article 12 to holders of
Senior Indebtedness of such Guarantor which otherwise would have been made to
Holders is not, as between such Guarantor and Holders, a payment by such
Guarantor on Senior Indebtedness of such Guarantor.
90
<PAGE> 97
SECTION 12.07. Relative Rights. This Article 12 defines the relative
rights of Holders and holders of Senior Indebtedness of a Guarantor. Nothing in
this Indenture shall:
(a) impair, as between a Guarantor and Holders, the obligation of a
Guarantor which is absolute and unconditional, to make payments with
respect to the Guaranteed Obligations to the extent set forth in Article
11; or
(b) prevent the Trustee or any Holder from exercising its available
remedies upon a default by a Guarantor under its obligations with respect
to the Guaranteed Obligations, subject to the rights of holders of Senior
Indebtedness of such Guarantor to receive distributions otherwise payable
to Holders.
SECTION 12.08. Subordination May Not Be Impaired by a Guarantor. No
right of any holder of Senior Indebtedness of a Guarantor to enforce the
subordination of the obligations of such Guarantor hereunder shall be impaired
by any act or failure to act by such Guarantor or by its failure to comply with
this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 12.03, the Trustee or the Paying Agent may continue to make payments on
the Notes and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article 12. A Guarantor, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness of a Guarantor may give the
notice; provided, however, that if an issue of Senior Indebtedness of a
Guarantor has a Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of a Guarantor with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article 12 with respect to any Senior Indebtedness of a Guarantor which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness of such Guarantor; and nothing in Article 7 shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article 12 shall
apply to claims of, or payments to, the Trustee under or pursuant to Section
7.07 or any other Section of this Indenture.
SECTION 12.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of a Guarantor, the distribution may be made and the notice given to their
Representative (if any).
91
<PAGE> 98
SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit
Right To Demand Payment. The failure of a Guarantor to make a payment on any of
its obligations by reason of any provision in this Article 12 shall not be
construed as preventing the occurrence of a default by such Guarantor under
such obligations. Nothing in this Article 12 shall have any effect on the right
of the Holders or the Trustee to make a demand for payment on a Guarantor
pursuant to Article 11.
SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 12, the Trustee and the Holders shall be
entitled to rely (a) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section
12.02 are pending, (b) upon a certificate of the liquidating trustee or agent
or other Person making such payment or distribution to the Trustee or to the
Holders or (c) upon the Representatives for the holders of Senior Indebtedness
of a Guarantor for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior
Indebtedness of a Guarantor and other Indebtedness of a 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 12. In the event that
the Trustee determines, in good faith, that evidence is required with respect
to the right of any Person as a holder of Senior Indebtedness of a Guarantor to
participate in any payment or distribution pursuant to this Article 12, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness of such
Guarantor held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article 12, 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. The
provisions of Sections 7.01 and 7.02 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article 12.
SECTION 12.13. Trustee To Effectuate Subordination. Each Holder by
accepting a Note authorizes and directs the Trustee on his or her behalf to
take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Holders and the holders of Senior
Indebtedness of each of the Guarantors as provided in this Article 12 and
appoints the Trustee as attorney-in-fact for any and all such purposes.
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of a Guarantor. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of a Guarantor and shall
not be liable to any such holders if it shall mistakenly pay over or distribute
to Holders or the relevant Guarantor
92
<PAGE> 99
or any other Person, money or assets to which any holders of Senior
Indebtedness of such Guarantor shall be entitled by virtue of this Article 12
or otherwise.
SECTION 12.15. Reliance by Holders of Senior Indebtedness of a
Guarantor on Subordination Provisions. Each Holder by accepting a Note
acknowledges and agrees that the foregoing subordination provisions are, and
are intended to be, an inducement and a consideration to each holder of any
Senior Indebtedness of a Guarantor, whether such Senior Indebtedness was
created or acquired before or after the issuance of the Notes, to acquire and
continue to hold, or to continue to hold, such Senior Indebtedness and such
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.
SECTION 12.16. Defeasance. The terms of this Article 12 shall not
apply to payments from money or the proceeds of U.S. Government Obligations
held in trust by the Trustee for the payment of principal of and interest on
the Notes pursuant to the provisions described in Section 8.03.
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls. If and to the extent that
any provision of this Indenture limits, qualifies or conflicts with the duties
imposed by, or with another provision (an "incorporated provision") included in
this Indenture by operation of TIA ss.ss. 310 to 318, inclusive, such imposed
duties or incorporated provision shall control.
SECTION 13.02. Notices. Any notice or communication shall be in
writing and delivered in person, by facsimile (followed by hard copy) or mailed
by first-class mail addressed as follows:
if to the Company:
Maxxim Medical Group, Inc.
10300 49th Street North
Clearwater, Florida 33762
Attention of: Corporate Secretary
(telecopier no.: 727-561-2180)
93
<PAGE> 100
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention of: Corporate Trust Department
(telecopier no.: 212-815-5915)
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed , first
class mail, to the Holder at the Holder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
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 13.03. Communication by Holders with Other Holders. Holders
may communicate pursuant to TIA ss. 312(b) with other Holders with respect to
their rights under this Indenture or the Notes. The Company, the Trustee, the
Registrar and anyone else shall have the protection of TIA ss. 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or
refrain from taking any action under this Indenture, the Company shall furnish
to the Trustee:
(a) an Officers' Certificate in form reasonably satisfactory to the
Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(b) an Opinion of Counsel in form reasonably satisfactory to the
Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
94
<PAGE> 101
SECTION 13.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture (other than pursuant to Section 4.09) shall
include:
(a) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. When Notes Disregarded. In determining whether the
Holders of the required principal amount at maturity of Notes have concurred in
any direction, waiver or consent, Notes owned by the Company, any Guarantor or
by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any Guarantor shall be
disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which the Trustee knows are so owned
shall be so disregarded. Subject to the foregoing, only Notes outstanding at
the time shall be considered in any such determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or at a meeting of Holders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required by law or
regulation to be open in the State of New York. If a payment date is a Legal
Holiday, payment shall be made on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If a regular
record date is a Legal Holiday, the record date shall not be affected.
SECTION 13.09. GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED IN
95
<PAGE> 102
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 LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 13.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company or any of the Guarantors shall
not have any liability for any obligations of the Company or any of the
Guarantors under the Notes or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Note, each Holder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Notes.
SECTION 13.11. Successors. All agreements of the Company and each
Guarantor in this Indenture and the Notes shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 13.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
96
<PAGE> 103
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
MAXXIM MEDICAL GROUP, INC., a
Delaware corporation, as issuer
by /s/ Kenneth W. Davidson
------------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President and
Chief Executive Officer
MAXXIM MEDICAL, INC., a Texas corporation,
as Guarantor
by /s/ Kenneth W. Davidson
------------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President and
Chief Executive Officer
MAXXIM MEDICAL, INC., a Delaware
corporation, as Guarantor
by /s/ Kenneth W. Davidson
------------------------------------
Name: Kenneth W. Davidson
Title: President, Secretary and
Chief Executive Officer
FABRITEK LA ROMANA, INC.,
a Mississippi corporation, as Guarantor
by /s/ Kenneth W. Davidson
------------------------------------
Name: Kenneth W. Davidson
Title: President, Secretary and
Treasurer
97
<PAGE> 104
MAXXIM INVESTMENT MANAGEMENT, INC., a
Nevada corporation, as Guarantor
by /s/ Peter M. Graham
------------------------------------
Name: Peter M. Graham
Title: Chief Operating Officer,
Secretary and Senior
Executive Vice President
THE BANK OF NEW YORK, a New York banking
corporation, as Trustee
by /s/ Annette L. Kos
------------------------------------
Name: Annette L. Kos
Title: Assistant Vice President
98
<PAGE> 105
APPENDIX A
PROVISIONS RELATING TO INITIAL NOTES
AND EXCHANGE NOTES
1. Definitions
1.1 Definitions
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Definitive Note" means a certificated Initial Note or Exchange
Note (bearing the Restricted Notes Legend if the transfer of such Note is
restricted by applicable law) that does not include the Global Notes Legend.
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Global Notes Legend" means the legend set forth under that
caption in Exhibit B to this Indenture.
"IAI" means an institutional "accredited investor" as described
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Notes Custodian," who shall initially be the Trustee, means the
custodian with respect to a Global Exchange Note (as appointed by the
Depositary) or any successor person thereto.
"Purchase Agreement" means the Purchase Agreement dated November
12, 1999, among the Company, the Guarantors and the Purchasers.
"Purchasers" means GS Mezzanine Partners, L.P., GS Mezzanine
Partners Offshore, L.P., John Hancock Mutual Life Insurance Company, John
Hancock Variable Life Insurance Company, Signature 3 Limited, Merrill Lynch
International, The Northwestern Mutual Life Insurance Company, Chase Equity
Associates, L.P., CIBC WMC INC., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Nationwide Life Insurance Company, Deusche Bank AG, New York
Branch and Credit Suisse First Boston Corporation.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
<PAGE> 106
"Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Agreement, to certain Holders of Initial Notes, to
issue and deliver to such Holders, in exchange for their Initial Notes, a like
aggregate principal amount at maturity of Exchange Notes registered under the
Securities Act.
"Registration Agreement" means the Exchange and Registration
Rights Agreement dated November 12, 1999, among the Company, the Guarantors and
the Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Restricted Notes Legend" means the legend set forth in
paragraph 2.3(d)(i) herein.
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means a registration statement
filed by the Company in connection with the offer and sale of Initial Notes
pursuant to the Registration Agreement.
"Transfer Restricted Notes" means Definitive Notes and any other
Notes that bear or are required to bear the Restricted Notes Legend.
1.2 Other Definitions
<TABLE>
<CAPTION>
Term: Defined in Section:
----- -------------------
<S> <C>
"Agent Members" ..................................... 2.1(c)
"Initial Definitive Notes" .......................... 2.1(b)
"Global Exchange Note"............................... 2.1(b)
</TABLE>
2. The Notes
2.1 Form and Dating
(a) The Initial Notes issued on the date hereof will be sold by
the Company pursuant to the Purchase Agreement to the Purchasers. Such Initial
Notes may thereafter be transferred to, among others, QIBs, purchasers in
reliance on Regulation S and, except as set forth below, IAIs in accordance
with Rule 501.
(b) The Initial Notes shall be issued in the form of Definitive
Notes, in fully registered form (the "Initial Definitive Notes") bearing the
Restricted Notes Legend and shall
<PAGE> 107
be issued to and registered in the name of the applicable Purchaser and duly
executed by the Company and authenticated by the Trustee as provided in this
Indenture.
Initial Notes will be exchanged for Exchange Notes in the Registered
Exchange Offer pursuant to the Registration Agreement. Exchange Notes will also
be issued upon the sale of Initial Notes (i) under a Shelf Registration
Statement or (ii) at any time that the Initial Notes being sold are not
Transfer Restricted Notes. Exchange Notes shall, except as provided in Sections
2.3 and 2.4, be issued in global form bearing the Global Notes Legend (the
"Global Exchange Notes"). The aggregate principal amount at maturity of the
Global Exchange Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee and on the schedules thereto as hereinafter provided.
(c) Book-Entry Provisions. This Section 2.1(c) shall apply only to a
Global Exchange Note deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.1(c) and Section 2.2 and pursuant to an order of the Company
signed by one Officer, authenticate and deliver one Global Exchange Note that
(i) shall be registered in the name of the Depositary for such Global Exchange
Note or the nominee of such Depositary and (ii) shall be delivered by the
Trustee to such Depositary or pursuant to such Depositary's instructions or
held by the Trustee as Notes Custodian.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Exchange Note
held on their behalf by the Depositary or by the Trustee as Notes Custodian or
under such Global Exchange Note, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Exchange 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 Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of
a holder of a beneficial interest in any Global Exchange Note.
(d) Definitive Notes. Except as provided in Sections 2.3 or 2.4,
owners of beneficial interests in Global Exchange Notes will not be entitled to
receive physical delivery of certificated Notes.
2.2 Authentication. The Trustee shall authenticate and make available
for delivery upon a written order of the Company signed by one Officer (a)
Initial Definitive Notes for original issue on the date hereof in an aggregate
principal amount at maturity of
3
<PAGE> 108
$144,552,000, (b) subject to the terms of this Indenture, Exchange Notes in the
form of Global Exchange Notes for issue in a Registered Exchange Offer pursuant
to the Registration Agreement in a like principal amount at maturity of the
Initial Notes exchanged pursuant thereto, (c) subject to the terms of this
Indenture, Exchange Notes in the form of Global Exchange Notes in lieu of
Initial Notes upon the sale of such Initial Notes (i) under a Shelf
Registration Statement or (ii) at any time that such Initial Notes being sold
are not Transfer Restricted Notes and (d) subject to the terms of this
Indenture, upon presentation to the Trustee of Initial Notes that are not
Transfer Restricted Notes. Such order shall specify the amount of the Notes to
be authenticated, the date on which the original issue of Notes is to be
authenticated and whether the Notes are to be Initial Notes or Exchange Notes.
The aggregate principal amount at maturity of Notes outstanding at any time may
not exceed $144,552,000 except as provided in Sections 2.07 and 2.08 of this
Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Notes. When Definitive Notes are presented to the Registrar with a request:
(i) to register the transfer of such Definitive Notes; or
(ii) to exchange such Definitive Notes for an equal principal amount
at maturity of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the Definitive Notes surrendered for transfer or exchange:
(1) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the
Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(2) in the case of Transfer Restricted Notes are accompanied by the
following additional information and documents, as applicable:
(A) if such Definitive Notes are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse side of the Initial Note); or
(B) if such Definitive Notes are being transferred to the
Company, a certification to that effect (in the form set forth on the
reverse side of the Initial Note); or
4
<PAGE> 109
(C) if such Definitive Notes are being transferred pursuant
to an exemption from registration in accordance with Rule 144 under
the Securities Act or in reliance upon another exemption from the
registration requirements of the Securities Act, (x) a certification
to that effect (in the form set forth on the reverse side of the
Initial Note) and (y) if the Company so requests, an opinion of
counsel or other evidence reasonably satisfactory to it as to the
compliance with the restrictions set forth in the legend set forth in
Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Note for a Beneficial
Interest in a Global Exchange Note. A Definitive Note may not be exchanged for
a beneficial interest in a Global Exchange Note except (i) as part of a
Registered Exchange Offer, (ii) upon sale of the Definitive Note under the
Shelf Registration Statement, (iii) upon sale of the Definitive Note at the
time such Definitive Note is not a Transfer Restricted Note or (iv) upon
presentation to the Trustee of Definitive Notes that are not Transfer
Restricted Notes. Upon receipt by the Trustee of a Definitive Note, duly
endorsed or accompanied by a written instrument of transfer in form reasonably
satisfactory to the Company and the Registrar, together with written
instructions directing the Trustee to make, or to direct the Notes Custodian to
make, an adjustment on its books and records with respect to such Global
Exchange Note to reflect an increase in the aggregate principal amount at
maturity of the Notes represented by the Global Exchange Note, such
instructions to contain information regarding the Depositary account to be
credited with such increase, then the Trustee shall cancel such Definitive Note
and cause, or direct the Notes Custodian to cause, in accordance with the
standing instructions and procedures existing between the Depositary and the
Notes Custodian, the aggregate principal amount at maturity of Notes
represented by the Global Exchange Note to be increased by the aggregate
principal amount at maturity of the Definitive Note to be exchanged and shall
credit or cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the Global Exchange Note equal to the
principal amount at maturity of the Definitive Note so canceled. If no Global
Exchange Notes are then outstanding and the Global Exchange Note has not been
previously exchanged for certificated Notes pursuant to Section 2.4, the
Company shall issue and the Trustee shall authenticate, upon written order of
the Company in the form of an Officers' Certificate, a new Global Exchange Note
in the appropriate principal amount at maturity.
(c) Transfer and Exchange of Global Exchange Notes. (i) The transfer
of the Global Exchange Note or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture and the procedures of
the Depositary therefor. A transferor of a beneficial interest in a Global
Exchange Note shall deliver a written order given in accordance with the
Depositary's procedures containing information regarding the participant
account of the Depositary to be credited with a beneficial interest in such
Global Exchange Note and such account shall be credited in accordance with such
order with a beneficial interest in the applicable Global Exchange Note and the
account of the Person making the
5
<PAGE> 110
transfer shall be debited by an amount equal to the beneficial interest in the
Global Exchange Note being transferred.
(ii) Notwithstanding any other provisions of this Appendix (other than
the provisions set forth in Section 2.4), a Global Exchange Note may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(d) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii) or
(iv), each Definitive Note (and all Notes issued in exchange therefor or
in substitution thereof) shall bear a legend in substantially the
following form (each defined term in the legend being defined as such for
purposes of the legend only):
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR
OF SUCH NOTE), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT
OCCUR OUTSIDE THE
6
<PAGE> 111
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES
ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE NOTE FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH
CASE IN A MINIMUM PRINCIPAL AMOUNT AT MATURITY OF THE NOTES OF $250,000,
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR
(F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
Each Definitive Note shall bear the following additional legend:
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS.
(ii) Upon any sale or transfer of a Transfer Restricted Note that is a
Definitive Note, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Note for a Definitive Note that does
not bear the legends set forth above and rescind any restriction on the
transfer of such Transfer Restricted Note if the Holder certifies in
writing to the Registrar that its request for such exchange was made in
reliance on Rule 144 (such certification to be in the form set forth on
the reverse of the Initial Note).
(iii) After a transfer of any Initial Notes during the period of the
effectiveness of and pursuant to a Shelf Registration Statement with
respect to such Initial Notes, all requirements pertaining to the
Restricted Notes Legend on such Initial Notes shall cease to apply and
the requirements that any such Initial Notes be issued in global form
shall become applicable.
7
<PAGE> 112
(iv) Upon the consummation of a Registered Exchange Offer with respect
to the Initial Notes pursuant to which Holders of such Initial Notes are
offered Exchange Notes in exchange for their Initial Notes, Exchange
Notes in global form without the Restricted Notes Legend shall be
available to Holders that exchange such Initial Notes in such Registered
Exchange Offer.
(e) Cancelation or Adjustment of Global Exchange Note. At such time
as all beneficial interests in a Global Exchange Note have either been
exchanged for Definitive Notes, transferred, redeemed, repurchased or canceled,
such Global Exchange Note shall be returned by the Depositary to the Trustee
for cancelation or retained and canceled by the Trustee. At any time prior to
such cancelation, if any beneficial interest in a Global Exchange Note is
exchanged for Definitive Notes, transferred in exchange for an interest in
another Global Exchange Note, redeemed, repurchased or canceled, the principal
amount at maturity of Notes represented by such Global Exchange Note shall be
reduced and an adjustment shall be made on the books and records of the Trustee
(if it is then the Notes Custodian for such Global Exchange Note) with respect
to such Global Exchange Note, by the Trustee or the Notes Custodian, to reflect
such reduction.
(f) Obligations with Respect to Transfers and Exchanges of Notes.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate, Definitive Notes and
Global Exchange Notes at the Registrar's request.
(ii) 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, assessments, or similar governmental charge
payable in connection therewith (other than any such transfer taxes,
assessments or similar governmental charge payable upon exchanges
pursuant to Sections 3.06, 4.06, 4.08 and 9.05 of this Indenture).
(iii) Prior to the due presentation for registration of transfer of
any Note, the Company, the Trustee, the Paying Agent or the Registrar may
deem and treat the person in whose name a Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on and Additional Amounts, if any, with respect
to such Note and for all other purposes whatsoever, whether or not such
Note is overdue, and none of the Company, the Trustee, the Paying Agent
or the Registrar shall be affected by notice to the contrary.
(iv) All Notes issued upon any transfer or exchange pursuant to the
terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Notes
surrendered upon such transfer or exchange.
8
<PAGE> 113
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Exchange Note, a member of, or a participant
in the Depositary or any other Person with respect to the accuracy of the
records of the Depositary or its nominee or of any participant or member
thereof, with respect to any ownership interest in the Notes or with
respect to the delivery to any participant, member, beneficial owner or
other Person (other than the Depositary) of any notice (including any
notice of redemption or repurchase) or the payment of any amount, under
or with respect to such Notes. All notices and communications to be given
to the Holders and all payments to be made to Holders under the Notes
shall be given or made only to the registered Holders (which shall be the
Depositary or its nominee in the case of a Global Exchange Note). The
rights of beneficial owners in any Global Exchange Note shall be
exercised only through the Depositary subject to the applicable rules and
procedures of the Depositary. The Trustee may rely and shall be fully
protected in relying upon information furnished by the Depositary with
respect to its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Note (including any transfers between or
among Depositary participants, members or beneficial owners in any Global
Exchange Note) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do
so if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Definitive Notes
(a) A Global Exchange Note deposited with the Depositary or with the
Trustee as Notes Custodian pursuant to Section 2.1 or issued in connection with
a Registered Exchange Offer shall be transferred to the beneficial owners
thereof in the form of Definitive Notes in an aggregate principal amount at
maturity equal to the principal amount at maturity of such Global Exchange
Note, in exchange for such Global Exchange Note, only if such transfer complies
with Section 2.3 and (i) the Depositary notifies the Company that it is
unwilling or unable to continue as a Depositary for such Global Exchange Note
or if at any time the Depositary ceases to be a "clearing agency" registered
under the Exchange Act, and a successor depositary is not appointed by the
Company within 90 days of such notice or after the Company becomes aware of
such cessation, or (ii) an Event of Default has occurred and is continuing or
(iii) the Company, in its sole discretion, notifies the Trustee in writing that
it elects to cause the issuance of certificated Notes under this Indenture.
9
<PAGE> 114
(b) Any Global Exchange Note that is transferable to the beneficial
owners thereof pursuant to this Section 2.4 shall be surrendered by the
Depositary to the Trustee, to be so transferred, in whole or from time to time
in part, without charge, and the Trustee shall authenticate and deliver, upon
such transfer of each portion of such Global Exchange Note, an equal aggregate
principal amount at maturity of Definitive Notes of authorized denominations.
Any portion of a Global Exchange Note transferred pursuant to this paragraph
shall be executed, authenticated and delivered only in denominations of $1,000
(in principal amount at maturity) and any integral multiple thereof and
registered in such names as the Depositary shall direct. Any certificated
Initial Note in the form of a Definitive Note delivered in exchange for an
interest in the Global Exchange Note shall, except as otherwise provided by
Section 2.3(d), bear the Restricted Notes Legend.
(c) Subject to the provisions of Section 2.4(b), the registered Holder
of a Global Exchange 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.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to
the Trustee a reasonable supply of Definitive Notes in fully registered form
without interest coupons.
10
<PAGE> 115
EXHIBIT A
FORM OF FACE OF INITIAL NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL
ACCREDITED INVESTOR ACQUIRING THE NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT AT MATURITY OF THE NOTES OF $250,000, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
<PAGE> 116
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES
WITH THE FOREGOING RESTRICTIONS.
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE REGULATIONS THEREUNDER, HOLDERS MAY OBTAIN
INFORMATION CONCERNING THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT
AND THE YIELD TO MATURITY FROM THE CORPORATE SECRETARY OF THE COMPANY AT 10300
49TH STREET NORTH, CLEARWATER, FLORIDA 33762.
<PAGE> 117
No. [___________] $__________
Senior Subordinated Discount Note due 2009
Private Placement No. 57777# AA 5 MAXXIM MEDICAL GROUP, INC., a
Delaware corporation, promises to pay to [___________] or registered assigns,
the principal sum at maturity of [ ] Dollars on November 15, 2009.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
3
<PAGE> 118
Additional provisions of this Note are set forth on the other side of
this Note.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
MAXXIM MEDICAL GROUP, INC.,
by
------------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK
as Trustee, certifies
that this is one of
the Notes referred
to in the Indenture.
by
-------------------------
Authorized Signatory
Dated: November 12, 1999
4
<PAGE> 119
FORM OF REVERSE SIDE OF INITIAL NOTE
Senior Subordinated Discount Note due 2009
1. Interest
(a) MAXXIM MEDICAL GROUP, INC., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay cash interest
on the Accreted Value as of the Issue Date (and not as of any subsequent date)
of this Note at the rate of 11% per annum. The Company shall pay cash interest
semiannually on May 15 and November 15 of each year, commencing May 15, 2000.
Such cash interest on the Notes shall accrue from the most recent date to which
interest has been paid or duly provided for or, if no such cash interest has
been paid or duly provided for, from November 12, 1999 until the principal (as
defined in the Indenture) hereof is due. Principal of the Notes will accrete as
set forth in the Indenture. Cash interest shall be computed and Accreted Value
shall accrete on the basis of a 360-day year of twelve 30-day months. The
Company shall pay interest on overdue principal at the rate of cash interest
borne by the Notes plus 1% per annum (namely 12%), and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
(b) Additional Amounts. The holder of this Note is entitled to the
benefits of the Registration Agreement, dated as of November 12, 1999, among
the Company, Maxxim Medical, Inc., a Texas corporation and the parent of the
Company, Maxxim Medical Inc., a Delaware corporation, Fabritek La Romana, Inc.,
a Mississippi corporation, and Maxxim Investment Management, Inc., a Nevada
corporation (collectively, the "Guarantors"), and the Purchasers named therein.
Capitalized terms used in this paragraph (b) but not defined herein have the
meanings assigned to them in the Registration Agreement. If (i) the Shelf
Registration Statement or Exchange Offer Registration Statement, as applicable
under the Registration Agreement, is not filed with the Commission on or prior
to 75 days after the Issue Date, (ii) the Exchange Offer Registration Statement
or the Shelf Registration Statement, as the case may be, is not declared
effective on or prior to 150 days after the Issue Date (or in the case of a
Shelf Registration Statement required to be filed in response to a change in
law or the applicable interpretations of the Commission's staff, if later, on
or prior to 60 days after publication of the change in law or interpretation),
(iii) the Registered Exchange Offer is not consummated on or prior to 180 days
after the Issue Date, or (iv) the Shelf Registration Statement is filed and
declared effective on or prior to 150 days after the Issue Date (or in the case
of a Shelf Registration Statement required to be filed in response to a change
in law or the applicable interpretations of the Commission's staff, if later,
on or prior to 60 days after publication of the change in law or
interpretation) but
5
<PAGE> 120
shall thereafter cease to be effective (at any time that the Company and the
Guarantors are obligated to maintain the effectiveness thereof) without being
succeeded within 45 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company and the Guarantors will be jointly and
severally obligated to pay Additional Amounts to each holder of Transfer
Restricted Notes, during the period of one or more such Registration Defaults,
in an amount equal to $0.192 per week per $1,000 of Accreted Value, as of the
most recent interest payment date or, if no interest has been paid, the Issue
Date, of Transfer Restricted Notes held by such holder until (i) the applicable
Registration Statement is filed, (ii) the Exchange Offer Registration Statement
is declared effective and the Registered Exchange Offer is consummated, (iii)
the Shelf Registration Statement is declared effective or (iv) the Shelf
Registration Statement again becomes effective, as the case may be. All accrued
Additional Amounts shall be paid to holders in the same manner as interest
payments on the Notes on semi-annual payment dates which correspond to interest
payment dates for the Notes. Following the cure of all Registration Defaults,
the accrual of Additional Amounts shall cease. The Trustee shall have no
responsibility with respect to the determination of the amount of any such
Additional Amounts. For purposes of the foregoing, "Transfer Restricted Notes"
means (i) each Initial Note until the date on which such Initial Note has been
exchanged for a freely transferable Exchange Note in the Registered Exchange
Offer, (ii) each Initial Note until the date on which such Initial Note has
been effectively registered under the Securities Act and disposed of in
accordance with a Shelf Registration Statement or (iii) each Initial Note until
the date on which such Initial Note is distributed to the public pursuant to
Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under
the Securities Act.
6
<PAGE> 121
2. Method of Payment
The Company shall pay interest on the Notes (except defaulted
interest) to the Persons who are registered holders of Notes at the close of
business on the May 1 or November 1 next preceding the interest payment date
even if Notes are canceled after the record date and on or before the interest
payment date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Company shall pay principal, Additional Amounts, if
any, and interest in money of the United States of America that at the time of
payment is legal tender for payment of public and private debts. The Company
will make all payments in respect of a certificated Note (including principal
and interest), by mailing a check to the registered address of each Holder
thereof; provided, however, that payments on the Notes may also be made, in the
case of a Holder of at least $500,000 aggregate principal amount at maturity of
Notes, by wire transfer to a U.S. dollar account maintained by the payee with a
bank in the United States if such Holder elects payment by wire transfer by
giving written notice to the Trustee or the Paying Agent to such effect
designating such account no later than 30 days immediately preceding the
relevant due date for payment (or such other date as the Trustee may accept in
its discretion).
3. Paying Agent and Registrar
The Company shall maintain an office or agency, which shall be located
in the Borough of Manhattan, The City of New York, where Notes may be presented
for registration of transfer or for exchange (the "Registrar") and an office or
agency where Notes may be presented for payment (the "Paying Agent").
Initially, The Bank of New York, a New York banking corporation (the
"Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice. The Company
or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Notes under an Indenture dated as of November
12, 1999 (the "Indenture"), among the Company, the Guarantors and the Trustee.
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.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the
"TIA"). Except as set forth in Section 1(b) of this Note, terms defined in the
Indenture and used but not defined herein have the meanings ascribed thereto in
the Indenture. The Notes are subject to all terms and provisions of the
Indenture, and Holders (as defined in the Indenture) are referred to the
Indenture and the TIA for a statement of such terms and provisions.
7
<PAGE> 122
The Notes are senior subordinated unsecured discount obligations of
the Company limited to $144,552,000 aggregate principal amount at maturity at
any one time outstanding (subject to Section 2.07 of the Indenture). This Note
is one of the Initial Notes referred to in the Indenture issued in an aggregate
principal amount at maturity of $144,552,000. The Notes include the Initial
Notes and any Exchange Notes issued in exchange for Initial Notes. The Initial
Notes and the Exchange Notes are treated as a single class of Notes under the
Indenture. The Indenture imposes certain limitations on the ability of the
Company and the Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
issue or sell shares of capital stock of such Restricted Subsidiaries, enter
into or permit certain transactions with Affiliates and make asset sales. The
Indenture also imposes limitations on the ability of the Company to consolidate
or merge with or into any other Person or convey, transfer or lease all or
substantially all of the property of the Company.
To guarantee the due and punctual payment of the principal of and
interest on the Notes and all other amounts payable by the Company under the
Indenture and the Notes when and as the same shall be due and payable, whether
at maturity, by acceleration or otherwise, according to the terms of the Notes
and the Indenture, the Guarantors have jointly and severally unconditionally
guaranteed the Guaranteed Obligations on an unsecured senior subordinated basis
pursuant to the terms of the Indenture.
5. Optional Redemption
Except as set forth in the following paragraph, the Notes shall not be
redeemable at the option of the Company prior to November 15, 2004. Thereafter,
the Notes shall be redeemable at the option of the Company, in whole or in
part, on not less than 30 nor more than 60 days' prior notice, at the following
redemption prices (expressed as percentages of Accreted Value), plus accrued
and unpaid interest thereon and Additional Amounts, if any, in respect thereof
to the redemption date (subject to the right of holders of record on the
relevant record date to receive interest and Additional Amounts, if any, due on
the relevant interest payment date), if redeemed during the twelve-month period
commencing on November 15 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2004 106.875%
2005 104.583%
2006 102.292%
2007 and thereafter 100.000%
</TABLE>
8
<PAGE> 123
Prior to November 15, 2002, the Company may, at its option, on one or
more occasions, redeem Notes representing up to a maximum of 35% of the
aggregate principal amount at maturity of the Notes with the Net Cash Proceeds
of one or more Equity Offerings (a) by the Company or (b) by Holdings to the
extent the Net Cash Proceeds thereof are contributed to the Company or used to
purchase Capital Stock (other than Disqualified Stock) of the Company from the
Company, at a redemption price equal to 113 3/4% of the Accreted Value thereof,
plus accrued and unpaid interest thereon and Additional Amounts, if any, in
respect thereof to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest and Additional Amounts,
if any, due on the relevant interest payment date); provided, however, that
after giving effect to any such redemption, (i) at least 65% of the aggregate
principal amount at maturity of the Notes remains outstanding; and (ii) any
such redemption shall be made within 90 days of such related Equity Offering by
the Company or Holdings, as the case may be, upon not less than 30 nor more
than 60 days' notice mailed to each Holder of Notes being redeemed and
otherwise in accordance with the procedures set forth in the Indenture.
6. Sinking Fund
The Notes are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 (in principal amount at maturity) may be
redeemed in part but only in whole multiples of $1,000 (in principal amount at
maturity). If money sufficient to pay the redemption price of and accrued and
unpaid interest and Additional Amounts, if any, on all Notes (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date, the Accreted Value ceases to accrete and
cash interest ceases to accrue on such Notes (or such portions thereof) called
for redemption.
9
<PAGE> 124
8. Repurchase of Notes at the Option of Holders upon Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right, subject to certain conditions specified in the Indenture, to
require the Company to repurchase all or any part of the Notes of such Holder
at a purchase price in cash equal to 101% of the Accreted Value of the Notes to
be repurchased, plus accrued and unpaid interest thereon and Additional
Amounts, if any, in respect thereof, to the date of repurchase (subject to the
right of holders of record on the relevant record date to receive interest and
Additional Amounts, if any, due on the relevant interest payment date) as
provided in, and subject to the terms of, the Indenture.
In accordance with Section 4.06 of the Indenture, the Company will be
required to offer to purchase Notes upon the occurrence of certain events.
9. Subordination
The Notes are subordinated to Senior Indebtedness, as defined in the
Indenture. To the extent provided in the Indenture, Senior Indebtedness must be
paid before the Notes may be paid. Each of the Company and the Guarantors
agrees, and each Holder by accepting a Note agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give them
effect and appoints the Trustee as attorney-in-fact for such purpose.
10. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in denominations of
$1,000 (in principal amount at maturity) and integral multiples thereof. A
Holder may transfer or exchange Initial Notes in accordance with the Indenture.
Upon any transfer or exchange, the Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes required by law or permitted by the Indenture.
The Company shall not be required to make and the Registrar need not register
transfers or exchanges of Notes selected for redemption (except, in the case of
a Note to be redeemed in part, the portion of the Note not to be redeemed) or
any Notes for a period of 15 days prior to a selection of Notes to be redeemed.
11. Persons Deemed Owners
Except as provided in paragraph 2 hereof, the registered Holder of
this Note may be treated as the owner of it for all purposes.
10
<PAGE> 125
12. Unclaimed Money
If money for the payment of principal of or interest on the Notes
remains unclaimed for two years, the Trustee or Paying Agent shall pay the
money back to the Company at its written request unless an abandoned property
law designates another Person. After any such payment, Holders entitled to the
money must look only to the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under the Notes and the Indenture if the Company
deposits with the Trustee money or U.S. Government Obligations for the payment
of principal of and interest on the Notes to redemption or maturity, as the
case may be.
14. Amendment, Waiver
11
<PAGE> 126
Subject to certain exceptions set forth in the Indenture, (a) the
Indenture or the Notes may be amended without prior notice to any Holder but
with the written consent of the Holders of at least a majority in aggregate
principal amount at maturity of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange for the Notes) and (b)
any default may be waived with the written consent of the Holders of at least a
majority in aggregate principal amount at maturity of the outstanding Notes.
Subject to certain exceptions set forth in the Indenture, without the consent
of any Holder of Notes, the Company, the Guarantors and the Trustee may amend
the Indenture or the Notes (a) to cure any ambiguity, omission, defect or
inconsistency; (b) to comply with Article 5 of the Indenture; (c) to provide
for uncertificated Notes in addition to or in place of certificated Notes
(provided, however, that the uncertificated Notes are issued in registered form
for purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code); (d) to
make any change in Article 10 or 12 of the Indenture that would limit or
terminate the benefits available to any holder of Senior Indebtedness (or any
Representative thereof) under Article 10 or 12 of the Indenture; (e) to add
additional Guarantees with respect to the Notes; (f) to secure the Notes; (g)
to add to the covenants of the Company for the benefit of the Holders or to
surrender any right or power conferred on the Company in the Indenture; (h) to
comply with any requirement of the SEC in connection with qualifying, or
maintaining the qualification of, the Indenture under the TIA; (i) to make any
change that does not adversely affect the rights of any Holder; (j) to provide
for the issuance of the Exchange Notes which shall have terms substantially
identical in all material respects to the Initial Notes (except that the
transfer restrictions contained in the Initial Notes shall be modified or
eliminated, as appropriate), and which shall be treated, together with any
outstanding Initial Notes, as a single issue of securities; or (k) to change
the name or title of the Initial Notes or Exchange Notes and make any
conforming changes related thereto.
15. Defaults, Remedies and Acceleration
If an Event of Default (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Company)
occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount at maturity of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs, the principal
of and interest on all the Notes shall become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holders. Under certain circumstances, the Holders of a majority in aggregate
principal amount at maturity of the Notes may rescind any such acceleration
with respect to the Notes and its consequences.
12
<PAGE> 127
If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by the Indenture and use the
same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs. No provision of the Indenture, however, shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties under the Indenture or in the exercise of any
of its rights or powers. Except to enforce the right to receive payment of
principal or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Notes unless (i) such Holder has previously given to the
Trustee written notice stating that an Event of Default is continuing, (ii)
Holders of at least 25% in aggregate principal amount at maturity of the
outstanding Notes have requested the Trustee in writing to pursue the remedy,
(iii) such Holder or Holders have offered to the Trustee security or indemnity
reasonably satisfactory to it against any loss, liability or expense, (iv) the
Trustee has not complied with such request within 60 days after receipt of the
request and the offer of security or indemnity and (v) the Holders of a
majority in aggregate principal amount at maturity of the outstanding Notes
have not given the Trustee a direction inconsistent with such request during
such 60-day period. Subject to certain restrictions, the Holders of a majority
in aggregate principal amount at maturity of the outstanding Notes are given
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or of exercising any trust or power
conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or, subject to certain
exceptions in the Indenture, that the Trustee determines is unduly prejudicial
to the rights of other Holders or would involve the Trustee in personal
liability. Prior to taking any action under the Indenture, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, 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 and collect obligations owed to it
by the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee.
13
<PAGE> 128
17. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
or any of the Guarantors shall not have any liability for any obligations of
the Company or any of the Guarantors under the Notes or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Note, each Holder waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Notes.
18. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
19. Abbreviations
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. Governing Law
THIS NOTE SHALL BE 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 LAWS
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
21. Private Placement Numbers
The Company has caused Private Placement numbers to be printed on the
Notes and has directed the Trustee to use Private Placement numbers in notices
of redemption as a convenience to Holders. No representation is made as to the
accuracy of such numbers either as printed on the Notes or as contained in any
notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY HOLDER OF NOTES UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE
TEXT OF THIS NOTE.
14
<PAGE> 129
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books of
the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date: ________________ Your Signature: _________________________________________
(Sign exactly as your name appears on the other side of this Note.)
Signature Guarantee: ___________________________________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or
other signature guarantor acceptable to the Trustee
15
<PAGE> 130
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED NOTES
This certificate relates to $_________ principal amount at maturity of Notes
held in definitive form by the undersigned.
The undersigned has requested the Trustee by written order to exchange or
register the transfer of a Note or Notes.
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Notes are
being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to the Company; or
(2) [ ] to the Registrar for registration in the name of the
Holder, without transfer; or
(3) [ ] pursuant to an effective registration statement under the
Securities Act of 1933; or
(4) [ ] inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of
1933) that purchases for its own account or for the account of
a qualified institutional buyer to whom notice is given that
such transfer is being made in reliance on Rule 144A, in each
case pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or
(5) [ ] outside the United States in an offshore transaction
within the meaning of Regulation S under the Securities Act in
compliance with Rule 904 under the Securities Act of 1933; or
(6) [ ] to an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act of
1933) that has furnished to the Trustee a signed letter
containing certain representations and agreements; or
16
<PAGE> 131
(7) [ ] pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the name of
any Person other than the registered holder thereof; provided,
however, that if box (5), (6) or (7) is checked, the Trustee may
require, prior to registering any such transfer of the Notes, such
legal opinions, certifications and other information as the Company
has reasonably requested 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 of 1933.
______________________________________
Your Signature
Signature Guarantee:
Date: ___________________ ______________________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
________________________________________________________________________________
17
<PAGE> 132
TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ________________ ____________________________________________
NOTICE: To be executed by
an executive officer
18
<PAGE> 133
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS NOTE PURCHASED BY THE COMPANY
PURSUANT TO SECTION 4.06 (LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK)
OR 4.08 (CHANGE OF CONTROL) OF THE INDENTURE, CHECK THE BOX:
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK [ ] CHANGE OF
CONTROL [ ]
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS NOTE PURCHASED BY THE
COMPANY PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE PRINCIPAL
AMOUNT AT MATURITY ($1,000 OR AN INTEGRAL MULTIPLE THEREOF):
$
DATE: __________________ YOUR SIGNATURE: _______________________________________
(SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE NOTE)
SIGNATURE
GUARANTEE:______________________________________________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A RECOGNIZED
SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER SIGNATURE GUARANTOR
ACCEPTABLE TO THE TRUSTEE
19
<PAGE> 134
EXHIBIT B
FORM OF FACE OF EXCHANGE NOTE
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, 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 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 EXCHANGE NOTE SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL EXCHANGE
NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE REGULATIONS THEREUNDER, HOLDERS MAY OBTAIN
INFORMATION CONCERNING THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT
AND THE YIELD TO MATURITY FROM THE CORPORATE SECRETARY OF THE COMPANY AT 10300
49TH STREET NORTH, CLEARWATER, FLORIDA 33762.
<PAGE> 135
No. $__________
Senior Subordinated Discount Note due 2009
[CUSIP No. ______]
MAXXIM MEDICAL GROUP, INC., a Delaware corporation, promises to pay to
[Cede & Co.], or registered assigns, the principal sum at maturity [of Dollars]
[listed on the Schedule of Increases or Decreases in Global Exchange Note
attached hereto]1 on November 15, 2009.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
- --------
1 Use the Schedule of Increases and Decreases language if Note is in Global
Form.
2
<PAGE> 136
Additional provisions of this Note are set forth on the other side of
this Note.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
MAXXIM MEDICAL GROUP, INC.,
by
----------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Notes referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
Dated:
- ------------
*/ If the Note is to be issued in global form, add the Global Notes Legend and
the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL EXCHANGE
NOTES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL EXCHANGE NOTE".
3
<PAGE> 137
FORM OF REVERSE SIDE OF EXCHANGE NOTE
Senior Subordinated Discount Note due 2009
1. Interest
(a) MAXXIM MEDICAL GROUP, INC., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay cash interest
on the Accreted Value as of the Issue Date (and not as of any subsequent date)
of this Note at the rate of 11% per annum. The Company shall pay cash interest
semiannually on May 15 and November 15 of each year, commencing May 15, 2000.
Such cash interest on the Notes shall accrue from the most recent date to which
interest has been paid or duly provided for or, if no such cash interest has
been paid or duly provided for, from November 12, 1999 until the principal (as
defined in the Indenture) hereof is due. Principal of the Notes will accrete as
set forth in the Indenture. Cash interest shall be computed and Accreted Value
shall accrete on the basis of a 360-day year of twelve 30-day months. The
Company shall pay interest on overdue principal at the rate of cash interest
borne by the Notes plus 1% per annum (namely 12%), and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
2. Method of Payment
The Company shall pay interest on the Notes (except defaulted
interest) to the Persons who are registered holders of Notes at the close of
business on the May 1 or November 1 next preceding the interest payment date
even if Notes are canceled after the record date and on or before the interest
payment date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Company shall pay principal, Additional Amounts and
interest in money of the United States of America that at the time of payment
is legal tender for payment of public and private debts. Payments in respect of
the Notes represented by a Global Exchange Note (including principal,
Additional Amounts and interest) shall be made by wire transfer of immediately
available funds to the accounts specified by The Depository Trust Company. The
Company will make all payments in respect of a certificated Note (including
principal and interest), by mailing a check to the registered address of each
Holder thereof; provided, however, that payments on the Notes may also be made,
in the case of a Holder of at least $500,000 aggregate principal amount at
maturity of Notes, by wire transfer to a U.S. dollar account maintained by the
payee with a bank in the United States if such Holder elects payment by wire
transfer by giving written notice to the Trustee or the Paying Agent to such
effect designating such account no later than 30 days immediately preceding the
relevant due date for payment (or such other date as the Trustee may accept in
its discretion).
4
<PAGE> 138
3. Paying Agent and Registrar
The Company shall maintain an office or agency, which shall be located
in the Borough of Manhattan, The City of New York, where Notes may be presented
for registration of transfer or for exchange (the "Registrar") and an office or
agency where Notes may be presented for payment (the "Paying Agent").
Initially, The Bank of New York, a New York banking corporation (the
"Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice. The Company
or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Notes under an Indenture dated as of November
12, 1999 (the "Indenture"), among the Company, the Guarantors and the Trustee.
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.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the
"TIA"). Terms defined in the Indenture and used but not defined herein have the
meanings ascribed thereto in the Indenture. The Notes are subject to all terms
and provisions of the Indenture, and Holders (as defined in the Indenture) are
referred to the Indenture and the TIA for a statement of such terms and
provisions.
The Notes are senior subordinated unsecured discount obligations of
the Company limited to $144,552,000 aggregate principal amount at maturity at
any one time outstanding (subject to Section 2.07 of the Indenture). This Note
is one of the Exchange Notes referred to in the Indenture issued in an
aggregate principal amount at maturity of $144,552,000. The Notes include the
Initial Notes and any Exchange Notes issued in exchange for Initial Notes. The
Initial Notes and the Exchange Notes are treated as a single class of Notes
under the Indenture. The Indenture imposes certain limitations on the ability
of the Company and the Restricted Subsidiaries to, among other things, make
certain Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
issue or sell shares of capital stock of such Restricted Subsidiaries, enter
into or permit certain transactions with Affiliates and make asset sales. The
Indenture also imposes limitations on the ability of the Company to consolidate
or merge with or into any other Person or convey, transfer or lease all or
substantially all of the property of the Company.
To guarantee the due and punctual payment of the principal of and
interest on the Notes and all other amounts payable by the Company under the
Indenture and the
5
<PAGE> 139
Notes when and as the same shall be due and payable, whether at maturity, by
acceleration or otherwise, according to the terms of the Notes and the
Indenture, the Guarantors have jointly and severally unconditionally guaranteed
the Guaranteed Obligations on an unsecured senior subordinated basis pursuant
to the terms of the Indenture.
5. Optional Redemption
Except as set forth in the following paragraph, the Notes shall not be
redeemable at the option of the Company prior to November 15, 2004. Thereafter,
the Notes shall be redeemable at the option of the Company, in whole or in
part, on not less than 30 nor more than 60 days' prior notice, at the following
redemption prices (expressed as percentages of Accreted Value), plus accrued
and unpaid interest thereon and Additional Amounts, if any, in respect thereof
to the redemption date (subject to the right of holders of record on the
relevant record date to receive interest and Additional Amounts, if any due on
the relevant interest payment date), if redeemed during the twelve-month period
commencing on November 15 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2004 106.875%
2005 104.583%
2006 102.292%
2007 and thereafter 100.000%
</TABLE>
Prior to November 15, 2002, the Company may, at its option, on one or
more occasions, redeem Notes representing up to a maximum of 35% of the
aggregate principal amount at maturity of the Notes with the Net Cash Proceeds
of one or more Equity Offerings (a) by the Company or (b) by Holdings to the
extent the Net Cash Proceeds thereof are contributed to the Company or used to
purchase Capital Stock (other than Disqualified Stock) of the Company from the
Company, at a redemption price equal to 113 3/4% of the Accreted Value thereof,
plus accrued and unpaid interest thereon and Additional Amounts, if any, in
respect thereof to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest and Additional Amounts,
if any, due on the relevant interest payment date); provided, however, that
after giving effect to any such redemption, (i) at least 65% of the aggregate
principal amount at maturity of the Notes remains outstanding; and (ii) any
such redemption shall be made within 90 days of such related Equity Offering by
the Company or Holdings, as the case may be, upon not less than 30 nor more
than 60 days' notice mailed to each Holder of Notes being redeemed and
otherwise in accordance with the procedures set forth in the Indenture.
6
<PAGE> 140
6. Sinking Fund
The Notes are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 (in principal amount at maturity) may be
redeemed in part but only in whole multiples of $1,000 (in principal amount at
maturity). If money sufficient to pay the redemption price of and accrued and
unpaid interest and Additional Amounts, if any, on all Notes (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date, the Accreted Value ceases to accrete and
cash interest ceases to accrue on such Notes (or such portions thereof) called
for redemption.
8. Repurchase of Notes at the Option of Holders upon Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right, subject to certain conditions specified in the Indenture, to
require the Company to repurchase all or any part of the Notes of such Holder
at a purchase price in cash equal to 101% of the Accreted Value of the Notes to
be repurchased, plus accrued and unpaid interest thereon and Additional
Amounts, if any, in respect thereof, to the date of repurchase (subject to the
right of holders of record on the relevant record date to receive interest and
Additional Amounts, if any, due on the relevant interest payment date) as
provided in, and subject to the terms of, the Indenture.
In accordance with Section 4.06 of the Indenture, the Company will be
required to offer to purchase Notes upon the occurrence of certain events.
9. Subordination
The Notes are subordinated to Senior Indebtedness, as defined in the
Indenture. To the extent provided in the Indenture, Senior Indebtedness must be
paid before the Notes may be paid. Each of the Company and the Guarantors
agrees, and each Holder by accepting a Note agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give them
effect and appoints the Trustee as attorney-in-fact for such purpose.
7
<PAGE> 141
10. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in denominations of
$1,000 (in principal amount at maturity) and integral multiples thereof. A
Holder may transfer or exchange Notes in accordance with the Indenture. Upon
any transfer or exchange, the Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements or transfer documents
and to pay any taxes required by law or permitted by the Indenture. The Company
shall not be required to make and the Registrar need not register transfers or
exchanges of Notes selected for redemption (except, in the case of a Note to be
redeemed in part, the portion of the Note not to be redeemed) or any Notes for
a period of 15 days prior to a selection of Notes to be redeemed.
11. Persons Deemed Owners
Except as provided in paragraph 2 hereof, the registered Holder of
this Note may be treated as the owner of it for all purposes.
12. Unclaimed Money
If money for the payment of principal of or interest on the Notes
remains unclaimed for two years, the Trustee or Paying Agent shall pay the
money back to the Company at its written request unless an abandoned property
law designates another Person. After any such payment, Holders entitled to the
money must look only to the Company and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under the Notes and the Indenture if the Company
deposits with the Trustee money or U.S. Government Obligations for the payment
of principal of and interest on the Notes to redemption or maturity, as the
case may be.
8
<PAGE> 142
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (a) the
Indenture or the Notes may be amended without prior notice to any Holder but
with the written consent of the Holders of at least a majority in aggregate
principal amount at maturity of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange for the Notes) and (b)
any default may be waived with the written consent of the Holders of at least a
majority in aggregate principal amount at maturity of the outstanding Notes.
Subject to certain exceptions set forth in the Indenture, without the consent
of any Holder of Notes, the Company, the Guarantors and the Trustee may amend
the Indenture or the Notes (a) to cure any ambiguity, omission, defect or
inconsistency; (b) to comply with Article 5 of the Indenture; (c) to provide
for uncertificated Notes in addition to or in place of certificated Notes
(provided, however, that the uncertificated Notes are issued in registered form
for purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code); (d) to
make any change in Article 10 or 12 of the Indenture that would limit or
terminate the benefits available to any holder of Senior Indebtedness (or any
Representative thereof) under Article 10 or 12 of the Indenture; (e) to add
additional Guarantees with respect to the Notes; (f) to secure the Notes; (g)
to add to the covenants of the Company for the benefit of the Holders or to
surrender any right or power conferred on the Company in the Indenture; (h) to
comply with any requirement of the SEC in connection with qualifying, or
maintaining the qualification of, the Indenture under the TIA; (i) to make any
change that does not adversely affect the rights of any Holder; (j) to provide
for the issuance of the Exchange Notes which shall have terms substantially
identical in all material respects to the Initial Notes (except that the
transfer restrictions contained in the Initial Notes shall be modified or
eliminated, as appropriate), and which shall be treated, together with any
outstanding Initial Notes, as a single issue of securities; or (k) to change
the name or title of the Initial Notes or Exchange Notes and make any
conforming changes related thereto.
9
<PAGE> 143
15. Defaults, Remedies and Acceleration
If an Event of Default (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Company)
occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount at maturity of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs, the principal
of and interest on all the Notes shall become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holders. Under certain circumstances, the Holders of a majority in principal
amount at maturity of the Notes may rescind any such acceleration with respect
to the Notes and its consequences.
If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by the Indenture and use the
same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs. No provision of the Indenture, however, shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties under the Indenture or in the exercise of any
of its rights or powers. Except to enforce the right to receive payment of
principal or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Notes unless (i) such Holder has previously given the to
the Trustee written notice stating that an Event of Default is continuing, (ii)
Holders of at least 25% in aggregate principal amount at maturity of the
outstanding Notes have requested the Trustee in writing to pursue the remedy,
(iii) such Holder or Holders have offered to the Trustee security or indemnity
reasonably satisfactory to it against any loss, liability or expense, (iv) the
Trustee has not complied with such request within 60 days after receipt of the
request and the offer of security or indemnity and (v) the Holders of a
majority in aggregate principal amount at maturity of the outstanding Notes
have not given the Trustee a direction inconsistent with such request during
such 60-day period. Subject to certain restrictions, the Holders of a majority
in aggregate principal amount at maturity of the outstanding Notes are given
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or of exercising any trust or power
conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or, subject to certain
exceptions in the Indenture, that the Trustee determines is unduly prejudicial
to the rights of other Holders or would involve the Trustee in personal
liability. Prior to taking any action under the Indenture, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
10
<PAGE> 144
16. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, 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 and collect obligations owed to it
by the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee.
17. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
or any of the Guarantors shall not have any liability for any obligations of
the Company or any of the Guarantors under the Notes or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Note, each Holder waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Notes.
18. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
19. Abbreviations
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act). 20. Governing Law
THIS NOTE SHALL BE 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 LAWS
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
11
<PAGE> 145
21. CUSIP Numbers
The Company has caused CUSIP numbers to be printed on the Notes and
has directed the Trustee to use CUSIP numbers in notices of redemption as a
convenience to Holders. No representation is made as to the accuracy of such
numbers either as printed on the Notes or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.
THE COMPANY WILL FURNISH TO ANY HOLDER OF NOTES UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE
TEXT OF THIS NOTE.
12
<PAGE> 146
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date: ________________ Your Signature: _________________________________________
(Sign exactly as your name appears on the other side of this Note.)
Signature Guarantee: ___________________________________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the Trustee
13
<PAGE> 147
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS NOTE PURCHASED BY THE COMPANY
PURSUANT TO SECTION 4.06 (LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK)
OR 4.08 (CHANGE OF CONTROL) OF THE INDENTURE, CHECK THE BOX:
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK[ ]CHANGE OF
CONTROL[ ]
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS NOTE PURCHASED BY THE
COMPANY PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE PRINCIPAL
AMOUNT AT MATURITY ($1,000 OR AN INTEGRAL MULTIPLE THEREOF):
$
DATE: __________________ YOUR SIGNATURE: _______________________________________
(SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE NOTE)
SIGNATURE GUARANTEE:____________________________________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A
RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER
SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE.
14
<PAGE> 148
EXHIBIT C
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as of ,
among [GUARANTOR] (the "New Guarantor"), MAXXIM MEDICAL GROUP, INC.
(or its successor), a Delaware corporation (the "Company"), MAXXIM
MEDICAL, INC., a Texas corporation and parent of the Company ("Maxxim
Texas"), MAXXIM MEDICAL, INC., a Delaware corporation ("Maxxim
Delaware"), FABRITEK LA ROMANA, INC., a Mississippi corporation,
MAXXIM INVESTMENT MANAGEMENT, INC., a Nevada corporation, and THE BANK
OF NEW YORK, a New York banking corporation, as trustee under the
indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS the Company and Maxxim Texas, Maxxim Delaware, Fabritek La
Romana, Inc. and Maxxim Investment Management, Inc. (collectively, the
"Existing Guarantors") have heretofore executed and delivered to the Trustee an
Indenture (the "Indenture") dated as of November 12, 1999, providing for the
issuance of an aggregate principal amount at maturity of up to $144,552,000 of
Senior Subordinated Discount Notes due 2009 of the Company (the "Notes");
WHEREAS Section 4.11 of the Indenture provides that under certain
circumstances the Company is required to cause the New Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the New
Guarantor shall unconditionally guarantee all the Company's obligations under
the Notes pursuant to a Guarantee on the terms and conditions set forth herein;
and
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the
Company and the Existing Guarantors are authorized to execute and deliver this
Supplemental Indenture;
<PAGE> 149
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
New Guarantor, the Company, the Existing Guarantors and the Trustee mutually
covenant and agree for the equal and ratable benefit of the holders of the
Notes as follows:
1. Agreement to Guarantee. The New Guarantor hereby agrees, jointly
and severally with all the Existing Guarantors, to unconditionally guarantee
the Company's obligations under the Notes on the terms and subject to the
conditions set forth in Articles 11 and 12 of the Indenture and to be bound by
all other applicable provisions of the Indenture and the Notes.
2. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Notes heretofore or
hereafter authenticated and delivered shall be bound hereby.
3. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE 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 LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
4. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental
Indenture.
5. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. Effect of Headings. The Section headings herein are for convenience
only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR],
by
----------------------------------
Name:
Title:
<PAGE> 150
MAXXIM MEDICAL GROUP, INC.,
by
----------------------------------
Name:
Title:
MAXXIM MEDICAL, INC., a Texas corporation
by
----------------------------------
Name:
Title:
MAXXIM MEDICAL, INC., a Delaware
corporation
by
----------------------------------
Name:
Title:
FABRITEK LA ROMANA, INC.,
by
----------------------------------
Name:
Title:
MAXXIM INVESTMENT MANAGEMENT, INC.,
by
----------------------------------
Name:
Title:
3
<PAGE> 151
THE BANK OF NEW YORK, as Trustee
by
----------------------------------
Name:
Title:
4
<PAGE> 1
Exhibit 4.2
MAXXIM MEDICAL GROUP, INC.
MAXXIM MEDICAL, INC.
144,552 Units consisting of
$144,552,000 Aggregate Principal Amount at Maturity
of Senior Subordinated Discount Notes due 2009
of Maxxim Medical Group, Inc.
and
144,552 Warrants to Purchase an aggregate of 118,908 shares of common stock
of Maxxim Medical, Inc.
PURCHASE AGREEMENT
November 12, 1999
GS Mezzanine Partners, L.P.
c/o Goldman, Sachs & Co.
85 Broad Street, 10th Floor
New York, New York 10004
GS Mezzanine Partners Offshore, L.P.
c/o Goldman, Sachs & Co.
85 Broad Street, 10th Floor
New York, New York 10004
John Hancock Mutual Life Insurance Company
200 Clarendon Street
Boston, Massachusetts 02117
John Hancock Variable Life Insurance Company
200 Clarendon Street
Boston, Massachusetts 02117
Signature 3 Limited
c/o John Hancock Mutual Life Insurance Company
200 Clarendon Street
Boston, Massachusetts 02117
Merrill Lynch International
c/o John Hancock Mutual Life Insurance Company
200 Clarendon Street
Boston, Massachusetts 02117
<PAGE> 2
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Chase Equity Associates, L.P.
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, New York 10017
CIBC WMC, Inc.
c/o CIBC Capital Partners
161 Bay Street, 8th Floor
Toronto, Ontario M5J 2S8
Canada
Merrill Lynch, Pierce, Fenner & Smith Incorporated
250 Vesey Street
World Financial Center, North Tower
New York, New York 10281
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Deutsche Bank AG, New York Branch
130 Liberty Street, 29th Floor
New York, New York 10006
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
<PAGE> 3
Ladies and Gentlemen:
Maxxim Medical Group, Inc., a Delaware corporation (the "Company"),
and Maxxim Medical, Inc., a Texas corporation and the parent of the Company
("Holdings"), propose to issue and sell 144,552 units (the "Units"), each Unit
consisting of $1,000 in principal amount at maturity of the Company's Senior
Subordinated Discount Notes due 2009 (the "Notes") and one warrant (a
"Warrant") to purchase 0.8226 shares of common stock of Holdings, par value
$0.001 per share, at an exercise price of $0.01 per share. The Notes will be
issued pursuant to an Indenture to be dated as of November 12, 1999 (the
"Indenture"), among the Company, the Guarantors (as defined below) and The Bank
of New York, as trustee (the "Trustee"). The Notes will be initially guaranteed
on an unsecured senior subordinated basis by Holdings and each U.S. subsidiary
of the Company listed on the signature pages hereto (collectively referred to
as the "Guarantors"). The Warrants will be issued pursuant to a warrant
agreement (the "Warrant Agreement") dated as of November 12, 1999 among
Holdings and the Purchasers (as defined herein). Holdings and the Company
hereby confirm their agreement with GS Mezzanine Partners, L.P., GS Mezzanine
Partners Offshore, L.P., John Hancock Mutual Life Insurance Company, John
Hancock Variable Life Insurance Company, Signature 3 Limited, Merrill Lynch
International, The Northwestern Mutual Life Insurance Company, Chase Equity
Associates, L.P., CIBC WMC, Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Nationwide Life Insurance Company, Deutsche Bank AG, New York
Branch and Credit Suisse First Boston Corporation (collectively, the
"Purchasers") concerning the purchase by the Purchasers of the Warrants from
Holdings and the Notes from the Company.
The Units will be sold to the Purchasers without being registered
under the Securities Act of 1933, as amended (the "Securities Act"), in
reliance upon an exemption therefrom. The Company has prepared a private
placement memorandum dated November 12, 1999 (the "Private Placement
Memorandum") setting forth information concerning Holdings, the Company and the
Units. Copies of the Private Placement Memorandum have been delivered by
Holdings and the Company to the Purchasers pursuant to the terms of this
Agreement. Any references herein to the Private Placement Memorandum shall be
deemed to include all amendments and supplements thereto, unless otherwise
noted. Holdings and the Company hereby confirm that they have authorized the
use of the Private Placement Memorandum in connection with the sale of the
Units to the Purchasers in accordance with Section 2.
Holders of the Units (including the Purchasers and their direct and
indirect transferees) will be entitled to the benefits of an Exchange and
Registration Rights Agreement, substantially in the form attached hereto as
Annex A (the "Registration Rights Agreement"), pursuant to which the Company
and the Guarantors will agree to file with the Securities and Exchange
Commission (the "Commission") (a) a registration
3
<PAGE> 4
statement under the Securities Act (the "Exchange Offer Registration
Statement") registering an issue of senior subordinated discount notes of the
Company (the "Exchange Notes") which are identical in all material respects to
the Notes (except that the Exchange Notes will not contain terms with respect
to transfer restrictions) and (b) under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Securities Act (the
"Shelf Registration Statement").
Pursuant to or in connection with the Agreement and Plan of Merger
(the "Merger Agreement") dated as of June 13, 1999, as amended, between
Holdings and Fox Paine Medic Acquisition Corporation ("Fox Paine Maxxim"), a
Texas corporation newly formed by Fox Paine Capital Fund, L.P. (the "Fox Paine
Fund"), as part of the proposed recapitalization (the "Recapitalization") of
Holdings, Fox Paine Maxxim will merge (the "Merger") with and into Holdings,
with Holdings as the surviving corporation in the Merger. Prior to or
simultaneously with the Merger, (a) the Fox Paine Fund and other affiliated
investment funds (collectively, the "Fox Paine Investors"), together with
certain other minority investors (together with the Fox Paine Investors, the
"Investors"), will purchase or will have purchased all the common stock of Fox
Paine Maxxim, with such common stock being converted into Holdings' common
stock in the Merger (the "Investor Equity Contribution"), (b) Maxxim Medical,
Inc., a Delaware corporation and indirect wholly owned subsidiary of Holdings
("Maxxim Delaware"), will sell (the "Circon Sale") to Circon Holdings
Corporation (formerly Fox Paine Citron Acquisition Corporation) ("Fox Paine
Circon"), a newly formed Delaware corporation to be owned by the Investors and
the Continuing Shareholders (as defined herein), all the capital stock of its
wholly owned subsidiary Circon Corporation ("Circon") and (c) Holdings will
contribute all its assets and liabilities (other than those assets and
liabilities relating to Holdings' existing credit facilities) to the Company
(the "Asset Dropdown"). As part of the Recapitalization, (a) each outstanding
share of common stock of Holdings (other than certain shares held by a group of
10 current shareholders of Holdings (the "Continuing Shareholders")) will be
converted into the right to receive $26.00 in cash (the "Merger Consideration")
and (b) certain options to purchase the common stock of Holdings will be
canceled in return for a cash payment for each share subject to such options
equal to the excess of $26.00 over the exercise price of such options (the
"Option Consideration"). The Recapitalization and related transactions will be
funded from the following sources: (a) an aggregate of up to $262.0 million of
borrowings under new senior secured credit facilities of the Company (the "New
Credit Facilities"); (b) at least $100.0 million from the issuance and sale of
the Units; (c) $50.0 million from the issuance by Holdings of senior unsecured
discount notes (the "Holdings Notes") and related warrants to purchase Holdings
common stock; (d) $228.0 million in cash proceeds from the Circon Sale
(including the repayment of any intercompany indebtedness owed by Circon to
Maxxim Delaware immediately prior to the Circon Sale); (e) $131.8 million in
cash from the Investor Equity Contribution; and (f) $4.4 million in cash from
the sale of new shares of common stock of Holdings to the Continuing
Shareholders financed from a portion of the
4
<PAGE> 5
Option Consideration they receive. As part of the Recapitalization, (a)
Holdings and its subsidiaries will repay all their existing debt, other than
any Existing Notes (as defined) not purchased in the Debt Tender Offer (as
defined) and $8.7 million in capital leases, industrial revenue bonds and other
long-term obligations, by (i) repaying all amounts outstanding under the Third
Amended and Restated Credit Agreement dated January 4, 1999, among Holdings,
Nationsbank, N.A., as agent, The Bank of Nova Scotia and First Union Bank, as
managing agents, and certain other banks named therein and (ii) consummating a
debt tender offer (the "Debt Tender Offer") to acquire up to $100.0 million in
principal amount of Holding's outstanding 10 1/2% Senior Subordinated Notes due
2006 (the "Existing Notes"), with any Existing Notes not tendered and purchased
in the Debt Tender Offer becoming direct obligations of the Company, and (b)
the Company, Holdings, Fox Paine Circon and Circon will enter into a services
agreement (the "Services Agreement"), pursuant to which Holdings and the
Company will provide Circon and Fox Paine Circon certain services. All the
above described transactions, together with any related transactions, are
collectively referred to herein as the "Transactions."
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Private Placement Memorandum. References to
subsidiaries of Holdings and/or the Company give effect to the Circon Sale.
1. Representations, Warranties and Agreements of the Company and the
Guarantors. The Company and each of the Guarantors represent and warrant to,
and agree with, the Purchasers on and as of the date hereof that:
(a) The Private Placement Memorandum does not 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 therein,
in the light of the circumstances under which they were made, not
misleading.
(b) Assuming the accuracy of the representations and warranties of the
Purchasers contained in Section 2 and their compliance with the
agreements set forth therein, it is not necessary, in connection with the
issuance and sale of the Units to the Purchasers in the manner
contemplated by this Agreement and the Private Placement Memorandum, to
register the Units, the Notes or the Warrants under the Securities Act or
to qualify the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
(c) Holdings and each of its subsidiaries have been duly incorporated
and are validly existing as corporations in good standing under the laws
of their respective jurisdictions of incorporation, are duly qualified to
do business and are in good standing as foreign corporations in each
jurisdiction in which their
5
<PAGE> 6
respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all power and
authority necessary to own or hold their respective properties and to
conduct the businesses in which they are engaged, except where the
failure to so qualify or have such power or authority could not,
singularly or in the aggregate, be reasonably expected to be materially
adverse to the condition (financial or otherwise), results of operations,
business, assets or liabilities of Holdings and its subsidiaries, taken
as a whole (a "Material Adverse Effect"). The Company is the only direct
subsidiary of Holdings. Schedule 2 hereto sets forth, as of the date
hereof and the Closing Date, a list of all direct and indirect
subsidiaries of Holdings.
(d) As of the Closing Date, Holdings and the Company will have a pro
forma capitalization as set forth in the Private Placement Memorandum
under the heading "Capitalization." All the outstanding shares of capital
stock of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and are owned directly by Holdings. All
the outstanding shares of capital stock of Holdings have been duly and
validly authorized and issued, are fully paid and non-assessable and the
capital stock of Holdings conforms in all material respects to the
description thereof contained in the Private Placement Memorandum. When
the Units are delivered and paid for pursuant to this Agreement on the
Closing Date, the Warrants will be exercisable for shares of Holdings
common stock ("Underlying Shares") in accordance with their terms and the
Underlying Shares initially issuable upon exercise of such Warrants have
been duly and validly authorized and reserved for issuance upon such
exercise and, when issued in accordance with the terms of the Warrant
Agreement and the Warrants and paid for pursuant to this Agreement, will
be validly issued, fully paid and non-assessable. As of the Closing Date,
all the outstanding capital stock of the Company and each of the
Guarantors other than Holdings is duly and validly authorized and issued,
is fully paid and non-assessable and is owned directly or indirectly by
Holdings and (other than the capital stock of the Company) by the
Company. As of the Closing Date, after giving effect to the Asset
Dropdown, Holdings engages in no business other than holding the
outstanding shares of capital stock of the Company. As of the Closing
Date, all the outstanding shares of capital stock of the Company and its
subsidiaries will be free and clear of any lien, charge, encumbrance,
security interest or restriction upon voting or transfer, except for the
pledge of such capital stock as security for the obligations under the
credit agreement (the "Credit Agreement"), to be dated as of the Closing
Date, among Holdings, the Company, The Chase Manhattan Bank, as
Administrative Agent and Collateral Agent, Bankers Trust Company and
Merrill Lynch Capital Corporation, as Co-Syndication Agents, Canadian
Imperial Bank of Commerce and Credit Suisse First Boston Corporation, as
Co-Documentation Agents, and the lenders party thereto, relating to the
New Credit
6
<PAGE> 7
Facilities and except for the Warrants and the Holdings Warrants (as
defined herein).
(e) Holdings had full right, power and authority to execute and
deliver the Merger Agreement and has full right, power and authority to
perform its obligations thereunder; and all corporate action required to
be taken for the due and proper authorization, execution and delivery of
the Merger Agreement and the consummation of the transactions
contemplated thereby were validly taken.
(f) Each of the Company and the Guarantors, as applicable, has full
right, power and authority to execute and deliver this Agreement, the
Indenture, the Registration Rights Agreement, the Notes, the Warrants,
the Credit Agreement and the Guarantee Agreements (as defined in the
Credit Agreement), Pledge Agreement (as defined in the Credit Agreement)
and Security Agreement (as defined in the Credit Agreement) to be entered
into by the Company and the Guarantors in connection with the Credit
Agreement (collectively, the "New Credit Facilities Documents"), the
Services Agreement, the Shareholders Agreement, the Warrant Agreement,
the supplemental indenture dated as of October 18, 1999, relating to the
Existing Notes (the "Supplemental Indenture"), the Stock Purchase
Agreement dated as of November 12, 1999 by and between Maxxim Delaware
and Fox Paine Circon (the "Circon Purchase Agreement"), the Holdings
Notes, the indenture relating to the Holdings Notes dated as of November
12, 1999 (the "Holdings Notes Indenture"), the warrants ("Holdings
Warrants") exercisable for Holdings common stock issued in connection
with the issuance and sale of the Holdings Notes and the warrant
agreement (the "Holdings Warrant Agreement") dated as of November 12,
1999 relating to the Holdings Warrants (collectively, the "Transaction
Documents") to which such entity is, or will be as of the Closing Date, a
party and to perform their respective obligations hereunder and
thereunder; and all corporate action required to be taken for the due and
proper authorization, execution and delivery of each of the Transaction
Documents by such entities and the consummation of the transactions
contemplated thereby by such entities has been duly and validly taken.
(g) This Agreement has been duly authorized, executed and delivered by
the Company and each of the Guarantors and constitutes a valid and
legally binding agreement of the Company and each of the Guarantors.
(h) The Indenture has been duly authorized by the Company and each of
the Guarantors, and, when duly executed and delivered in accordance with
its terms by each of the parties thereto, will constitute a valid and
legally binding agreement of the Company and each of the Guarantors
enforceable against the Company and each of the Guarantors in accordance
with its terms, except as may
7
<PAGE> 8
be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether considered
in a proceeding in equity or at law). On the Closing Date, the Indenture
will conform in all material respects to the requirements of the Trust
Indenture Act and the rules and regulations of the Commission applicable
to an indenture which is qualified thereunder.
(i) The Notes have been duly authorized by the Company and each of the
Guarantors and, when duly executed, authenticated, issued and delivered
as provided in the Indenture and paid for as provided herein, will be
duly and validly issued and outstanding and will constitute valid and
legally binding obligations of the Company as issuer, and each of the
Guarantors, as guarantors, entitled to the benefits of the Indenture and
enforceable against the Company, as issuer, and each of the Guarantors,
as guarantors, in accordance with their terms, except as may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether considered
in a proceeding in equity or at law).
(j) The Warrants have been duly authorized by Holdings and, when duly
executed, authenticated, issued and delivered as provided in the Warrant
Agreement and paid for as provided herein, will be duly and validly
issued and outstanding and will constitute valid and legally binding
obligations of Holdings, entitled to the benefits of the Warrant
Agreement and enforceable against Holdings in accordance with their
terms, except as may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law) and except to
the extent that the indemnification or contribution provisions contained
therein may be unenforceable.
8
<PAGE> 9
(k) The Registration Rights Agreement has been duly authorized by the
Company and each of the Guarantors and, when duly executed and delivered
in accordance with its terms by each of the parties thereto, will
constitute a valid and legally binding agreement of the Company and each
of the Guarantors enforceable against the Company and each of the
Guarantors in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally
and by general equitable principles (whether considered in a proceeding
in equity or at law) and except to the extent that the indemnification or
contribution provisions contained therein may be unenforceable.
(l) The Merger Agreement has been duly authorized, executed and
delivered by Holdings and constitutes a valid and legally binding
agreement of Holdings, enforceable against Holdings in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law).
(m) Each New Credit Facilities Document to which the Company or a
Guarantor is to be a party has been duly authorized by the Company or
such Guarantor, as applicable, and, when duly executed and delivered in
accordance with its terms by each of the parties thereto, will constitute
a valid and legally binding agreement of the Company or such Guarantor,
as applicable, enforceable against the Company or such Guarantor, in
accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in
equity or at law).
(n) The Services Agreement has been duly authorized by Holdings and
the Company and, when duly executed and delivered in accordance with its
terms by each of the parties thereto, will constitute a valid and legally
binding agreement of each of Holdings and the Company enforceable against
each of Holdings and the Company in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting
creditors' rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law).
9
<PAGE> 10
(o) The Shareholders Agreement has been duly authorized by Holdings,
and when duly executed and delivered in accordance with its terms by each
of the parties thereto, will constitute a valid and legally binding
agreement of Holdings enforceable against Holdings in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law).
(p) The Warrant Agreement has been duly authorized by Holdings, and
when duly executed and delivered in accordance with its terms by each of
the parties thereto, will constitute a valid and legally binding
agreement of Holdings enforceable against Holdings in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law).
(q) Each other Transaction Document to which the Company or a
Guarantor is to be a party has been duly authorized by the Company or
such Guarantor, as applicable, and, when duly executed and delivered in
accordance with its terms by each of the parties thereto, will constitute
a valid and legally binding agreement of the Company or such Guarantor,
as applicable, enforceable against the Company or such Guarantor, as
applicable, in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally
and by general equitable principles (whether considered in a proceeding
in equity or at law).
(r) Each Transaction Document conforms in all material respects to the
description thereof contained in the Private Placement Memorandum to the
extent described therein.
(s) The execution, delivery and performance by the Company and each of
the Guarantors of each of the Transaction Documents to which each is a
party, the issuance, authentication, sale and delivery of the Units and
compliance by the Company and each of the Guarantors with the terms
thereof (including the Notes and the Warrants) and the consummation of
the transactions contemplated by the Transaction Documents will not
conflict in any respect with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, or, except as
created pursuant to the New Credit Facilities Documents or the
Shareholders Agreement, result in the creation or imposition of any lien,
charge or
10
<PAGE> 11
encumbrance upon any property or assets of Holdings or any of its
subsidiaries pursuant to any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which Holdings or any of
its subsidiaries is a party or by which Holdings or any of its
subsidiaries is bound or to which any of the property or assets of
Holdings or any of its subsidiaries is subject, nor will such actions
result in any violation of the provisions of the charter or by-laws of
Holdings or any of its subsidiaries or any statute or any judgment,
order, decree, or rule or regulation of any court or arbitrator or
governmental agency or body having jurisdiction over Holdings or any of
its subsidiaries or any of their properties or assets, except for any
such conflicts, breaches, violations, defaults, liens, charges or
encumbrances which, singularly or in the aggregate, would not have a
Material Adverse Effect; and no consent, approval, authorization or order
of, or filing or registration with, any such court or arbitrator or
governmental agency or body under any such statute, judgment, order,
decree, rule or regulation is required for the execution, delivery and
performance by Holdings and each of its subsidiaries of each of the
Transaction Documents to which each is a party, the issuance,
authentication, sale and delivery of the Units and compliance by Holdings
and its subsidiaries with the terms thereof and the consummation of the
transactions contemplated by the Transaction Documents, except for such
consents, approvals, authorizations, filings, orders, registrations or
qualifications (i) which shall have been obtained or made on or prior to
the Closing Date, (ii) as may be required to be obtained or made under
the Securities Act and applicable state securities laws as provided in
the Registration Rights Agreement, the exchange and registration rights
agreement (the "Holdings Notes Registration Agreement") dated November
12, 1999 relating to the Holdings Notes and the Shareholders Agreement or
(iii) the failure of which to be obtained would not materially restrain,
prevent or impose material burdensome conditions on any of the
transactions contemplated by the Transaction Documents.
(t) KPMG LLP are independent certified public accountants with respect
to Holdings and its subsidiaries within the meaning of Rule 101 of the
Code of Professional Conduct of the American Institute of Certified
Public Accountants (the "AICPA") and the interpretations and rulings
thereunder. The historical financial statements (including the related
notes) contained in the Private Placement Memorandum comply in all
material respects with the requirements applicable to a registration
statement on Form S-1 under the Securities Act (except that certain
supporting schedules are omitted); such financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby and fairly
present in all material respects the financial position of the entities
purported to be covered thereby at the respective dates indicated and the
results of their operations and their cash flows for the respective
periods indicated; and the historical financial
11
<PAGE> 12
information contained in the Private Placement Memorandum under the
headings "Summary--Summary Historical and Pro Forma Financial
Information," "Capitalization," "Unaudited Pro Forma Financial
Information of the Company," "Selected Historical Consolidated Financial
Information of Holdings," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Management --
Compensation of Executive Officers" are derived from the accounting
records of Holdings and its subsidiaries and fairly present in all
material respects the information purported to be shown thereby. The pro
forma financial information contained in the Private Placement Memorandum
has been prepared on a basis consistent with the historical financial
statements contained in the Private Placement Memorandum (except for the
pro forma adjustments specified therein), includes all material
adjustments to the historical financial information required by Rule
11-02 of Regulation S-X promulgated by the Commission to reflect the
transactions described in the Private Placement Memorandum, gives effect
to assumptions made on a reasonable basis and fairly presents in all
material respects the historical and proposed transactions contemplated
by the Private Placement Memorandum and the Transaction Documents;
provided that no representation is made with respect to the compliance of
the calculation of "EBITDA" with the requirements of Rule 11-02 of
Regulation S-X under the Exchange Act. The other historical financial and
statistical information and data included in the Private Placement
Memorandum are, in all material respects, fairly presented.
(u) Except as disclosed in the Private Placement Memorandum, there are
no legal or governmental proceedings pending to which Holdings or any of
its subsidiaries is a party or of which any property or assets of
Holdings or any of its subsidiaries is the subject which, (i) singularly
or in the aggregate, if determined adversely to Holdings or any of its
subsidiaries, could reasonably be expected to have a Material Adverse
Effect or (ii) question the validity or enforceability of any of the
Transaction Documents or any action taken or to be taken pursuant
thereto; and to the best knowledge of the Company and the Guarantors, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(v) No action has been taken and no statute, rule, regulation or order
has been enacted, adopted or issued by any governmental agency or body
which prevents the issuance of the Units or suspends the sale of the
Units in any jurisdiction; no injunction, restraining order or order of
any nature by any federal or state court of competent jurisdiction has
been issued with respect to Holdings or any of its subsidiaries which
would prevent or suspend the issuance or sale of the Units or the use of
the Private Placement Memorandum in any jurisdiction in which the Units
are being issued and sold pursuant thereto; except as disclosed in
12
<PAGE> 13
the Private Placement Memorandum, no action, suit or proceeding is
pending against or, to the best knowledge of the Company and each of the
Guarantors, threatened against or affecting Holdings or any of its
subsidiaries before any court or arbitrator or any governmental agency,
body or official, domestic or foreign, which could reasonably be expected
to interfere with or adversely affect the issuance of the Units or in any
manner draw into question the validity or enforceability of any of the
Transaction Documents or any action taken or to be taken pursuant
thereto.
(w) Neither Holdings nor any of its subsidiaries is (i) in violation
of its charter or by-laws, (ii) in default in any respect, and no event
has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which it is a
party or by which it is bound or to which any of its property or assets
is subject, other than any such default as would not, singularly or in
the aggregate, have a Material Adverse Effect or (iii) in violation in
any respect of any law, ordinance, governmental rule, regulation or court
decree to which it or its property or assets are subject, other than any
such violation as could not, singularly or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(x) Holdings and each of its subsidiaries possess all licenses,
certificates, authorizations and permits issued by, and have made all
declarations and filings with, the appropriate federal, state or foreign
regulatory agencies or bodies which are necessary or, in the reasonable
judgment of Holdings and the Company, desirable for the ownership of
their respective properties or the conduct of their respective businesses
as described in the Private Placement Memorandum, except where the
failure to possess or make the same would not, singularly or in the
aggregate, have a Material Adverse Effect, and, neither Holdings nor any
of its subsidiaries has received notification of any revocation or
modification of any such license, certificate, authorization or permit or
has any reason to believe that any such license, certificate,
authorization or permit will not be renewed in the ordinary course of its
business, which revocation, modification or nonrenewal would, singularly
or in the aggregate, have a Material Adverse Effect.
(y) Holdings and each of its subsidiaries have filed all federal,
state, local and foreign income and franchise tax returns required to be
filed through the date hereof and have paid all taxes due thereon (other
than those taxes being contested in good faith or those taxes currently
payable without penalty or interest, in each case for which adequate
reserves have been provided in accordance with generally accepted
accounting principles, and other than any such failure that could not
13
<PAGE> 14
reasonably be expected to have, singularly or in the aggregate with any
such other failures, a Material Adverse Effect), and no tax deficiency
has been determined adversely to Holdings or any of its subsidiaries
which has had (nor does the Company or any Guarantor have any knowledge
of any tax deficiency which, if determined adversely to Holdings or any
of its subsidiaries, could reasonably be expected, singularly or in the
aggregate, to have) a Material Adverse Effect.
(z) Neither Holdings nor any of its subsidiaries is (i) an "investment
company" or a company "controlled by" an investment company within the
meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the rules and regulations of the
Commission thereunder or (ii) a "holding company" or a "subsidiary
company" of a holding company or an "affiliate" thereof within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(aa) Except as would not, singularly or in the aggregate, have a
Material Adverse Effect, Holdings and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(bb) Except as would not, singularly or in the aggregate, have a
Material Adverse Effect, Holdings and each of its subsidiaries have
insurance covering their respective properties, operations, personnel and
businesses, which insurance is in amounts and insures against such losses
and risks as are, in the reasonable judgment of Holdings and the Company,
adequate to protect Holdings and its subsidiaries and their respective
businesses. Neither Holdings nor any of its subsidiaries has received
notice from any insurer or agent of such insurer that material capital
improvements or other material expenditures are required or necessary to
be made in order to continue such insurance.
(cc) Holdings and each of its subsidiaries own or possess adequate
rights to use all material patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service mark
registrations, copyrights, licenses and know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) necessary for the
14
<PAGE> 15
conduct of their respective businesses; and the conduct of their
respective businesses will not conflict in any respect with, and Holdings
and its subsidiaries have not received any notice of any claim of
conflict with, any such rights of others which conflict, singularly or in
the aggregate with any other such conflicts, if the subject of an
unfavorable decision, ruling or finding, could reasonably be expected to
result in a Material Adverse Effect.
(dd) Holdings and each of its subsidiaries have good and marketable
title in fee simple to, or have valid rights to lease or otherwise use,
all items of real and personal property which are material to the
business of Holdings and its subsidiaries, in each case free and clear of
all liens, encumbrances, claims and defects and imperfections of title
except such as (i) do not materially interfere with the use made and
proposed to be made of such property by Holdings and its subsidiaries,
(ii) could not reasonably be expected to have, singularly or in aggregate
with all other liens, encumbrances, claims and defects and imperfections
of title, a Material Adverse Effect, (iii) arise under the New Credit
Facilities Documents or (iv) are permitted under the Indenture.
(ee) No labor disturbance by or dispute with the employees of Holdings
or any of its subsidiaries exists or, to the best knowledge of the
Company and the Guarantors, is contemplated or threatened, which
disturbance or dispute would, singularly or in the aggregate, have a
Material Adverse Effect.
(ff) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including
the regulations and published interpretations thereunder ("ERISA"), or
Section 4975 of the Internal Revenue Code of 1986, as amended from time
to time (the "Code")) or, except as set forth in Section 3.11(d) of the
Merger Agreement and the related schedule, "accumulated funding
deficiency" (as defined in Section 302 of ERISA) or any of the events set
forth in Section 4043(b) of ERISA (other than events with respect to
which the 30-day notice requirement under Section 4043 of ERISA has been
waived) has occurred with respect to any employee benefit plan of
Holdings or any of its subsidiaries which could reasonably be expected to
have a Material Adverse Effect; each such employee benefit plan is in
compliance in all material respects with applicable law, including ERISA
and the Code; Holdings and each of its subsidiaries have not incurred and
do not expect to incur liability under Title IV of ERISA with respect to
the termination of, or withdrawal from, any pension plan for which
Holdings or any of its subsidiaries would have any liability; and each
such pension plan that is intended to be qualified under Section 401(a)
of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which could reasonably
be expected to cause the loss of such qualification.
15
<PAGE> 16
(gg) There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission or other release of any kind of
toxic or other wastes or other hazardous substances by, due to or caused
by Holdings or any of its subsidiaries (or, to the best knowledge of the
Company and the Guarantors, any other entity (including any predecessor)
for whose acts or omissions Holdings or any of its subsidiaries is or
could reasonably be expected to be liable) upon any of the property now
or previously owned or leased by Holdings or any of its subsidiaries, or
upon any other property, in violation of any statute or any ordinance,
rule, regulation, order, judgment, decree or permit or which would, under
any statute or any ordinance, rule (including rule of common law),
regulation, order, judgment, decree or permit, give rise to any
liability, except for any violation or liability that could not
reasonably be expected to have, singularly or in the aggregate with all
such violations and liabilities, a Material Adverse Effect; and there has
been no disposal, discharge, emission or other release of any kind onto
such property or land contiguous with such property of any toxic or other
wastes or other hazardous substances with respect to which the managers
of the Company and the Guarantors at the Executive Vice President level
and above and the vice president responsible for environmental matters of
the Company and the Guarantors has actual knowledge, except for any such
disposal, discharge, emission or other release of any kind which could
not reasonably be expected to have, singularly or in the aggregate with
all such discharges and other releases, a Material Adverse Effect.
(hh) Neither Holdings nor any of its subsidiaries or, to the best
knowledge of the Company and each of the Guarantors, any director,
officer, agent, employee or other person associated with or acting on
behalf of Holdings or any of its subsidiaries has (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; (ii) made any unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of
the Foreign Corrupt Practices Act of 1977; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
(ii) On and immediately after the Closing Date, the Company and each
of the Guarantors (after giving effect to the issuance of the Notes and
the Warrants and to the other Transactions) will be Solvent. As used in
this paragraph, the term "Solvent" means, with respect to a particular
date, that on such date (i) the fair value and present fair saleable
value of the assets of the Company or such Guarantor, as the case may be,
exceeds: (x) the total liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) of the Company or such Guarantor,
as the case may be, and (y) the amount required to pay such
16
<PAGE> 17
liabilities as they become absolute and matured in the normal course of
business; (ii) the Company or such Guarantor, as the case may be, has the
ability to pay its debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) as they become
absolute and matured in the normal course of business; and (iii) neither
the Company nor such Guarantor, as the case may be, has an unreasonably
small amount of capital with which to conduct its business after giving
due consideration to the prevailing practice in the industry in which the
Company or such Guarantor, as the case may be, is engaged. In computing
the amount of such contingent liabilities at any time, it is intended
that such liabilities will be computed at the amount that, in the light
of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
(jj) Except as described in the Private Placement Memorandum, there
are no outstanding subscriptions, rights, warrants, calls or options to
acquire, or instruments convertible into or exchangeable for, or
agreements or understandings with respect to the sale or issuance of, any
shares of capital stock of or other equity or other ownership interest in
Holdings or any of its subsidiaries.
(kk) None of the proceeds of the sale of the Units will be used,
directly or indirectly, for the purpose of purchasing or carrying any
margin security, for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security or
for any other purpose which would cause any of the Units to be considered
a "purpose credit" within the meanings of Regulation T, U or X of the
Board of Governors of the Federal Reserve System.
(ll) Neither Holdings nor any of its subsidiaries is a party to any
contract, agreement or understanding, other than this Agreement, with any
person that would give rise to a valid claim against Holdings or its
subsidiaries or the Purchasers for a brokerage commission, finder's fee
or like payment in connection with the sale of the Units.
(mm) The Notes and the Warrants satisfy the eligibility requirements
of Rule 144A(d)(3) under the Securities Act.
(nn) None of Holdings, any of its subsidiaries or any of their
respective affiliates has, directly or through any agent, made any offer
or sale, solicited offers to buy or otherwise negotiated in respect of
any of the Notes or the Warrants or any securities of the same or similar
class as the Notes or the Warrants, the result of which would cause the
sale of the Notes or the Warrants to fail to be entitled to the exemption
from registration afforded by Section 4(2) of
17
<PAGE> 18
the Securities Act. As used herein, the terms "offer" and "sale" have the
meanings specified in Section 2(3) of the Securities Act.
(oo) None of Holdings, any of its subsidiaries or any of their
respective affiliates or any other person acting on its or their behalf
has engaged, in connection with the sale of the Units, in any form of
general solicitation or general advertising within the meaning of Rule
502(c) of Regulation D under the Securities Act ("Regulation D").
(pp) Following the Transactions, there will not be, other than
pursuant to the requirements of the Registration Rights Agreement the
Shareholders Agreement and the Holdings Notes Registration Agreement, any
securities of the Company or the Guarantors registered under the
Securities Exchange Act of 1934 (the "Exchange Act"), or listed on a
national securities exchange or quoted in a U.S. automated inter-dealer
quotation system following delisting and deregistration of the common
stock of Holdings.
(qq) No forward-looking statement (within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act) contained in
the Private Placement Memorandum has been made or reaffirmed without a
reasonable basis or has been disclosed other than in good faith.
(rr) Any reprogramming required to permit the proper functioning in
and following the year 2000 of (i) the computer systems of Holdings and
each of its subsidiaries and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with
which the systems of Holdings or each of its subsidiaries interface) and
the testing of all such systems and equipment, as so reprogrammed, was
materially complete by October 31, 1999. The cost to Holdings and each of
its subsidiaries of such reprogramming and testing and of the reasonably
foreseeable consequences of the occurrence of the year 2000 to Holdings
and each of its subsidiaries (including reprogramming errors and the
failure of others' systems or equipment) did not and will not result in a
Material Adverse Effect. The computer and management information systems
of Holdings and each of its subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement
to be, sufficient to permit Holdings and its subsidiaries to conduct
their businesses without Material Adverse Effect.
(ss) Since the date as of which information is given in the Private
Placement Memorandum, except as otherwise stated therein, (i) there has
been no material adverse change or any development involving a material
adverse change in the condition (financial or otherwise), earnings,
business affairs, management
18
<PAGE> 19
or business of Holdings and its subsidiaries, taken as a whole, whether
or not arising in the ordinary course of business and (ii) Holdings and
its subsidiaries have not incurred any material liability or obligation,
direct or contingent, other than in the ordinary course of business or in
connection with the Transactions.
2. Purchase of the Units. (a) On the basis of the representations,
warranties and agreements contained herein, and subject to the terms and
conditions set forth herein, Holdings and the Company agree to issue and sell
to each of the Purchasers, severally and not jointly, and each of the
Purchasers, severally and not jointly, agrees to purchase from Holdings and the
Company the number of Units set forth opposite the name of such Purchaser on
Schedule 1 hereto at a purchase price equal to $761.00 per Unit. Schedule 1
also sets forth for each Purchaser the principal amount at maturity of the
Notes and the number of Warrants represented by the Units that such Purchaser
has agreed to purchase.
(b) Each Purchaser represents to Holdings and the Company that (i) it
is either (A) an "accredited investor," within the meaning of Rule 501
promulgated by the Commission under the Securities Act or (B) a Qualified
Institutional Buyer ("QIB") as defined in Rule 144A under the Securities Act
("Rule 144A"), (ii) it is acquiring the Units, the Notes and the Warrants to be
purchased by it hereunder for its own account, for investment, and not with a
view to or for sale in connection with any distribution thereof in violation of
the registration provisions of the Securities Act or the rules and regulations
promulgated thereunder, (iii) it is aware that it must bear the economic risk
of such investment for an indefinite period of time since the statutory basis
for exemption from registration under the Securities Act would not be present
if such representation meant merely that the present intention of such
Purchaser is to hold these securities for a deferred sale or for any fixed
period in the future and (iv) it can afford to bear such economic risk and can
afford to suffer the complete loss of its investment hereunder. Each Purchaser
acknowledges that the Notes and the Warrants are "restricted securities" under
the federal securities laws, have not been registered under the Securities Act
or any state securities or blue sky laws and may not be sold except pursuant to
an effective registration statement thereunder or any exemption from
registration under the Securities Act and applicable state securities laws.
Each Purchaser further acknowledges that each Note and Warrant shall include
the restrictive legend set forth below:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
19
<PAGE> 20
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, SUCH REGISTRATION."
Each Purchaser further acknowledges that the Warrants and the Underlying Shares
will be subject to the provisions of the Shareholders Agreement, which
agreement provides for certain restrictions on the transferability of the
Warrants and the Underlying Shares and will bear such other legends as may be
set forth in the Shareholders Agreement.
(c) It is hereby agreed that, for purposes of Treasury Regulations
1.1273- 2(h), (i) the aggregate "issue price" of a Unit consisting of the
$1,000 in principal amount at maturity of the Notes and one Warrant to be
purchased by the Purchasers is $738.17 (representing the $761.00 purchase price
reduced by the takedown fee referred to in Section 3(c)), (ii) the aggregate
fair market value and aggregate purchase price of each Note of $1,000 principal
amount at maturity is $716.79 and (iii) the aggregate fair market value and
aggregate purchase price of each Warrant is $21.38. Holdings, the Company and
the Purchasers agree to use the foregoing issue price, purchase prices and fair
market values for U.S. federal income tax purposes with respect to this
transaction (unless otherwise required by a final determination by the Internal
Revenue Service or a court of competent jurisdiction).
3. Delivery of and Payment for the Units. (a) Delivery of and payment
for the Units shall be made at the offices of Wachtell, Lipton, Rosen & Katz,
New York, New York, or at such other place as shall be agreed upon by the
Purchasers and the Company, at 3:30 p.m., New York City time, on November 12,
1999, or at such other time or date, not later than seven full business days
thereafter, as shall be agreed upon by the Purchasers, Holdings and the Company
(such date and time of payment and delivery being referred to herein as the
"Closing Date"). On the Closing Date, Holdings and the Company will deliver to
the Purchasers certificates evidencing an aggregate of 144,552 Units consisting
of $144,552,000 aggregate principal amount at maturity of the Notes duly
executed and authenticated by the Company and 144,552 Warrants duly executed by
Holdings and registered in the names of the Purchasers and in the amounts set
forth on Schedule 1 (and in such denominations requested by each such Purchaser
not later than two business days prior to the Closing Date).
(b) On the Closing Date, payment of the purchase price for the Units
shall be made to the Company by wire or book-entry transfer of same-day funds
to such account or accounts as Holdings and the Company shall specify prior to
the Closing Date or by such other means as the parties hereto shall agree prior
to the Closing Date against delivery to the Purchasers of the certificates
evidencing the Units. Time shall be of the essence, and delivery at the time
and place specified pursuant to this Agreement is a further condition of the
obligations of the Purchasers hereunder. On the Closing Date, the Company shall
deliver to each Purchaser, against payment of the purchase price therefor,
20
<PAGE> 21
certificates in definitive form representing the Notes, and Holdings shall
deliver to each Purchaser, against payment of the purchase price therefor,
certificates in definitive form representing the Warrants to be purchased by
such Purchaser, in each case registered in such names and in such denominations
as such Purchaser shall have requested not later than two business days prior
to the Closing Date.
(c) On the Closing Date, Holdings and the Company shall, jointly and
severally, pay to each Purchaser or its designee, by wire transfer in same-day
funds, a takedown fee equal to 3.00% of the purchase price of each Unit
purchased by such Purchaser on the Closing Date (which fee equals $22.83 per
Unit) and, to the extent requested to be paid on the Closing Date, all the
reasonable fees of and disbursements to, Cravath, Swaine & Moore, counsel to
the Purchasers, incurred in connection with the issuance and sale of the Notes
and the Warrants.
4. Further Agreements of the Company and the Guarantors. Each of the
Company and the Guarantors agrees with each of the Purchasers:
(a) at all times prior to the Closing Date, to advise the Purchasers
promptly and, if reasonably requested, confirm such advice in writing, of
the happening of any event which makes any statement of a material fact
made in the Private Placement Memorandum untrue or which requires the
making of any additions to or changes in the Private Placement Memorandum
(as amended or supplemented from time to time) in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(b) if at any time prior to the Closing Date any event shall occur or
condition exist as a result of which it is necessary, in the opinion of
counsel for the Purchasers or counsel for the Company, to amend or
supplement the Private Placement Memorandum in order that the Private
Placement Memorandum will not include any 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 existing at the
time it is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Private Placement Memorandum to
comply with applicable law, to promptly prepare such amendment or
supplement as may be necessary to correct such untrue statement or
omission or so that the Private Placement Memorandum, as so amended or
supplemented, will comply with applicable law and to deliver copies
thereof to the Purchasers;
(c) for so long as the Notes or the Warrants are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to furnish to holders of the Notes or the Warrants and
prospective purchasers of the Notes or the Warrants designated by such
holders, upon request of such
21
<PAGE> 22
holders or such prospective purchasers, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act, unless
Holdings or the Company is then subject to and in compliance with Section
13 or 15(d) of the Exchange Act (the foregoing agreement being for the
benefit of the holders from time to time of the Units, the Notes or the
Warrants and prospective purchasers of the Units, the Notes or the
Warrants designated by such holders);
(d) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case
may be, not to, and to cause its affiliates not to, and not to authorize
or knowingly permit any person acting on their behalf to, solicit any
offer to buy or offer to sell the Notes by means of engaging in any form
of general solicitation or general advertising within the meaning of Rule
502 (c) of Regulation D under the Securities Act; and not to offer, sell,
contract to sell or otherwise dispose of, or negotiate in respect of,
directly or indirectly, any securities of the same or similar class as
the Notes or the Warrants under circumstances where such offer, sale,
contract, negotiation or disposition could be integrated with the sale of
the Notes or the Warrants in a manner which would cause the exemption
afforded by Section 4(2) of the Securities Act to cease to be applicable
to the sale of the Units as contemplated by this Agreement and the
Private Placement Memorandum;
(e) during the period from the Closing Date until two years after the
Closing Date not to, and not permit any of its affiliates (as defined in
Rule 144 under the Securities Act) to, resell any of the Notes or the
Warrants that have been reacquired by them, except for Notes and Warrants
purchased by Holdings, the Company or any of their respective affiliates
and resold in a transaction registered under the Securities Act or unless
the Notes or the Warrants bear a legend specifying the date of such
resale;
(f) not to, for so long as the Notes or the Warrants are outstanding,
be or become, or be or become owned by, an open-end investment company,
unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company Act,
and to not be or become, or be or become owned by, a closed-end
investment company required to be registered under the Investment Company
Act, but not registered thereunder;
(g) to do and perform all things required to be done and performed by
it under this Agreement that are within its control prior to or after the
Closing Date, and to use its best efforts to satisfy all conditions
precedent on its part to the delivery of the Units;
22
<PAGE> 23
(h) not to take any action prior to the execution and delivery of the
Indenture which, if taken after such execution and delivery, would have
violated any of the covenants contained in the Indenture;
(i) not to take any action prior to the Closing Date which would
require the Private Placement Memorandum to be amended or supplemented
pursuant to Section 4(b);
(j) to apply the net proceeds from the sale of the Units as set forth
in the Private Placement Memorandum under the heading "Summary--Sources
and Uses" and "Use of Proceeds";
(k) to cause each of Wachtell, Lipton, Rosen & Katz, Shumaker, Loop &
Kendrick, LLP and Vinson & Elkins (as such firms and counsel may allocate
such opinions) to furnish to the Purchasers their written opinions, as
counsel for the Company and the Guarantors, addressed to the Purchasers
and dated as of the Closing Date, in form and substance reasonably
satisfactory to the Purchasers, such opinions together to be
substantially in the form set forth in Annex B hereto;
(l) to furnish to the Purchasers a certificate, dated as of the
Closing Date, of the respective Chief Executive Officers and Chief
Financial Officers of the Company and each of the Guarantors stating that
(i) such officers have carefully examined the Private Placement
Memorandum, (ii) in their opinion, the Private Placement Memorandum, as
of its date, did not include any untrue statement of a material fact and
did not omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and since the
date of the Private Placement Memorandum, no event has occurred which
should have been set forth in a supplement or amendment to the Private
Placement Memorandum so that the Private Placement Memorandum (as so
amended or supplemented) would not include any untrue statement of a
material fact and would not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, (iii) as of the Closing Date, the representations and
warranties of the Company or the particular Guarantor, as applicable, in
this Agreement are true and correct in all material respects, and the
Company or the particular Guarantor, as applicable, have complied in all
material respects with all agreements and satisfied all conditions on
their part to be performed or satisfied hereunder on or prior to the
Closing Date and (iv) subsequent to the date of the most recent financial
statements contained in the Private Placement Memorandum, there has been
no material adverse change in the financial position or results of
operations of Holdings and its subsidiaries, taken as a whole, or any
material change, or any material development, in or affecting the
condition
23
<PAGE> 24
(financial or otherwise), results of operations, business or prospects of
Holdings and its subsidiaries, taken as a whole;
(m) to furnish to the Purchasers, on or prior to the Closing Date, a
counterpart of the Registration Rights Agreement which shall have been
duly executed and delivered by each of the Company and the Guarantors;
(n) to furnish to the Purchasers, on or prior to the Closing Date, (i)
the Indenture which shall have been duly executed and delivered by the
Company, the Guarantors and the Trustee, and (ii) the Notes which shall
have been duly executed and delivered by the Company and duly
authenticated by the Trustee;
(o) to furnish to the Purchasers, on or prior to the Closing Date, a
counterpart of the Shareholders Agreement which shall have been duly
executed and delivered by of Holdings and each other party thereto other
than the Purchasers;
(p) to furnish to the Purchasers, on or prior to the Closing Date, (i)
a counterpart of the Warrant Agreement, which shall have been duly
executed and delivered by Holdings and the Warrant Agent, and (ii) the
Warrants which shall have been duly executed and delivered by Holdings;
and
(q) to furnish to the Purchasers, on or prior to the Closing Date,
true and complete copies of all the Transaction Documents (and all
related closing documents), which shall have been duly executed and
delivered by all the parties thereto, including, without limitation, the
Services Agreement, the Credit Agreement and other New Credit Facilities
Documents and the Supplemental Indenture.
5. Conditions to Purchasers' Obligations. The respective obligations
of the Purchasers hereunder are subject, on and as of the date hereof and the
Closing Date, to the satisfaction of the following terms and conditions:
(a) The representations and warranties of the Company and each of the
Guarantors set forth in this Agreement that are qualified as to
materiality shall be true and correct in all respects, as of the date
hereof and as of the Closing Date as though made as of such time, except
to the extent such representations and warranties expressly relate to an
earlier date (in which case such representations and warranties shall be
true and correct in all respects as of such earlier date) and the
representations and warranties of the Company and each of the Guarantors
set forth in this Agreement that are not qualified as to materiality
shall be true and correct in all material respects, as of the date hereof
and as of the Closing Date as though made as of such time, except to the
extent such representations and
24
<PAGE> 25
warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date). The Company and each of the Guarantors
shall have performed or complied in all material respects with all
obligations and covenants required by this Agreement to be performed or
complied with by the Company and each of the Guarantors on or prior to
the Closing Date. All the statements made by the Company and each of the
Guarantors and their respective officers made in any certificates
delivered pursuant hereto shall be accurate in all material respects.
(b) The Private Placement Memorandum (and any amendments or
supplements thereto) shall have been printed and copies distributed to
the Purchasers; and no stop order suspending the sale of the Units in any
jurisdiction shall have been issued and no proceeding for that purpose
shall have been commenced or shall be pending or threatened.
(c) The Company and the Guarantors shall have furnished to the
Purchasers such certificates, opinions and other documents as are
customary in connection with the closing of transactions similar to the
transactions contemplated by this Agreement.
(d) The capitalization of Holdings and its subsidiaries shall be as
contemplated by the commitment letters each dated as of October 22, 1999
entered into by each of the Purchasers (other than GS Mezzanine Partners,
L.P.) with Fox Paine Maxxim and the commitment letter dated as of August
13, 1999 among Fox Paine Maxxim, Fox Paine Circon and GS Mezzanine
Partners, L.P., as amended on October 29, 1999 (each a "Purchaser
Commitment Letter" and collectively the "Purchaser Commitment Letters"),
and the commitment letter dated as of June 12, 1999 among Fox Paine
Maxxim, The Chase Manhattan Bank and Chase Securities, Inc., as amended
on September 30, 1999, and November 1, 1999 (the "Chase Commitment
Letter"), except where any change to such capitalization is on terms that
are not materially adverse to the Purchasers and the investment
contemplated by such Purchaser Commitment Letters and the Chase
Commitment Letter.
(e) Subsequent to June 13, 1999, there shall not have been any event,
change or development that has constituted or constitutes a Company
Material Adverse Effect (as defined in the Merger Agreement), in each
case other than actions taken pursuant to or as disclosed in the Merger
Agreement.
(f) The Merger Agreement shall be in full force and effect.
25
<PAGE> 26
(g) (i) The issuance of the Units, the Notes and the Warrants shall be
in compliance with existing law and no action shall have been taken and
(ii) no statute, rule, regulation or order shall have been enacted,
adopted or issued by any governmental agency or body which would, as of
the Closing Date, prevent the issuance or sale of the Units, the Notes or
the Warrants; and no injunction, restraining order or order of any other
nature by any federal or state court of competent jurisdiction shall have
been issued as of the Closing Date which would prevent the issuance or
sale of the Units, the Notes or the Warrants.
(h) The Investors shall have previously made, or shall substantially
concurrently with the sale of the Units hereunder make, payments in
respect of the entire amount of the Investor Equity Contribution.
(i) All the Transactions, other than the sale of the Units, shall be
consummated substantially concurrently with the sale of the Units
hereunder.
6. Termination. The obligations of the Purchasers hereunder may be
terminated by the Purchasers, in their absolute discretion, by notice given to
and received by Holdings or the Company prior to delivery of and payment for
the Units (a) if, prior to that time, any of the events described in Section
5(g)(ii) shall have occurred and be continuing or (b) at any time after
December 31, 1999.
7. Defaulting Purchasers. (a) If, on the Closing Date, any Purchaser
defaults in the performance of its obligations under this Agreement, the
non-defaulting Purchasers or Holdings may make arrangements for the purchase of
the Units which such defaulting Purchaser agreed but failed to purchase by
other persons satisfactory to Holdings, the Company and the non-defaulting
Purchasers, but if no such arrangements are made within 36 hours after such
default, this Agreement shall terminate without liability on the part of the
non-defaulting Purchasers or the Company, except that the Company and the
Guarantors will continue to be liable for the payment of expenses to the extent
set forth in Section 10 and except that the provisions of Section 8 shall not
terminate and shall remain in effect. As used in this Agreement, the term
"Purchasers" includes, for all purposes of this Agreement, unless the context
otherwise requires, any party not listed in Schedule 1 hereto that, pursuant to
this Section 7, purchases Units which a defaulting Purchaser agreed but failed
to purchase.
(b) Nothing contained herein shall relieve a defaulting Purchaser of
any liability it may have to Holdings, the Company or any non-defaulting
Purchaser for damages caused by its default. If other persons are obligated or
agree to purchase the Units of a defaulting Purchaser, either the
non-defaulting Purchasers, Holdings or the Company may postpone the Closing
Date for up to seven full business days in order to effect any changes that in
the opinion of counsel for the Company or counsel for the Purchasers may be
necessary in any document or arrangement.
26
<PAGE> 27
8. Indemnification. (a) The Company and each of the Guarantors hereby
jointly and severally agree to defend, indemnify and hold harmless each
Purchaser, its respective affiliates, officers, directors, stockholders,
trustees, employees and representatives, and each person, if any, who controls
any such person within the meaning of the Securities Act or the Exchange Act
(collectively referred to herein as the "Indemnitees"), from and against any
and all liabilities, obligations, losses, damages, claims, and the related
costs and expenses, including, without limitation, legal fees and other
expenses incurred in the investigation, defense, appeal and settlement of
claims, actions, suits and proceedings (collectively referred to herein as the
"Indemnified Liabilities"), incurred by the Indemnitees as a result of, or
arising out of or relating to the Transactions, (it being understood and agreed
that such Indemnified Liabilities do not include losses by the Purchasers of
all or a portion of their investment in the Notes and Warrants except as a
result of a breach by the Company and the Guarantors of their obligations under
this Agreement, the Warrant Agreement, the Registration Rights Agreement, the
Indenture, the Warrants or the Notes (collectively, the "Unit Documents") and
provided that this parenthetical shall in no way be deemed to limit or effect
the rights and obligations of the Company and the Guarantors under the Unit
Documents otherwise than under this Section 8) including, without limitation:
(i) any action or failure to act by any of Holdings or any of its
subsidiaries;
(ii) any statements or omissions made in any disclosure or other
information or materials used in connection with the Transactions;
(iii) the execution, delivery, performance or enforcement of this
Agreement, the other Transaction Documents or any other instrument or
document contemplated hereby or thereby or any act, event or transaction
related or attendant thereto or contemplated hereby or thereby, or any
action or inaction by any Indemnitee under or in connection herewith or
therewith; or
(iv) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract,
tort or other theory and regardless of whether any Indemnitee is a party
thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that (x) such Indemnified Liabilities are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or wilful misconduct of such Indemnitee or (y) such
Indemnified Liabilities of a Purchaser result from disputes among such
Purchaser and one or more other Purchasers. If and to the extent that the
foregoing undertaking may be unenforceable for any reason each of the
27
<PAGE> 28
Company and the Guarantors jointly and severally hereby agrees to make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
(b) The obligations of the Company and each Guarantor under this
Section 8 shall be in addition to any liability that the Company and each
Guarantor may otherwise have and shall survive the payment or prepayment in
full or transfer of any Unit and the enforcement of any provision hereof or
thereof.
9. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the several Purchasers, the
Company, the Guarantors and their respective successors. This Agreement and the
terms and provisions hereof are for the sole benefit of only those persons,
except as provided in Section 8 with respect to affiliates, officers,
directors, stockholders, trustees, employees, representatives, agents and
controlling persons of the Purchasers. Nothing in this Agreement is intended or
shall be construed to give any person, other than the persons referred to in
this Section 9, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
10. Expenses. The Company and each of the Guarantors, jointly and
severally, agree, whether or not the sale of the Units hereunder or any other
transactions contemplated hereby shall be consummated, to pay and hold the
Purchasers harmless against the reasonable fees and disbursements to Cravath,
Swaine & Moore, counsel to the Purchasers. The obligations of the Company and
Guarantors under this Section 10 shall survive the payment for or transfer of
any Unit, the enforcement of any provision hereof or thereof, any such
amendments and waivers or consents. The Purchasers shall not be responsible for
any fees or disbursements of the accountants or any other costs and expenses
incident to the performance of the obligations of the Company under this
Agreement which are not otherwise specifically provided for in this Section 10.
11. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company, the Guarantors and
the Purchasers contained in this Agreement or made by or on behalf of the
Company, the Guarantors or the Purchasers pursuant to this Agreement or any
certificate delivered pursuant hereto shall survive the delivery of and payment
for the Units and shall remain in full force and effect, regardless of any
termination or cancelation of this Agreement or any investigation made by or on
behalf of any of them or any of their respective affiliates, officers,
directors, employees, representatives, agents or controlling persons.
28
<PAGE> 29
12. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing and delivered in person or overnight courier
service, mailed by first-class mail addressed as follows or delivered via
telecopy transmission:
(a) if to the Purchasers:
GS Mezzanine Partners, L.P.
GS Mezzanine Partners Offshore, L.P.
c/o Goldman, Sachs & Co.
85 Broad Street, 10th Floor
New York, New York 10004
Attn: Ben Adler, Esq.
(telecopier no.: 212-357-5505)
John Hancock Mutual Life Insurance Company
John Hancock Variable Life Insurance Company
Signature 3 Limited
Merrill Lynch International
200 Clarendon Street
Boston, Massachusetts 02117
Attn: Manager, Investment Accounting Division, B-3
(telecopier no.: 617-572-0628)
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Securities Department
(telecopier no.: 414-299-7124)
Chase Equity Associates, L.P.
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, New York 10017
Attn: Eric Green
(telecopier no.: 212-622-3101)
CIBC WMC, Inc.
c/o CIBC Capital Partners
161 Bay Street, 8th Floor
Toronto Ontario M5J 2S8
Canada
Attn: Managing Director
(telecopier no.: 416-594-8637)
29
<PAGE> 30
Merrill Lynch, Pierce, Fenner & Smith Incorporated
250 Vesey Street
World Financial Center, North Tower
New York, New York 10281
(telecopier no.: 212-449-7750)
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attn: Corporate Fixed-Income Securities
(telecopier no.: 614-249-4553)
Deutsche Bank AG, New York Branch
130 Liberty Street, 29th Floor
New York, New York 10006
Attn: Kristine Cicardo
(telecopier no.: 212-619-1502)
with an additional copy to:
Deutsche Bank AG, New York Branch
31 West 52nd Street
New York, New York 10019
Attn: Mark Fedorcik
(telecopier no.: 212-469-2883)
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Attn: Richard Gallant
(telecopier no.: 212-325-9136)
(b) if to the Company or any Guarantor:
10300 49th Street North
Clearwater, Florida 33762
Attention: Corporate Secretary
(telecopier no.: 727-561-2180)
The Company, the Guarantors or the Purchasers, by notice to the other
parties, may designate additional or different addresses for subsequent notices
or communications.
30
<PAGE> 31
13. Definition of Terms. For purposes of this Agreement, (a) the term
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act and (c) except where otherwise expressly provided, the
term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE 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 LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
15. Submission to Jurisdiction; Waiver of Service and Venue. (a) Each
of the parties hereto hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the U.S. District
Court of the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement, the Units or any other document, instrument or agreement executed or
delivered in connection herewith or therewith, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement, the Units or any other
document, instrument or agreement executed or delivered in connection herewith
or therewith shall affect any right that any of the parties hereto may
otherwise have to bring any action or proceeding relating to this Agreement,
the Units or any other document, instrument or agreement executed or delivered
in connection herewith or therewith against the Company, the Guarantors or
their properties in the courts of any jurisdiction.
(b) Each of the parties hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement, the
Units or any other document, instrument or agreement executed or delivered in
connection herewith or therewith in any court referred to in Section 15(a).
Each of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 12. Nothing in this
Agreement, the
31
<PAGE> 32
Units or any other document, instrument or agreement executed or delivered in
connection herewith or therewith will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
16. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE UNITS
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THEREWITH WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT, TORT OR OTHER THEORY. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
17. [This paragraph has been left blank intentionally]
18. Counterparts. This Agreement may be executed in one or more
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
19. Amendments. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the
parties hereto.
20. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
21. Previous Agreements. This Agreement supersedes any other agreement
existing between the Purchasers, Holdings and the Company concerning the
purchase of the Units pursuant to the Purchaser Commitment Letters, provided
that (a) provisions relating to confidentiality of any such Purchaser
Commitment Letter shall remain in full force and effect and (b) all the
provisions other than paragraph 7(i) of the Purchaser Commitment Letter dated
August 13, 1999 among Fox Paine Maxxim, Fox Paine Circon and GS Mezzanine
Partners, L.P., as amended on October 29, 1999, shall remain in full force and
effect.
32
<PAGE> 33
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between the Company, the Guarantors
and the several Purchasers in accordance with its terms.
Very truly yours,
MAXXIM MEDICAL GROUP, INC.,
by /s/ Kenneth W. Davidson
--------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President and
Chief Executive Officer
MAXXIM MEDICAL, INC., a Texas
corporation,
by /s/ Kenneth W. Davidson
--------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President and
Chief Executive Officer
MAXXIM MEDICAL, INC., a Delaware
corporation,
by /s/ Kenneth W. Davidson
--------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President and
Chief Executive Officer
FABRITEK LAROMANA, INC.,
by /s/ Kenneth W. Davidson
--------------------------------
Name: Kenneth W. Davidson
Title: President, Secretary and
Treasurer
33
<PAGE> 34
MAXXIM INVESTMENT
MANAGEMENT, INC.,
by /s/ Peter M. Graham
------------------------------
Name: Peter M. Graham
Title: Chief Operating Officer,
Secretary and Senior
Executive Vice President
34
<PAGE> 35
Accepted:
GS MEZZANINE PARTNERS, L.P.
by GS MEZZANINE ADVISORS, L.P.,
its general partner,
by GS MEZZANINE ADVISORS, INC.,
its general partner,
by /s/ Melina Higgins
-----------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(b):
c/o Goldman, Sachs & Co.
85 Broad Street, 10th Floor
New York, New York 10004
Attention: Ben Adler, Esq.
GS MEZZANINE PARTNERS OFFSHORE, L.P.
by GS MEZZANINE ADVISORS (CAYMAN),
L.P., its general partner,
by GS MEZZANINE ADVISORS, INC.,
its general partner,
by /s/ Melina Higgins
-----------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(b):
c/o Goldman, Sachs & Co.
85 Broad Street, 10th Floor
New York, New York 10004
Attention: Ben Adler, Esq.
35
<PAGE> 36
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY,
by /s/ Stephen J. Blewitt
-----------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(b):
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Manager, Investment Accounting
Division, B-3
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY,
by /s/ Stephen J. Blewitt
-----------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(b):
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Manager, Investment Accounting
Division, B-3
SIGNATURE 3 LIMITED,
by JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY, as Portfolio Advisor,
by /s/ Stephen J. Blewitt
-----------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(b):
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Manager, Investment Accounting
Division, B-3
36
<PAGE> 37
MERRILL LYNCH INTERNATIONAL,
by JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, as Manager under that certain
Bond Purchase and Asset Management Agreement dated as of June 22, 1999,
by /s/ Stephen J. Blewitt
-----------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(b):
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Manager, Investment Accounting
Division, B-3
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY,
by /s/ Gary A. Poliner
-----------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(b):
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Law Department
CHASE EQUITY ASSOCIATES, L.P.,
by CHASE CAPITAL PARTNERS,
its general partner,
by /s/ John O'Connor
-----------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(b):
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, New York l00l7
Attention: Eric Green
37
<PAGE> 38
CIBC WMC, INC.,
by /s/ Ken Kilgour
-----------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(b):
c/o CIBC Capital Partners
161 Bay Street, 8th Floor
Toronto, Ontario M5J 2S8
Canada
Attention: Managing Director
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
by /s/ Christopher K. Stout
-----------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(b):
250 Vesey Street
World Financial Center, North Tower
New York, New York 10281
Attention: Christopher Stout
NATIONWIDE LIFE INSURANCE COMPANY,
by /s/ Jerry D. Cohen
-----------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(b):
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
38
<PAGE> 39
DEUTSCHE BANK AG,
NEW YORK BRANCH,
by /s/ William W. Archer
-----------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(b):
31 West 52nd Street.
New York, New York 10019
Attention: Mark Fedorcik
CREDIT SUISSE FIRST BOSTON
CORPORATION,
by /s/ Richard Gallant
-----------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(b):
11 Madison Avenue
New York, New York 10010
Attention: Richard Gallant
39
<PAGE> 40
SCHEDULE 1
<TABLE>
<CAPTION>
Principal
Amount of
Number of Notes at Number of
Purchasers Units Maturity Warrants
<S> <C> <C> <C>
GS Mezzanine Partners, L.P. 25,649 $ 25,649,000 25,649
GS Mezzanine Partners
Offshore, L.P. 13,773 13,773,000 13,773
John Hancock Mutual Life
Insurance Company 21,682 $ 21,682,000 21,682
John Hancock Variable Life
Insurance Company 1,314 $ 1,314,000 1,314
Signature 3 Limited 657 $ 657,000 657
Merrill Lynch International 9,199 $ 9,199,000 9,199
The Northwestern Mutual Life
Insurance Company 32,852 $ 32,852,000 32,852
Chase Equity Associates, L.P. 13,140 $ 13,140,000 13,140
CIBC WMC, Inc. 6,572 $ 6,572,000 6,572
Merrill Lynch, Pierce, Fenner &
Smith Incorporated 6,571 $ 6,571,000 6,571
Nationwide Life Insurance
Company 6,571 $ 6,571,000 6,571
Bankers Trust Corporation 3,286 $ 3,286,000 3,286
Credit Suisse First Boston
Corporation 3,286 $ 3,286,000 3,286
Total 144,552 $144,552,000 144,552
======= ============ =======
</TABLE>
<PAGE> 41
SCHEDULE 2
Subsidiaries of Holdings as of the Closing Date
MAXXIM MEDICAL GROUP, INC.
State/County of Incorporation: Delaware
Address: 10300 49th Street North
Clearwater, Florida 33762
MAXXIM MEDICAL, INC.
State/County of Incorporation: Delaware
Address: 10300 49th Street North
Clearwater, Florida 33762
FABRITEK LAROMANA, INC.
State/Country of Incorporation: Mississippi
Address: 10300 49th Street North
Clearwater, Florida 33762
MAXXIM INVESTMENT MANAGEMENT, INC.
State/Country of Incorporation: Nevada
Address: 1325 Airmotive Way, Suite 130
Reno Nevada 89902
MAXXIM MEDICAL FSC, INC.
State/Country of Incorporation: Barbados
Address: Hastings
Christ Church, Barbados
MAXXIM MEDICAL CANADA, LIMITED
State/Country of Incorporation: Canada
Address: 2460 South Sheridan Way
Mississauga, Ontario, Canada
MAXXIM MEDICAL HOLDINGS EUROPE B.V.
State/Country of Incorporation: Netherlands
Address: Lederstraat 1
5223 AW's - Hertogenbosch
The Netherlands
<PAGE> 42
MAXXIM MEDICAL EUROPE B.V.
State/Country of Incorporation: Netherlands
Address: Lederstraat 1
5223 AW's - Hertongenbosch
The Netherlands
MAXXIM MEDICAL BELGIUM N.V.
State/Country of Incorporation: Belgium
Address: Nachtegaalstraat #4
B-9320 Aalst
Erembodegem, Belgium
<PAGE> 1
EXHIBIT 4.3
WARRANT AGREEMENT
AMONG
MAXXIM MEDICAL, INC.
and
the parties named herein
Dated as of November 12, 1999
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
SECTION 1. Warrant Certificates...............................................1
SECTION 2. Execution of Warrant Certificates..................................1
SECTION 3. Registration.......................................................2
SECTION 4. Registration of Transfers and Exchanges............................2
SECTION 5. Warrants; Exercise of Warrants.....................................5
SECTION 6. Payment of Taxes...................................................7
SECTION 7. Mutilated or Missing Warrant Certificates..........................7
SECTION 8. Reservation of Warrant Shares......................................7
SECTION 9. Obtaining Stock Exchange Listings..................................8
SECTION 10. Adjustment of Number of Warrant Shares Issuable....................8
SECTION 11. Fractional Interests..............................................18
SECTION 12. Notices to Holders................................................18
SECTION 13. Mandatory Exercise in the Event of an Initial Public Offering.....20
SECTION 14. Notices to Company and Holders....................................20
SECTION 15. Supplements and Amendments........................................23
SECTION 16. Successors........................................................23
SECTION 17. Termination.......................................................23
SECTION 18. Governing Law.....................................................23
SECTION 19. Benefits of This Agreement........................................23
SECTION 20. Headings..........................................................24
SECTION 21. Submission to Jurisdiction........................................24
SECTION 22. Waiver of Jury Trial..............................................24
SECTION 23. Service of Process................................................24
SECTION 24. Counterparts......................................................24
Exhibit A - Form of Warrant Certificate
</TABLE>
i
<PAGE> 3
WARRANT AGREEMENT (the "Warrant Agreement" or this "Agreement") dated
as of November 12 , 1999 (the "Issue Date") between Maxxim Medical, Inc., a
Texas corporation (the "Company"), and GS Mezzanine Partners, L.P., GS
Mezzanine Partners Offshore, L.P., John Hancock Mutual Life Insurance Company,
John Hancock Variable Life Insurance Company, Signature 3 Limited, Merrill
Lynch International, The Northwestern Mutual Life Insurance Company, Chase
Equity Associates, L.P., CIBC WMC, Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Nationwide Life Insurance Company, Deutsche Bank AG, New York
Branch and Credit Suisse First Boston Corporation (collectively, the
"Purchasers," such Purchasers, together with their successors and assigns being
referred to herein as the "Holders").
Terms used but not defined herein are used as defined in the Purchase
Agreement (the "Purchase Agreement") dated as of November 12, 1999 among the
Company, Maxxim Medical Group, Inc., a Delaware corporation and a wholly owned
subsidiary of the Company ("Maxxim Medical Group"), certain subsidiaries of the
Company signatory thereto and the Purchasers.
WHEREAS, the Company proposes to issue Warrants, as hereinafter
described (the "Warrants"), to purchase up to118,908 shares of Common Stock
(the "Common Stock") of the Company (the Common Stock issuable on exercise of
the Warrants being referred to herein as the "Warrant Shares"), and sell to the
Purchasers, pursuant to the Purchase Agreement, an aggregate of 144,552 Units,
each Unit consisting of $1,000 principal amount at maturity of Maxxim Medical
Group's Senior Subordinated Discount Notes due 2009 and one Warrant entitling
the holder thereof to purchase 0.8226 Warrant Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Warrant Certificates. The certificates evidencing the
Warrants (the "Warrant Certificates") to be delivered pursuant to this
Agreement shall be in registered form only and shall be substantially in the
form set forth in Exhibit A attached hereto.
SECTION 2. Execution of Warrant Certificates. Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board or its
President or a Vice President and by its Secretary or an Assistant Secretary
under its corporate seal. Each such signature upon the Warrant Certificates may
be in the form of a facsimile signature of the present or any future Chairman
of the Board, President, Vice President, Secretary or Assistant Secretary and
may be imprinted or otherwise reproduced on the Warrant Certificates and for
that purpose the Company may adopt and use the facsimile signature of any
person who shall have been Chairman of the Board, President, Vice President,
Secretary or Assistant Secretary, notwithstanding the fact that at the time the
Warrant Certificates shall be delivered or disposed of he shall have ceased to
hold such office. The seal of the Company may be in the form of a
1
<PAGE> 4
facsimile thereof and may be impressed, affixed, imprinted or otherwise
reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be delivered or disposed of as though such person
had not ceased to be such officer of the Company; and any Warrant Certificate
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Warrant Certificate, shall be a proper officer of the
Company to sign such Warrant Certificate, although at the date of the execution
of this Warrant Agreement any such person was not such an officer.
SECTION 3. Registration. The Company shall number and register the
Warrant Certificates in a register as they are issued. The Company may deem and
treat the registered holder(s) of the Warrant Certificates as the absolute
owner(s) thereof (notwithstanding any notation of ownership or other writing
thereon made by anyone), for all purposes, and shall not be affected by any
notice to the contrary. The Company shall act as the registrar for the
Warrants.
SECTION 4. Registration of Transfers and Exchanges. (a) The Company
shall from time to time register the transfer of any outstanding Warrant
Certificates in a Warrant register to be maintained by the Company upon
surrender thereof accompanied by a written instrument or instruments of
transfer in the form as set forth on the reverse side of the form of Warrant
Certificate attached hereto as Exhibit A, duly executed by the registered
holder or holders thereof or by the duly appointed legal representative thereof
or by a duly authorized attorney, together with (if such transfer is pursuant
to clause (1)(w) or (1)(y) of the next paragraph) the opinion of counsel
specified therein. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be cancelled and disposed of by the Company.
The Holders, by their acceptance of Warrant Certificates or
certificates evidencing Warrant Shares, agree that any proposed resale, pledge
or other transfer (including any transfer by issuance of Warrant Shares upon
exercise of a Warrant evidenced by a Warrant Certificate in a name other than
the name in which such Warrant Certificate is registered) of any Warrant or
Warrant Shares may be effected only (1)(w) inside the United States (i) to a
person who the seller reasonably believes is a qualified institutional buyer
within the meaning of Rule 144A under the Securities Act in a transaction
meeting the requirements of Rule 144A, (ii) in accordance with Rule 144 under
the Securities Act or (iii) pursuant to another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
reasonably satisfactory to the Company to such effect, if the Company so
requests), (x) to the Company, (y) outside the United States to a foreign
person in a transaction meeting the requirements of Rule 904 under the
Securities Act (and based upon an opinion of counsel reasonably satisfactory to
the Company to such effect, if the Company so requests) or (z), in the case of
Warrant Shares only, pursuant to an
2
<PAGE> 5
effective registration statement under the Securities Act and (2) in each case,
in accordance with the applicable securities laws of any state of the United
States or any other applicable jurisdiction. Each Holder, by acceptance of
Warrant Certificates or certificates evidencing Warrant Shares, agrees to, and
each subsequent Holder is required to, notify any purchaser thereof of the
resale restrictions set forth above. Prior to any proposed resale, pledge or
other transfer (including any transfer by issuance of Warrant Shares upon
exercise of a Warrant evidenced by a Warrant Certificate in a name other than
the name in which such Warrant Certificate is registered) of any Warrant or
Warrant Shares, the Holder thereof shall give written notice to the Company of
such Holder's intention to effect such transfer and the names and circumstances
thereof and, if the proposed transfer is pursuant to clause (1)(w) or (1)(y) of
the second preceding sentence, will, if requested by the Company, deliver to
the Company:
(1) an investment covenant, signed by the proposed
transferee, setting forth acceptance of the provisions referenced in
this Section 4 reasonably satisfactory to the Company;
(2) an agreement by such transferee to the impression of the
restrictive investment legend set forth below on the Warrant or the
Warrant Shares;
(3) an agreement by such transferee that the Company may
place a notation in the stock books of the Company or a "stop transfer
order" with any transfer agent or registrar with respect to the
Warrant Shares or such other legend as the Company reasonably believes
is required by law; and
(4) an agreement by such transferee to be bound by the
provisions of this Section 4 relating to the transfer of such Warrant
or Warrant Shares.
The Holders agree that each Warrant Certificate and any certificate
representing the Warrant Shares will bear a legend substantially in the
following form:
THE SECURITY REPRESENTED BY THIS CERTIFICATE (AND ANY PREDECESSOR) WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF MAXXIM MEDICAL,
INC., A TEXAS CORPORATION (THE "COMPANY") THAT (A) SUCH SECURITY (AND,
IF SUCH SECURITY EVIDENCES A WARRANT, THE WARRANT SHARES ISSUABLE
PURSUANT THERETO) MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1) (W) INSIDE THE UNITED STATES (I) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED
3
<PAGE> 6
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
OR (II) IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR (III)
PURSUANT TO ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL, IF THE
COMPANY SO REQUESTS), (X) TO THE COMPANY, (Y) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 904 UNDER THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL, IF THE COMPANY SO REQUESTS) OR (Z) IN THE CASE OF SHARES
ONLY, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (2) IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. THE SECURITY
REPRE SENTED BY THIS CERTIFICATE IS ALSO SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFERABILITY, AND HAS THE BENEFIT OF CERTAIN
REGISTRATION RIGHTS, CONTAINED IN THE STOCKHOLDERS' AGREEMENT, DATED
AS OF NOVEMBER 12, 1999, AS AMENDED FROM TIME TO TIME, A COPY OF WHICH
TS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES.
Subject to the foregoing provisions, Warrant Certificates may be
exchanged at the option of the Holder(s) thereof, when surrendered to the
Company at its office for another Warrant Certificate or other Warrant
Certificates of like tenor and representing in the aggregate a like number of
Warrants. Warrant Certificates surrendered for exchange shall be cancelled and
disposed of by the Company.
On delivery of the Warrants by the Company to the Purchasers pursuant
to the Purchase Agreement, each Holder will have registration rights with
respect to the Warrant Shares set forth in the Stockholders' Agreement, dated
as of November 12, 1999, among the Company and the other parties set forth on
the signature pages thereto, as the same may be amended from time to time (the
"Stockholders Agreement").
Every Holder, by accepting a Warrant Certificate, consents and agrees
with the Company and with every subsequent Holder of such Warrant Certificate
that, prior to due presentment of such Warrant Certificate for registration of
transfer, the Company may treat the person in whose name the Warrant
Certificate is registered as the owner thereof for all purposes and as the
person entitled to exercise the rights granted under the Warrants, and neither
the Company nor any agent thereof shall be affected by any notice to the
contrary.
4
<PAGE> 7
(b) Termination of Restrictions. The restriction referred to in the
legend referenced in Section 4(a) of this Agreement shall cease and terminate
as to any particular Warrants or Warrant Certificates or certificates
representing Warrant Shares when, in the reasonable opinion of counsel for the
Company, such restriction is no longer required in order to assure compliance
with the Securities Act. The Company or the Company's counsel, at their
election, may request from any Holder a certificate or an opinion of such
Holder's counsel with respect to any relevant matters in connection with the
removal of the legend set forth in Section 4(a) from such Holder's Warrant
Certificate(s), any such certificate or opinion of counsel to be reasonably
satisfactory to the Company and its counsel. The restrictions referred to in
Section 4(a) shall cease and terminate as to any particular Warrants, Warrant
Certificates and certificates representing Warrant Shares when, in the
reasonable opinion of counsel for the Company, the provisions of this Agreement
are no longer applicable to such Warrants, Warrant Certificates or certificates
representing Warrant Shares, or this Agreement shall have terminated in
accordance with its terms. Any other restrictions referred to in any other
legends required pursuant to Section 4 shall cease and terminate when, in the
reasonable opinion of counsel for the Company, such restrictions are no longer
applicable. Whenever such restrictions shall cease and terminate as to any
Warrants, Warrant Certificates and certificates representing Warrant Shares,
the Holder shall be entitled to receive from the Company, without expense
(other than applicable transfer taxes, if any, if such unlegended shares are
being delivered and transferred to any person other than the registered holder
thereof), new certificates for a like number of Warrants, Warrant Certificates
and certificates representing Warrant Shares not bearing the relevant legend(s)
set forth or referred to in Section 4.
SECTION 5. Warrants; Exercise of Warrants. Subject to the terms of
this Agreement, each Holder shall have the right, which may be exercised
commencing at the opening of business on the Issue Date and until 5:00 p.m.,
New York City time on November 12, 2004, to receive from the Company the number
of fully paid and nonassessable Warrant Shares which the Holder may at the time
be entitled to receive on exercise of such Warrants and payment of the Exercise
Price then in effect for such Warrant Shares. Each Warrant not exercised prior
to 5:00 p.m., New York City time, November 12, 2004 shall become void and all
rights thereunder and all rights in respect thereof under this Agreement shall
cease as of such time.
A Warrant may be exercised upon surrender to the Company at its office
designated for such purpose (the address of which is set forth in Section 14
hereof) of the Warrant Certificate to be exercised with the form of election to
purchase on the reverse thereof duly filled in and signed, which signature
shall be guaranteed by a bank or trust company having an office or
correspondent in the United States or a broker or dealer which is a member of a
registered securities exchange or the National Association of Securities
Dealers, Inc., together with (if such exercise involves a transfer pursuant to
clause (1)(w) or (1)(y) of the second paragraph of Section 4) the opinion of
counsel specified therein, and upon payment to the Company of the exercise
price (the "Exercise Price") which is set forth in the form of Warrant
Certificate attached hereto as Exhibit A, as adjusted as provided in this
Agreement, for the
5
<PAGE> 8
number of Warrant Shares in respect of which such Warrants are then exercised.
Payment of the aggregate Exercise Price shall be made in cash or by certified
or official bank check to the order of the Company. In lieu of exercising a
Warrant by paying in full the Exercise Price plus transfer taxes (if applicable
pursuant to Section 6), if any, the Holder may, from time to time, convert such
Warrant(s), in whole or in part, into a number of shares of Common Stock
determined by dividing (a) the aggregate current market price of the number of
shares of Common Stock represented by the Warrants converted, minus the
aggregate Exercise Price for such shares of Common Stock, minus transfer taxes,
if any, by (b) the current market price of one share of Common Stock. The
current market price shall be determined pursuant to Section 10(f).
Subject to the provisions of Section 6 hereof, upon such surrender of
Warrant Certificates and payment of the Exercise Price the Company shall issue
and cause to be delivered with all reasonable dispatch (and in any event within
10 Business Days after such receipt) to or upon the written order of the Holder
and, subject to Section 4, in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants together with cash as provided in Section 11;
provided, however, that if any consolidation, merger or lease or sale of assets
is proposed to be effected by the Company as described in subsection (1) of
Section 10 hereof, or a tender offer or an exchange offer for shares of Common
Stock of the Company shall be made, upon such surrender of Warrant Certificates
and payment of the Exercise Price as aforesaid, the Company shall, as soon as
possible, but in any event not later than five business days thereafter, issue
and cause to be delivered the full number of Warrant Shares issuable upon the
exercise of such Warrants in the manner described in this sentence together
with cash as provided in Section 11. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrant Certificates and payment of the
Exercise Price.
Prior to the exercise of the Warrants, except as may be specifically
provided for herein, (i) no Holder, as such, shall be entitled to any of the
rights of a holder of Common Stock of the Company, including, without
limitation, the right to vote at or to receive any notice of any meetings of
stockholders; (ii) the consent of any such Holder shall not be required with
respect to any action or proceeding of the Company; (iii) except as provided in
Section 10(i), no such Holder, by reason of the ownership or possession of a
Warrant or the Warrant Certificate representing the same, shall have any right
to receive any cash dividends, stock dividends, allotments or rights or other
distributions paid, allotted or distributed or distributable to the
stockholders of the Company prior to, or for which the relevant record date
preceded, the date of the exercise of such Warrant; and (iv) no such Holder
shall have any right not expressly conferred by the Warrant or Warrant
Certificate held by such Holder.
The Warrants shall be exercisable, at the election of the Holders
thereof, either in full or from time to time in part and, in the event that a
Warrant Certificate is exercised in respect of fewer than all of the Warrant
Shares issuable on such exercise at any time prior to the date of expiration of
the Warrants, a new Warrant Certificate evidencing the remaining Warrant or
6
<PAGE> 9
Warrants will be issued and delivered pursuant to the provisions of this
Section and of Section 2 hereof.
All Warrant Certificates surrendered upon exercise of Warrants shall
be cancelled and disposed of by the Company. The Company shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by the Holders during normal business hours at its office.
SECTION 6. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue of any Warrant Certificates or any certificates
representing Warrant Shares in a name other than that of the registered holder
of a Warrant Certificate surrendered for registration of transfer or upon the
exercise of a Warrant, and the Company shall not be required to issue or
deliver such Warrant Certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the reasonable satisfaction of the
Company that such tax has been paid.
SECTION 7. Mutilated or Missing Warrant Certificates. In case any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant Certificate and
indemnity, if requested, also reasonably satisfactory to it. Applicants for
such substitute Warrant Certificates shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company may
prescribe.
SECTION 8. Reservation of Warrant Shares. The Company will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company or, if appointed, the transfer agent for the Common Stock
(the "Transfer Agent") and every subsequent transfer agent for any shares of
the Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrants. The
7
<PAGE> 10
Company will furnish such Transfer Agent a copy of all notices of adjustments
and certificates related thereto, transmitted to each Holder.
Before taking any action which would cause an adjustment pursuant to
Section 10 hereof to reduce the Exercise Price below the then par value (if
any) of the Warrant Shares, the Company will take any corporate action which
may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
The Company covenants that all Warrant Shares which may be issued upon
exercise of the Warrants will, upon issue, be duly authorized, fully paid,
nonassessable, free of preemptive rights and, subject to Section 6, free from
all taxes, liens, charges and security interests other than the restrictions
contained in the Stockholders Agreement. The Company further covenants,
represents and warrants that, (a) as of the Issue Date, no form of general
solicitation or general advertising was used by the Company or, to the best of
its knowledge, any other Person acting on behalf of the Company, in respect of
the Warrants or the Warrant Shares or in connection with the issuance of the
Warrants; (b) as of the Issue Date, neither the Company nor any Person acting
on behalf of the Company has, either directly or indirectly, sold or offered
for sale to any Person any of the Warrants, the Warrant Shares or any other
similar security of the Company except (i) as contemplated by this Agreement,
(ii) the issuance and sale of the warrants issued by the Company in connection
with the issuance and sale by the Company of $50 million aggregate principal
amount at maturity of senior discount notes due 2010 and (iii) the issuance and
sale of shares of Common Stock and the grant of options to purchase shares of
Common Stock of the Company in connection with the Agreement and Plan of Merger
dated as of June 13, 1999, as amended, between the Company and Fox Paine Medic
Acquisition Corporation; and (c) neither the Company nor any Person acting on
its behalf will sell or offer for sale any such security to or solicit any
offers to buy any such security from, or otherwise approach or negotiate in
respect thereof with, any Person or Persons so as thereby to bring the issuance
or sale of any of the Warrants within the provisions of Section 5 of the
Securities Act.
SECTION 9. Obtaining Stock Exchange Listings. The Company will from
time to time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of the Warrants, will be
listed on the principal securities exchanges and markets within the United
States of America, if any, on which other shares of Common Stock are then
listed.
SECTION 10. Adjustment of Number of Warrant Shares Issuable. The
number of Warrant Shares issuable upon the exercise of each Warrant is subject
to adjustment from time to time upon the occurrence of the events enumerated in
this Section 10. For purposes of this Section 10, "Common Stock" means shares
now or hereafter authorized of any class of common stock of the Company and any
other stock of the Company, however designated, that has the right (subject to
any prior rights of any class or series of preferred stock) to participate in
any distribution of the assets or earnings of the Company without limit as to
per share amount.
8
<PAGE> 11
(a) Adjustment for Change in Capital Stock.
If the Company:
(1) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(3) combines its outstanding shares of Common Stock into a smaller
number of shares;
(4) makes a distribution on its Common Stock in shares of its capital
stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares of its
capital stock;
then the number and kind of shares of its capital stock issuable upon exercise
of any Warrant in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which such Holder would have owned immediately following such action if
such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a Holder of a Warrant upon exercise of it may
receive shares of two or more classes of capital stock of the Company, the
exercise price of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section.
Such adjustment shall be made successively whenever any event listed
above shall occur.
9
<PAGE> 12
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them to purchase shares of Common Stock
or securities directly or indirectly convertible into or exchangeable for
Common Stock (or options or rights with respect to such securities) at a price
per share less than the current market price per share on the applicable record
date, the number of Warrant Shares issuable upon exercise of one Warrant shall
be adjusted in accordance with the formula:
N1 = N x (O + A)
---------
(O + (A x P))
-
M
where:
N1 = the adjusted number of Warrant Shares issuable
upon exercise of one Warrant.
N = the current number of Warrant Shares issuable upon
exercise of one Warrant.
O = the number of shares of Common Stock outstanding on the
record date.
A = the number of additional shares of Common Stock
offered pursuant to such rights, options or warrants
issuance.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock, on
the record date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or
warrants shall have been exercised, the number of Warrant Shares issuable upon
exercise of the Warrants shall be immediately readjusted to what it would have
been if "A" in the above formula had been the number of shares actually issued.
(c) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Stock any of
its assets (including but not limited to cash), debt securities, or any rights
or warrants to purchase debt securities, preferred stock, assets or other
securities of the Company, the number of Warrant Shares issuable upon exercise
of one Warrant shall be adjusted in accordance with the formula:
10
<PAGE> 13
N1 = N x M
---
M-F
where:
N1 = the adjusted number of Warrant Shares issuable
upon exercise of one Warrant.
N = the current number of Warrant Shares issuable upon
exercise of one Warrant.
M = the current market price per share of Common Stock
on the record date mentioned below.
F = the fair market value on the record date of the
assets, securities, rights or warrants applicable to
one share of Common Stock. The Board of Directors
shall determine the fair market value in good faith.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the
distribution.
This subsection does not apply to distributions of capital stock
referred to in subsection (a) of this Section 10 and to distributions of
rights, options or warrants referred to in subsection (b) of this Section 10.
(d) Adjustment for Common Stock Issue.
If the Company issues shares of Common Stock to Fox Paine & Company,
LLC, or its Affiliates, in their capacity as such (as defined in the
Stockholders' Agreement) for a consideration per share less than the current
market price per share on the date the Company fixes the offering price of such
additional shares, the number of Warrant Shares issuable upon exercise of one
Warrant shall be adjusted in accordance with the formula:
N1 = N x A
------
O + P
-
M
where:
N1 = the adjusted number of Warrant Shares issuable
upon exercise of one Warrant.
11
<PAGE> 14
N = the current number of Warrant Shares issuable upon
exercise of one Warrant.
O = the number of shares outstanding immediately prior
to the issuance of such additional shares.
P = the aggregate consideration received for the
issuance of such additional shares.
M = the current market price per share on the date of
sale of such additional shares.
A = the number of shares outstanding immediately after
the issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections (b) and (c) of
this Section 10,
(2) the exercise of Warrants, or the conversion or exchange of other
securities convertible or exchangeable for Common Stock,
(3) Common Stock issued upon the exercise of warrants and stock
options outstanding on the Issue Date, or
(4) Common Stock issued in a bona fide underwritten public offering.
(e) Adjustment for Convertible Securities Issue.
If the Company issues any securities convertible into or exchangeable
for Common Stock (other than securities issued in transactions described in
subsections (b), (c) and (d) of this Section 10) to Fox Paine & Company, LLC
its Affiliates, in their capacity as such for a consideration per share of
Common Stock initially deliverable upon conversion or exchange of such
securities less than the current market price per share on the date of issuance
of such securities, the number of Warrant Shares issuable upon exercise of one
Warrant shall be adjusted in accordance with this formula:
N1 = N x O + D
-------
O + P
-
M
12
<PAGE> 15
where:
N1 = the adjusted number of Warrant Shares issuable
upon exercise of one Warrant.
N = the then current number of Warrant Shares issuable
upon exercise of one Warrant.
O = the number of shares outstanding immediately prior
to the issuance of such securities.
P = the aggregate consideration received for the issuance
of such securities.
M = the current market price per share on the date of sale
of such securities.
D = the maximum number of shares deliverable upon
conversion or in exchange for such securities at the
initial conversion or exchange rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange of
such securities have not been issued when such securities are no longer
outstanding, then the number of Warrant Shares issuable upon exercise of one
Warrant shall promptly be readjusted to the number of Warrant Shares issuable
upon exercise of one Warrant which would then be in effect had the adjustment
upon the issuance of such securities been made on the basis of the actual
number of shares of Common Stock issued upon conversion or exchange of such
securities.
This subsection (e) does not apply to convertible securities issued in
a bona fide underwritten public offering.
13
<PAGE> 16
(f) Current Market Price.
In Sections 5 and 11 and in subsections (b), (c), (d) and (e) of this
Section 10, the current market price per share of Common Stock on any date is
the average of the Quoted Prices of the Common Stock for 10 consecutive trading
days commencing 15 trading days before the date in question. The "Quoted Price"
of the Common Stock is the last reported sales price of the Common Stock as
reported by NASDAQ, National Market System, or if the Common Stock is listed on
a securities exchange, the last reported sales price of the Common Stock on
such exchange which shall be for consolidated trading if applicable to such
exchange, or if neither so reported or listed, the last reported bid price of
the Common Stock. In the absence of one or more such quotations, the Board of
Directors of the Company shall determine the current market price (i) based on
the most recently completed arm's length transaction between the Company and a
person other than an Affiliate of the Company and the closing of which occurs
on such date or shall have occurred within the three months preceding such
date, (ii) if no such transaction shall have occurred on such date or within
such three month period, the value of the security most recently determined as
of a date within the six months preceding such date by a nationally recognized
financial advisory or appraisal firm selected by the Company's Board of
Directors which is not an Affiliate of the Company (an "Independent Financial
Advisor") or (iii) if neither clause (i) nor (ii) is applicable or at the
election of either the Company or the Holders of at least 50% of the total
Warrants issued under this Agreement (subject to adjustment pursuant to this
Section 10), then the value of the security shall be determined as of such date
by an Independent Financial Advisor.
(g) Consideration Received.
For purposes of any computation respecting consideration received
pursuant to subsections (d) and (e) of this Section 10, the following shall
apply:
(1) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided that in no
case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors (irrespective of the
accounting treatment thereof), whose determination shall be conclusive,
and described in a Board resolution;
(3) in the case of the issuance of securities convertible into or
exchangeable for shares, the aggregate consideration received therefor
shall be deemed to be the consideration received by the Company for the
issuance of such securities plus the additional minimum consideration, if
any, to be received by the Company upon the
14
<PAGE> 17
conversion or exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (1) and (2) of this
subsection).
(h) When De Minimis Adjustment May Be Deferred.
No adjustment in the number of Warrant Shares issuable upon exercise
of one Warrant need be made unless the adjustment would require an increase or
decrease of at least 1% in the number of Warrant Shares issuable upon exercise
of one Warrant. Any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment.
All calculations under this Section shall be made to the nearest
1/100th of a share.
(i) When No Adjustment Required.
No adjustment need be made for a transaction referred to in Section 10
(a), (b), (c), (d) or (e) hereof if a Holder actually participates in an
issuance or distribution pursuant to Section 10 (a), (b), (c), (d) or (e)
hereof
No adjustment need be made for rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no par
value of the Common Stock.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
(j) Notice of Adjustment.
Whenever the number of Warrant Shares issuable upon exercise of one
Warrant is adjusted, the Company shall provide the notices required by Section
12 hereof.
(k) Notice of Certain Transactions.
If:
(1) The Company takes any action that would require an adjustment in
the number of Warrant Shares issuable upon exercise of one Warrant
pursuant to subsection (a), (b), (c), (d) or (e) of this Section 10 and
if the Company does not arrange for Holders to participate pursuant to
subsection (i) of this Section 10;
(2) The Company takes any action that would require a supplemental
Warrant Agreement pursuant to subsection (l) of this Section 10; or
15
<PAGE> 18
(3) there is a liquidation or dissolution of the Company,
the Company shall mail to Holders a notice stating the proposed record date for
a dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall mail the notice at least 15 days
before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
(l) Reorganization of Company.
If the Company consolidates or merges with or into any person, upon
consummation of such transaction the Warrants shall automatically become
exercisable for the kind and amount of securities, cash or other assets which
the Holder would have owned immediately after the consolidation or merger if
the Holder had exercised the Warrant immediately before the effective date of
the transaction. Concurrently with the consummation of such transaction, the
corporation formed by or surviving any such consolidation or merger if other
than the Company, or the person to which such sale or conveyance shall have
been made, shall enter into a supplemental Warrant Agreement so providing and
further providing for adjustments which shall be as nearly equivalent as may be
practical to the adjustments provided for in this Section. The successor
company shall mail to Holders a notice describing the supplemental Warrant
Agreement.
If the issuer of securities deliverable upon exercise of Warrants
under the supplemental Warrant Agreement is an affiliate of the formed or
surviving corporation, that issuer shall join in the supplemental Warrant
Agreement.
If this subsection (l) applies, subsections (a), (b), (c), (d) and (e)
of this Section 10 do not apply.
(m) Company Determination Final.
Any determination that the Company or the Board of Directors must make
pursuant to subsection (a), (c), (d), (e), (f), (g) or (i) of this Section 10
which is made in good faith shall be conclusive.
(n) When Issuance or Payment May Be Deferred.
16
<PAGE> 19
In any case in which this Section 10 shall require that an adjustment
in the number of Warrant Shares issuable upon exercise of one Warrant be made
effective as of a record date for a specified event, the Company may elect to
defer until the occurrence of such event (i) issuing to the Holder of any
Warrant exercised after such record date the Warrant Shares and other capital
stock of the Company, if any, issuable upon such exercise over and above the
Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise on the basis of the current number of Warrant Shares issuable
upon exercise of one Warrant and (ii) paying to such Holder any amount in cash
in lieu of a fractional share pursuant to Section 11; provided, however, that
the Company shall deliver to such Holder a due bill or other appropriate
instrument evidencing such Holder's right to receive such additional Warrant
Shares, other capital stock and cash upon the occurrence of the event requiring
such adjustment.
(o) Adjustment in Exercise Price.
Upon each adjustment of the number of Warrant Shares pursuant to this
Section 10, the Exercise Price for each Warrant outstanding prior to the making
of the adjustment in the number of Warrant Shares shall thereafter be adjusted
to the Exercise Price (calculated to the nearest hundredth) obtained from the
following formula:
E1 = E x N
-
N1
Where
E1 = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
N1 = the adjusted number of Warrant Shares issuable
upon exercise of a Warrant.
N = the number or Warrant shares previously issuable
upon exercise of a Warrant prior to adjustment.
Notwithstanding anything to the contrary, in no event shall the
Exercise Price for a Warrant be reduced below the par value of the Warrant
Share underlying such Warrant.
(p) Form of Warrants.
Irrespective of any adjustments in the number or kind of shares
purchasable upon the exercise of the Warrants, Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
17
<PAGE> 20
(q) No Dilution or Impairment.
The Company will not, by amendment of its certificate of incorporation
or through any consolidation, merger, reorganization, transfer of assets,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of the
Warrants, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate (including through a reduction in the par value of Warrant Shares
as necessary) in order to protect the rights of the Holder against dilution or
other impairment.
SECTION 11. Fractional Interests. Any one Warrant may be exercised
only in full and not in part. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise at the same time by the same Holder, the number
of full Warrant Shares which shall be issuable upon the exercise thereof shall
be computed on the basis of the aggregate number of Warrant Shares purchasable
on exercise of the Warrants so requested to be exercised. If any fraction of a
Warrant Share would, except for the provisions of this Section 11, be issuable
on the exercise of any Warrants (or specified portion thereof) , the Company
shall pay an amount in cash equal to the product of (i) such fraction of a
Warrant Share and (ii) the difference between the current market price of a
share of Common Stock and the Exercise Price.
SECTION 12. Notices to Holders. Upon any adjustment of the number of
Warrant Shares issuable upon exercise of one Warrant pursuant to Section 10,
the Company shall promptly thereafter (i) no later than the delivery of the
audit opinion of a firm of independent public accountants of recognized
standing selected by the Board of Directors of the Company (who may be the
regular auditors of the Company) with respect to the then current fiscal year
of the Company, cause to be filed with the Company a certificate which includes
the report of such firm setting forth the number of Warrant Shares issuable
upon exercise of one Warrant after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein, and (ii) cause to be given to
each of the registered holders of the Warrant Certificates at such holder's
address appearing on the Warrant register written notice of such adjustments by
first class mail, postage prepaid. Where appropriate, such notice may be given
in advance and included as a part of the notice required to be mailed under the
other provisions of this Section 12.
In case:
(a) the Company shall authorize the issuance to all holders of shares
of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants; or
18
<PAGE> 21
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other
than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in shares of Common Stock
or distributions referred to in subsection (a) of Section 10 hereof); or
(c) of any consolidation or merger to which the Company is a party and
for which approval of any shareholders of the Company is required or of
any reclassification or change of Common Stock issuable upon exercise of
the Warrants (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for
shares of Common Stock by the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any action (other than actions of the
character described in Section 10(a)) which would require an adjustment
of the number of Warrant Shares issuable upon exercise of one Warrant
pursuant to Section 10;
then the Company shall cause to be given to each of the registered holders of
the Warrant Certificates at such holder's address appearing on the Warrant
register, at least 20 days (or 10 days in any case specified in clauses (a) or
(b) above) prior to the applicable record date hereinafter specified, or
promptly in the case of events for which there is no record date, by first
class mail, postage prepaid, a written notice stating (i) the date as of which
the holders of record of shares of Common Stock to be entitled to receive any
such rights, options, warrants or distribution are to be determined, or (ii)
the initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock by the Company, or (iii) the date on which any such
consolidation, merger, conveyance, dissolution, liquidation or winding up is
expected to become effective or consummated, and the date as of which it is
expected that holders of record of shares of Common Stock shall be entitled to
exchange such shares for securities or other property, if any, deliverable upon
such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 12 or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof
the right to vote or to consent or to receive notice as shareholders in
respect of the meetings of shareholders or the election of Directors of
the Company or any other matter, or any rights whatsoever as shareholders
of the Company.
19
<PAGE> 22
SECTION 13. Mandatory Exercise in the Event of an Initial Public
Offering. At the request of the Company, in the event of an underwritten
initial public offering or public offerings (on a cumulative basis) of shares
of Common Stock of the Company pursuant to a registration statement or
registration statements under the Securities Act with aggregate proceeds to the
Company of at least $50.0 million, the Holders shall exercise their Warrants to
purchase Common Stock of the Company upon consummation of such initial public
offering or at such other mutually agreed upon date on or before the date of
consummation of such initial public offering.
SECTION 14. Notices to Company and Holders. Any notice or demand
authorized by this Agreement to be given or made by the registered holder of
any Warrant Certificate to or on the Company shall be sufficiently given or
made when and if deposited in the mail, first class or registered, postage
prepaid, addressed to the office of the Company expressly designated by the
Company at its office for purposes of this Agreement (until the Holders are
otherwise notified in accordance with this Section by the Company), as follows:
Maxxim Medical, Inc.
10300 49th Street North
Clearwater, Florida 33762
Attn: Kenneth W. Davidson
(telecopier no.: 727-561-2180)
with a copy to:
Fox Paine & Company, LLC
950 Tower Lane, Suite 1950
Foster City, California 94404
Attention: Saul A. Fox
(telecopier no: 650-525-1396)
as well as a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Mitchell S. Presser, Esq.
(telecopier no.: 212-403-2000)
20
<PAGE> 23
GS Mezzanine Partners, L.P.
GS Mezzanine Partners Offshore, L.P.
c/o Goldman, Sachs & Co.
85 Broad Street, 10th Floor
New York, New York 10004
Attn: Ben Adler, Esq.
(telecopier no.: 212-357-5505)
John Hancock Mutual Life Insurance Company
John Hancock Variable Life Insurance Company
Signature 3 Limited
Merrill Lynch International
200 Clarendon Street
Boston, Massachusetts 02117
Attn: Manager, Investment Accounting Division, B-3
(telecopier no.: 617-572-0628)
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Securities Department
(telecopier no.: 414-299-7124)
Chase Equity Associates, L.P.
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, New York 10017
Attn: Eric Green
(telecopier no.: 212-622-3101)
21
<PAGE> 24
CIBC WMC, Inc.
c/o CIBC Capital Partners
161 Bay Street, 8th Floor
Toronto, Ontario M5J 2S8
Canada
Attn: Managing Director
(telecopier no.: 416-594-8637)
Merrill Lynch, Pierce, Fenner & Smith Incorporated
250 Vesey Street
World Financial Center, North Tower
New York, New York 10281
Attn: Christopher Stout
(telecopier no.: 415-676-3447)
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attn: Corporate Fixed-Income Securities
(telecopier no.: 614-249-4553)
Deutche Bank AG, New York Branch
c/o Bankers Trust Corporation
130 Liberty Street, 29th Floor
New York, New York 10006
Attn: Kristine Cicardo
(telecopier no.: 212-619-1502)
with an additional copy to:
Deutche Bank AG, New York Branch
31 West 52nd Street
New York, New York 10019
Attn: Mark Fedorcik
(telecopier no.: 212-469-2883)
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Attn: Richard Gallant
(telecopier no.: 212-325-9136)
22
<PAGE> 25
Any notice pursuant to this Agreement to be given by the Company to
the registered holder(s) of any Warrant Certificate shall be sufficiently given
when and if deposited in the mail, first class or registered, postage prepaid,
addressed (until the Company is otherwise notified in accordance with this
Section by such holder) to such holder at the address appearing on the Warrant
register of the Company.
SECTION 15. Supplements and Amendments. The Company may from time to
time supplement or amend this Agreement without the approval of any Holders in
order to cure any ambiguity or to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions in regard to matters or questions arising
hereunder which the Company may deem necessary or desirable and which shall not
in any way adversely affect the interests of the Holders. Any amendment or
supplement to this Agreement that has an adverse effect on the interests of
Holders shall require the written consent of registered holders of two thirds
of the then outstanding Warrant Shares issued or issuable upon exercise of the
Warrants (excluding Warrant Shares held by the Company or any of its
Affiliates). The consent of each Holder of a Warrant affected shall be required
for any amendment pursuant to which the number of Warrant Shares purchasable
upon exercise of Warrants would be decreased (other than in accordance with
Section 10 or 11 hereof).
SECTION 16. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its respective successors and assigns hereunder.
SECTION 17. Termination. This Agreement (except for the restrictions
on transfer of Warrant Shares specified in Section 4) shall terminate at 5:00
p.m., New York City time on November 12, 2004.
SECTION 18. Governing Law. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF SAID STATE.
SECTION 19. Benefits of This Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the registered holders of the Warrant Certificates or Warrant Shares any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company and the
registered holders of the Warrant Certificates and the Warrant Shares. Nothing
herein shall prohibit or limit the Company from entering into an agreement
providing holders of securities which may hereafter be issued by the Company
with such registration rights exercisable at such time or times and in such
manner as the Board of Directors shall deem in the best interests of the
Company so
23
<PAGE> 26
long as the performance by the Company of its obligations under such other
agreement will not cause the Company to breach its obligations hereunder to the
Holders.
SECTION 20. Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the
meanings or interpretation of this Agreement.
SECTION 21. Submission to Jurisdiction. If any action, proceeding or
litigation shall be brought by the Purchasers or any Holder in order to enforce
any right or remedy under this Agreement, the Company hereby consents and will
submit, and will cause each of its subsidiaries to submit, to the jurisdiction
of any state or federal court of competent jurisdiction sitting within the area
comprising the Southern District of New York on the date of this Agreement. The
Company hereby irrevocably waives any objection, including, but not limited to,
any objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any such
action, proceeding or litigation in such jurisdiction.
SECTION 22. Waiver of Jury Trial. THE ISSUER HEREBY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OF THE WARRANTS.
SECTION 23. Service of Process. Nothing herein shall affect the right
of any holder of a security to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against the Company
in any other jurisdiction.
SECTION 24. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
24
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed, as of the day and year first above written.
MAXXIM MEDICAL, INC.
by /s/ Kenneth W. Davidson
---------------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President and
Chief Executive Officer
Accepted:
GS MEZZANINE PARTNERS, L.P.
by GS MEZZANINE ADVISORS, L.P.,
its general partner,
by GS MEZZANINE ADVISORS, INC.,
its general partner,
by /s/ Melina Higgins
---------------------------------
Name: Melina Higgins
Title: Attorney-in-fact
GS MEZZANINE PARTNERS
OFFSHORE, L.P.
by GS MEZZANINE ADVISORS
(CAYMAN), L.P., its general partner,
by GS MEZZANINE ADVISORS, INC.,
its general partner,
by /s/ Melina Higgins
---------------------------------
Name: Melina Higgins
Title: Attorney-in-fact
25
<PAGE> 28
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY,
by /s/ Stephen J. Blewitt
--------------------------------
Name: Stephen J. Blewitt
Title: Senior Investment Officer
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY,
by /s/ Stephen J. Blewitt
--------------------------------
Name: Stephen J. Blewitt
Title: Senior Investment Officer
SIGNATURE 3 LIMITED,
by JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY, as Portfolio
Advisor,
by /s/ Stephen J. Blewitt
--------------------------------
Name: Stephen J. Blewitt
Title: Senior Investment Officer
MERRILL LYNCH INTERNATIONAL,
by JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY, as Manager
under that certain Bond Purchase and
Asset Management Agreement dated as of
June 22, 1999,
by /s/ Stephen J. Blewitt
--------------------------------
Name: Stephen J. Blewitt
Title: Senior Investment Officer
26
<PAGE> 29
THE NORTHWESTERN MUTUAL
LIFE INSURANCE COMPANY,
by /s/ Gary A. Poliner
--------------------------------
Name: Gary A. Poliner
Title: Authorized Representative
CHASE EQUITY ASSOCIATES, L.P.,
by CHASE CAPITAL PARTNERS, its
general partner
by /s/ John O'Connor
--------------------------------
Name: John O'Connor
Title: General Partner
CIBC WMC, INC.,
by /s/ Ken Kilgour
--------------------------------
Name: Ken Kilgour
Title: Managing Director
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED,
by /s/ Christopher K. Stout
--------------------------------
Name: Christopher K. Stout
Title: Director
27
<PAGE> 30
NATIONWIDE LIFE INSURANCE
COMPANY,
by /s/ Jerry D. Cohen
--------------------------------
Name: Jerry D. Cohen
Title: Authorized Signatory
DEUTSCHE BANK AG,
NEW YORK BRANCH,
by /s/ William Archer
--------------------------------
Name: William Archer
Title: Managing Director
CREDIT SUISSE FIRST BOSTON
CORPORATION,
by /s/ Richard Gallant
--------------------------------
Name: Richard Gallant
Title: Director
28
<PAGE> 31
EXHIBIT A
Form of Face of Warrant Certificate
THE WARRANTS REPRESENTED BY THIS CERTIFICATE (AND ANY PREDECESSOR)
WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION
5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE WARRANTS EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. THE HOLDER OF THE WARRANTS EVIDENCED HEREBY AGREES FOR THE BENEFIT
OF MAXXIM MEDICAL, INC., A TEXAS CORPORATION (THE "COMPANY") THAT (A) SUCH
WARRANTS (AND ANY SHARES ISSUABLE PURSUANT THERETO) MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (X) INSIDE THE UNITED STATES (I) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR (II) IN ACCORDANCE WITH RULE 144 UNDER THE
SECURITIES ACT, OR (III) PURSUANT TO ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL, IF
THE COMPANY SO REQUESTS), (Y) TO THE COMPANY OR (Z) OUTSIDE THE UNITED STATES
TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL, IF THE COMPANY SO
REQUESTS) AND (2) IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH
IN (A) ABOVE. THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFERABILITY, AND HAVE THE BENEFIT OF CERTAIN
REGISTRATION RIGHTS, CONTAINED IN THE STOCKHOLDERS' AGREEMENT DATED AS OF
NOVEMBER 12, 1999, AS AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE AT
THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES.
1
<PAGE> 32
EXERCISABLE ON OR BEFORE 5:00 P.M. NEW YORK CITY TIME ON
NOVEMBER 12, 2004.
Private Placement No.: 57777#115 ______ Warrants
Certificate No: W-
Warrant Certificate
Maxxim Medical, Inc.
This Warrant Certificate certifies that __________, or registered
assigns, is the registered holder of Warrants expiring November 12, 2004 (the
"Warrants") to purchase Common Stock, $0.001 par value (the "Common Stock"), of
Maxxim Medical, Inc., a Texas corporation (the "Company"). Each Warrant
entitles the holder upon exercise to receive from the Company on or before 5:00
p.m. New York City time on November 12, 2004, 0.8226 fully paid and
nonassessable shares of Common Stock (a "Warrant Share") at the exercise price
(the "Exercise Price") of $0.01 payable in lawful money of the United States of
America upon surrender of this Warrant Certificate and payment of the Exercise
Price at the office of the Company designated for such purpose, but only
subject to the conditions set forth herein and in the Warrant Agreement
referred to on the reverse hereof. In lieu of exercising the Warrants evidenced
by this Warrant Certificate by paying in full the Exercise Price minus transfer
taxes (if applicable pursuant to Section 6 of the Warrant Agreement), if any,
the holder hereof may, from time to time, convert such Warrants, in whole or in
part, into a number of shares of Common Stock determined by dividing (a) the
aggregate current market price of the number of shares of Common Stock
represented by the Warrants converted, minus the aggregate Exercise Price for
such shares of Common Stock, minus transfer taxes, if any, by (b) the current
market price of one share of Common Stock. The current market price shall be
determined pursuant to Section 10(f) of the Warrant Agreement.
The number of Warrant Shares issuable upon exercise of the Warrants
evidenced hereby is subject to adjustment upon the occurrence of certain events
set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City time on
November 12, 2004, and to the extent not exercised by such time such Warrants
shall become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
2
<PAGE> 33
IN WITNESS WHEREOF, Maxxim Medical, Inc. has caused this Warrant
Certificate to be signed by its Executive Vice President and Chief Financial
Officer and by its Secretary and has caused its corporate seal to be affixed
hereunto or imprinted hereon.
Dated:
By:
-------------------------------------
Name:
Title: Executive Vice President and
Chief Financial Officer
By:
-------------------------------------
Name:
Title: Secretary
3
<PAGE> 34
Form of Reverse Side of Warrant Certificate
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring November 12, 2004, entitling the holder
hereof on exercise to receive 0.8226 shares of Common Stock, $0.001 par value,
of the Company (the "Common Stock") per Warrant exercised, and are issued or to
be issued pursuant to a Warrant Agreement, dated as of November 12, 1999 (the
"Warrant Agreement"), duly executed and delivered by the Company, which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants. A copy of the Warrant Agreement
may be obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time on or before November 12, 2004.
The holder of Warrants evidenced by this Warrant Certificate may exercise them
by surrendering this Warrant Certificate, with the form of election to purchase
set forth hereon properly completed and executed, together with payment of the
Exercise Price in cash at the office of the Company designated for such
purpose. In lieu of exercising the Warrants evidenced by this Warrant
Certificate by paying in full the Exercise Price and transfer taxes (if
applicable pursuant to Section 6 of the Warrant Agreement), if any, the holder
of the Warrants may, from time to time, convert the Warrants evidenced by this
Warrant Certificate, in whole or in part, into a number of shares of Common
Stock determined by dividing (a) the aggregate current market price of the
number of shares of Common Stock represented by the Warrants converted, minus
the aggregate Exercise Price for such shares of Common Stock and transfer
taxes, if any, by (b) the current market price of one share of Common Stock.
The current market price shall be determined pursuant to Section 10(f) of the
Warrant Agreement. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number of
Warrants evidenced hereby, there shall be issued to the holder hereof or such
holder's assignee a new Warrant Certificate evidencing the number of Warrants
not exercised.
The Warrant Agreement provides that upon the occurrence of certain
events the number of Warrant Shares issuable upon exercise of one Warrant set
forth on the face hereof may, subject to certain conditions, be adjusted. No
fractions of a share of Common Stock will be issued upon the exercise of any
Warrant, but the Company will pay the cash value thereof determined as provided
in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations
4
<PAGE> 35
provided in the Warrant Agreement, but without payment of any service charge,
for another Warrant Certificate or Warrant Certificates of like tenor
evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Company a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
5
<PAGE> 36
ASSIGNMENT FORM
If you, the holder of this Warrant Certificate, want to assign all or
a portion of the Warrants evidenced hereby, fill in the form below and have
your signature guaranteed:
I or we assign and transfer the Warrants to:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code and social
security or tax ID number of assignee)
and irrevocably appoint _________________________________ agent to transfer the
Warrants evidenced hereby on the books of the Company. The agent may substitute
another to act for him.
Date: Signed:
--------------------------------- -----------------------------
(Signed exactly as your name
appears on the other side of
this Warrant Certificate)
Signature Guarantee:
---------------------------------
In connection with any transfer of the Warrants evidenced by this
Warrant Certificate occurring prior to the date which is the earlier of (a) the
date of the declaration by the Securities and Exchange Commission of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Warrant (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (b) [__________ , 2001], the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that the Warrants evidenced by the Warrant Certificate is being
transferred:
Check One
(1) ______ to the Company or a subsidiary thereof; or
(2) ______ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) ______ to an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act)
that has furnished to the Company a signed letter
containing certain representations and agreements (the
form of which appears below); or
6
<PAGE> 37
(4) ______ outside the United States to a "foreign person" in
compliance with Rule 904 of
(5) ______ Regulation S under the Securities Act; or pursuant to the
exemption from registration provided by Rule 144 under the
Securities Act; or
(6) ______ pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless one of the boxes is checked, the Company will refuse to register any of
the Warrants evidenced by this Warrant Certificate in the name of any person
other than the registered holder thereof; provided that if box (3) , (4), (5)
or (6) is checked, the Company may require, prior to registering any such
transfer of the Notes, in its sole discretion, such legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Company has reasonably requested to confirm that
such transfers being made pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Company shall not be obligated
to register the Warrants evidenced by this Warrant Certificate in the name of
any person other than the holder hereof unless and until the conditions to any
such transfer of registration set forth herein shall have been satisfied.
Date:
----------------------------------
Signed:
--------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
----------------------------------------------
7
<PAGE> 38
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing the
Warrant(s) for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date:
---------------------------------
Signed:
-------------------------------
NOTICE: To be executed by an executive officer
8
<PAGE> 39
FORM OF LETTER TO BE COMPLETED
BY PURCHASER IF (3) ABOVE IS CHECKED
Ladies and Gentlemen:
1. The undersigned understands that any subsequent transfer of the
Warrants is subject to certain restrictions and conditions set forth in the
Warrants and in the Warrant Agreement and the undersigned agrees to be bound
by, and not to resell, pledge or otherwise transfer the Warrants except in
compliance with, such restrictions and conditions and the Securities Act.
2. The undersigned understands that the offer and sale of the Warrants
have not been registered under the Securities Act, and that the Warrants may
not be offered or sold except as permitted in the following sentence. The
undersigned agrees, on its own behalf and on behalf of any accounts for which
it is acting as hereinafter stated, that if it should sell, pledge or otherwise
transfer any Warrants it will do so only (1) (x) inside the United States to a
person who the seller reasonably believes is a qualified institutional buyer
within the meaning of Rule 144A under the Securities Act in a transaction
meeting the requirements of Rule 144A, or in accordance with Rule 144 under the
Securities Act, or pursuant to another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel, if
the company so requests), (y) to the Company or (z) outside the United States
to a foreign person in a transaction meeting the requirements of Rule 904 under
the Securities Act (and based upon an opinion of counsel, if the Company so
requests) and (2) in each case, in accordance with the applicable securities
laws of any state of the United States or any other applicable jurisdiction,
and the undersigned further agrees to provide to any person purchasing any of
the Warrants from us a notice advising such purchaser that resales of the
Warrants are restricted as stated herein.
3. The undersigned understands that, on any proposed resale of any
Warrants, it may be required to furnish the Company such certification and
other information as the Company may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. The undersigned further
understands that the Warrants purchased by it will bear a legend to the
foregoing effect.
4. The undersigned is an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) and (7) 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 Warrants,
and the undersigned and any accounts for which it is acting are each able to
bear the economic risk of our or its investment, as the case may be.
9
<PAGE> 40
5. The undersigned is acquiring the Warrants 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 the undersigned exercises sole
investment discretion.
Date:
---------------------------------
Signed:
-------------------------------
NOTICE: To be signed by an executive officer
Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the Warrant,
represented by this Warrant Certificate, to receive shares of Common Stock and
herewith (check item)
(i) tenders payment for such shares to the order of Maxxim Medical,
Inc. in the amount of $ in accordance with the terms hereof; or
(ii) converts the Warrants evidenced by this Warrant Certificate, in
whole or in part, into a number of shares of Common Stock determined by
dividing (a) the aggregate current market price of the number of shares
of Common Stock represented by such Warrant, minus the aggregate Exercise
Price for such shares of Common Stock and transfer taxes, if any, by (b)
the current market price of one Share.
The undersigned requests that a certificate for such shares be
registered in the name of _______________________________, whose address is
_________________________________, and that such shares be delivered to
___________________________,whose address is _____________________________.
If said number of shares is less than all of the shares of Common
Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of _______________________, whose address is _______________________,
and that such Warrant Certificate be delivered to ______________________, whose
address is _______________________.
Signature:
-----------------------------
Date:
----------------------------------
Signature Guaranteed:
------------------
10
<PAGE> 1
Exhibit 4.4
MAXXIM MEDICAL GROUP, INC.
$144,552,000 Principal Amount At Maturity Of
Senior Subordinated Discount Notes due 2009
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
November 12, 1999
GS Mezzanine Partners, L.P.
c/o Goldman, Sachs & Co.
85 Broad Street, 10th Floor
New York, New York 10004
GS Mezzanine Partners Offshore, L.P.
c/o Goldman, Sachs & Co.
85 Broad Street, 10th Floor
New York, New York 10004
John Hancock Mutual Life Insurance Company
200 Clarendon Street
Boston, Massachusetts 02117
John Hancock Variable Life Insurance Company
200 Clarendon Street
Boston, Massachusetts 02117
Signature 3 Limited
c/o John Hancock Mutual Life Insurance Company
200 Clarendon Street
Boston, Massachusetts 02117
Merrill Lynch International
c/o John Hancock Mutual Life Insurance Company
200 Clarendon Street
Boston, Massachusetts 02117
<PAGE> 2
The Northwestern Mutual Life Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Chase Equity Associates, L.P.
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, New York 10017
CIBC WMC, Inc.
c/o CIBC Capital Partners
161 Bay Street, 8th Floor
Toronto, Ontario M5J 2S8
Canada
Merrill Lynch, Pierce, Fenner & Smith Incorporated
250 Vesey Street World Financial Center, North Tower
New York, New York 10281
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Deutsche Bank AG, New York Branch
130 Liberty Street
New York, New York 10006
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Ladies and Gentlemen:
Maxxim Medical Group, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to GS Mezzanine Partners, L.P., GS Mezzanine
Partners Offshore, L.P., John Hancock Mutual Life Insurance Company, John
Hancock Variable Life Insurance Company, Signature 3 Limited, Merrill Lynch
International, The Northwestern Mutual Life Insurance Company, Chase Equity
Associates, L.P., CIBC WMC, Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Nationwide Life Insurance Company, Deutsche Bank AG, New York
Branch and Credit Suisse First Boston Corporation (collectively, the
"Purchasers"), upon the terms and subject to the conditions set forth in a
purchase agreement dated November 12, 1999 (the "Purchase Agreement"),
$144,552,000 principal amount at maturity of its Senior Subordinated Discount
Notes due 2009 (the "Securities") to be jointly and severally guaranteed on a
senior subordinated basis by certain of the Company's subsidiaries signatory
hereto (the "Subsidiary Guarantors") and Maxxim Medical, Inc., a Texas
corporation ("Holdings", and together with the Subsidiary Guarantors, the
"Guarantors"). Capitalized terms used
<PAGE> 3
but not defined herein shall have the meanings given to such terms in the
Purchase Agreement.
As an inducement to the Purchasers to enter into the Purchase
Agreement, the Company and the Guarantors agree with the Purchasers, for the
benefit of the holders (including the Purchasers) of the Securities and the
Exchange Securities (as defined in Section 1) (collectively, the "Holders"), as
follows:
1. Registered Exchange Offer. The Company and the Guarantors shall (i)
prepare and, not later than 75 days following the date of original issuance of
the Securities (the "Issue Date"), file with the Commission a registration
statement (the "Exchange Offer Registration Statement") on an appropriate form
under the Securities Act with respect to a proposed offer to the Holders of the
Securities (the "Registered Exchange Offer") to issue and deliver to such
Holders, in exchange for the Securities, a like principal amount at maturity of
debt securities of the Company (the "Exchange Securities") that are identical
in all material respects to the Securities, except for the transfer
restrictions relating to the Securities, (ii) use their reasonable best efforts
to cause the Exchange Offer Registration Statement to become effective under
the Securities Act no later than 150 days after the Issue Date and the
Registered Exchange Offer to be consummated no later than 180 days after the
Issue Date and (iii) keep the Exchange Offer Registration Statement effective
for not less than 30 days (or longer, if required by applicable law) after the
date on which notice of the Registered Exchange Offer is mailed to the Holders
(such period being called the "Exchange Offer Registration Period"). The
Exchange Securities will be issued under the Indenture or an indenture (the
"Exchange Securities Indenture") between the Company, the Guarantors and the
Trustee or such other bank or trust company that is reasonably satisfactory to
the Purchasers, as trustee (the "Exchange Securities Trustee"), such indenture
to be identical in all material respects to the Indenture, except for the
transfer restrictions relating to the Securities (as described herein).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not an affiliate of the Company or an Exchanging Dealer (as defined below) not
complying with the requirements of the next sentence, (b) acquires the Exchange
Securities in the ordinary course of such Holder's business and (c) has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Securities) and to trade such Exchange Securities
from and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. The Company, the Guarantors, the
Purchasers and each Exchanging Dealer acknowledge that, pursuant to current
interpretations by the
3
<PAGE> 4
Commission's staff of Section 5 of the Securities Act, each Holder that is a
broker-dealer electing to exchange Securities, acquired for its own account as
a result of market-making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing substantially the information set forth in Annex A hereto on the
cover, in Annex B hereto in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer. Each Purchaser represents to Holdings and the
Company that it is acquiring the Notes to be purchased by it pursuant to the
Purchase Agreement for its own account, for investment, and not with a view to
or for sale in connection with any distribution thereof in violation of the
registration provisions of the Securities Act or the rules and regulations
promulgated thereunder.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York City time, on the last business day on
which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all material respects with all laws that are
applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer, the Company shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer;
(b) deliver to the Trustee for cancelation all Securities so accepted
for exchange; and
4
<PAGE> 5
(c) cause the Trustee or the Exchange Securities Trustee, as the case
may be, promptly to authenticate and deliver to each Holder Exchange
Securities equal in principal amount at maturity to the Securities of
such Holder so accepted for exchange.
The Company and the Guarantors shall use their reasonable 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 used by all persons subject to the prospectus delivery requirements of
the Securities Act for such period of time as such persons must comply with
such requirements in order to resell the Exchange Securities; provided that (i)
in the case where such prospectus and any amendment or supplement thereto must
be delivered by an Exchanging Dealer, such period shall be the period beginning
on the date on which the Exchange Offer Registration Statement is declared
effective and ending on the earlier to occur of (x) the date that is 180 days
after the date on which the Exchange Offer Registration Statement is declared
effective and (y) the date on which all Exchanging Dealers have sold all
Exchange Securities held by them and (ii) the Company shall make such
prospectus and any amendment or supplement thereto available to any
broker-dealer for use in connection with any resale of any Exchange Securities
for a period of not less than 90 days after the consummation of the Registered
Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the case may
be, shall provide that the Securities and the Exchange Securities shall vote
and consent together on all matters as one class and that neither the
Securities nor the Exchange Securities will have the right to vote or consent
as a separate class on any matter.
Interest on each Exchange Security issued pursuant to the Registered
Exchange Offer will accrue from the last interest payment date on which
interest was paid on the Securities surrendered in exchange therefor or, if no
interest has been paid on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of
the Registered Exchange Offer (i) any Exchange Securities received by such
Holder will be acquired in the ordinary course of business, (ii) such Holder
will have no arrangements or understanding with any person to participate in
the distribution of the Securities or the Exchange Securities within the
meaning of the Securities Act and (iii) such Holder is not an affiliate of the
Company or, if it is such an affiliate, such Holder will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
5
<PAGE> 6
Notwithstanding any other provisions hereof, the Company and the
Guarantors will ensure that (i) any Exchange Offer Registration Statement and
any amendment thereto and any prospectus forming part thereof and any
supplement thereto complies in all material respects with the Securities Act
and the rules and regulations of the Commission thereunder, (ii) any Exchange
Offer Registration Statement and any amendment thereto does not, when it
becomes effective, 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 not misleading and (iii) any prospectus forming part of any
Exchange Offer Registration Statement, and any supplement to such prospectus,
does not, as of the consummation of the Registered Exchange Offer, include 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.
2. Shelf Registration. If (i) because of any change in law or the
applicable interpretations thereof by the Commission's staff the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) any Securities validly tendered pursuant to the Registered
Exchange Offer are not exchanged for Exchange Securities on or prior to 180
days after the Issue Date, or (iii) any Purchaser so requests on or prior to
the 20th business day following the date on which the Registered Exchange Offer
is consummated with respect to Securities not eligible to be exchanged for
Exchange Securities in the Registered Exchange Offer and held by it following
the consummation of the Registered Exchange Offer, or (iv) any law or the
applicable interpretations thereof by the Commission's staff do not permit any
Holder to participate in the Registered Exchange Offer, or (v) any Holder that
participates in the Registered Exchange Offer and does not receive freely
transferable Exchange Securities in exchange for tendered Securities so
requests with respect to such Securities on or prior to the 20th business day
following the date on which the Registered Exchange Offer is consummated, or
(vi) the Company so elects, then the following provisions shall apply:
6
<PAGE> 7
(a) The Company and the Guarantors shall use their reasonable best
efforts to file as promptly as practicable (but in no event more than 45
days after so required or requested pursuant to this Section 2) with the
Commission, and thereafter shall use their reasonable best efforts to
cause to be declared effective, a shelf registration statement on an
appropriate form under the Securities Act relating to the offer and sale
of the Transfer Restricted Securities (as defined in Section 3(a)) by the
Holders thereof from time to time in accordance with the methods of
distribution set forth in such registration statement (hereafter, a
"Shelf Registration Statement" and, together with any Exchange Offer
Registration Statement, a "Registration Statement"); provided that no
Holder (other than each Purchaser) shall be entitled to have any
Securities held by such Holder covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound by the
provisions of this Agreement applicable to such Holder.
(b) The Company and the Guarantors shall use their reasonable best
efforts to keep the Shelf Registration Statement continuously effective
in order to permit the prospectus forming part thereof to be used by
Holders of Transfer Restricted Securities for a period ending on the
earlier of (i) two years from the Issue Date or such shorter period that
will terminate when all the Transfer Restricted Securities covered by the
Shelf Registration Statement have been sold pursuant thereto and (ii) the
date on which the Securities become eligible for resale without volume
restrictions pursuant to Rule 144 under the Securities Act (in any such
case, such period being called the "Shelf Registration Period"). The
Company and the Guarantors shall be deemed not to have used their
reasonable best efforts to keep the Shelf Registration Statement
effective during the requisite period if any of them voluntarily take any
action that results in Holders of Transfer Restricted Securities covered
thereby not being able to offer and sell such Transfer Restricted
Securities during that period, unless (i) such action is required by law
or the applicable interpretations thereof by the Commission's staff or
(ii) such action is taken by the Company and the Guarantors in good faith
and for valid business reasons (not including avoidance of their
obligations hereunder), provided that the Company and the Guarantors on
or prior to 60 days thereafter comply with the requirements of Section
4(j) hereof. Any such period during which the Company and Guarantors fail
to keep the Shelf Registration Statement effective and usable for offers
and sales of Securities and Exchange Securities is referred to as a
"Suspension Period". A Suspension Period shall commence on and include
the date the Company and the Guarantors give notice that the Shelf
Registration Statement is no longer effective or the prospectus included
therein is no longer usable for offers and sales of Securities and
Exchange Securities and shall end on the date when each Holder of
Securities and Exchange Securities covered by such Shelf Registration
Statement either receives copies of the supplemented or amended
prospectus or other document
7
<PAGE> 8
contemplated by Section 4(j) hereof or is advised in writing by the
Company and the Guarantors that use of the prospectus may be resumed. If
more than one Suspension Period occurs during any period of 360
consecutive days, then the Company and the Guarantors will be jointly and
severally obligated to pay Additional Amounts (as defined in Section
3(a)), in accordance with the provisions of Section 3, to each Holder of
Transfer Restricted Securities during each such Suspension Period in an
amount equal to $0.192 per week per $1,000 of Accreted Value (as defined
in the Indenture) (as of the most recent interest payment date, or if no
interest has been paid, the Issue Date) of Transfer Restricted Securities
held by such Holder. If one or more Suspension Periods occur, the
two-year time period referenced in the first sentence of this Section
2(b) shall be extended by the number of days included in each such
Suspension Period.
(c) Notwithstanding any other provisions hereof, the Company and the
Guarantors will ensure that (i) any Shelf Registration Statement and any
amendment thereto and any prospectus forming part thereof and any
supplement thereto complies in all material respects with the Securities
Act and the rules and regulations of the Commission thereunder, (ii) any
Shelf Registration Statement and any amendment thereto (in either case,
other than with respect to information included therein in reliance upon
or in conformity with written information furnished to the Company by or
on behalf of any Holder specifically for use therein (the "Holders'
Information")) does 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 not misleading and (iii) any prospectus
forming part of any Shelf Registration Statement, and any supplement to
such prospectus (in either case, other than with respect to Holders'
Information), does not include 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.
3. Liquidated Damages. (a) The parties hereto agree that the Holders
of Transfer Restricted Securities will suffer damages if the Company and the
Guarantors fail to fulfill their obligations under Section 1 or Section 2, as
applicable, and that it would not be feasible to ascertain the extent of such
damages. Accordingly, if (i) the applicable Registration Statement is not filed
with the Commission on or prior to 75 days after the Issue Date, (ii) the
Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, is not declared effective on or prior to 150 days after the
Issue Date (or in the case of a Shelf Registration Statement required to be
filed in response to a change in law or the applicable interpretations of
Commission's staff, if later, on or prior to 60 days after publication of the
change in law or interpretation), (iii) the Registered Exchange Offer is not
consummated on or prior to 180 days after the Issue Date, or (iv) the Shelf
Registration Statement is filed and declared effective on or
8
<PAGE> 9
prior to 150 days after the Issue Date (or in the case of a Shelf Registration
Statement required to be filed in response to a change in law or the applicable
interpretations of Commission's staff, if later, on or prior to 60 days after
publication of the change in law or interpretation) but shall thereafter cease
to be effective (at any time that the Company and the Guarantors are obligated
to maintain the effectiveness thereof) without being succeeded within 45 days
by an additional Registration Statement filed and declared effective (each such
event referred to in clauses (i) through (iv), a "Registration Default"), the
Company and the Guarantors will be jointly and severally obligated to pay
liquidated damages (collectively referred to herein as "Additional Amounts") to
each Holder of Transfer Restricted Securities, during the period of one or more
such Registration Defaults, in an amount equal to $0.192 per week per $1,000 of
Accreted Value (as of the most recent interest payment date, or if no interest
has been paid, the Issue Date) of Transfer Restricted Securities held by such
Holder until (i) the applicable Registration Statement is filed, (ii) the
Exchange Offer Registration Statement is declared effective and the Registered
Exchange Offer is consummated, (iii) the Shelf Registration Statement is
declared effective or (iv) the Shelf Registration Statement again becomes
effective, as the case may be. Following the cure of all Registration Defaults,
the accrual of Additional Amounts will cease. As used herein, the term
"Transfer Restricted Securities" means (i) each Security until the date on
which such Security has been exchanged for a freely transferable Exchange
Security in the Registered Exchange Offer, (ii) each Security until the date on
which it has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (iii) each Security
until the date on which it is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act. Notwithstanding anything to the contrary in this Section 3(a),
the Company and the Guarantors shall not be required to pay Additional Amounts
to a Holder of Transfer Restricted Securities if such Holder failed to comply
with its obligations to make the representations set forth in the second to
last paragraph of Section 1 or failed to provide the information required to be
provided by it, if any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent (as
defined in the Indenture) under the Indenture immediately upon the happening of
each and every Registration Default. The Company and the Guarantors shall pay
the Additional Amounts due on the Transfer Restricted Securities by depositing
with the Paying Agent (which may not be the Company for these purposes), in
trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York
City time, on the next interest payment date specified by the Indenture and the
Securities, sums sufficient to pay the Additional Amounts then due. The
Additional Amounts due shall be payable on each interest payment date specified
by the Indenture and the Securities to the record holder entitled to receive
the interest payment to be made on such date. Each obligation to pay Additional
Amounts shall be deemed to accrue from and including the date of the applicable
Registration Default.
9
<PAGE> 10
(c) The parties hereto agree that the Additional Amounts provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Purchaser, prior to the
filing thereof with the Commission, a copy of the Registration Statement
and each amendment thereof and each supplement, if any, to the prospectus
included therein and shall use its reasonable best efforts to reflect in
each such document, when so filed with the Commission, such comments as
any Purchaser may reasonably propose; (ii) include the information set
forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange
Offer Procedures" section and the "Purpose of the Exchange Offer" section
and in Annex C hereto in the "Plan of Distribution" section of the
prospectus forming a part of the Exchange Offer Registration Statement,
and include the information set forth in Annex D hereto in the Letter of
Transmittal (as defined in the Exchange Offer Registration Statement)
delivered pursuant to the Registered Exchange Offer; and (iii) if
requested by any Purchaser, include the information required by Items 507
or 508 of Regulation S-K, as applicable, in the prospectus forming a part
of the Exchange Offer Registration Statement.
(b) The Company shall advise each Purchaser, each Exchanging Dealer
and the Holders (if applicable) and, if requested by any such person,
confirm such advice in writing (which advice pursuant to clauses (ii)-(v)
hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment
thereto has been filed with the Commission and when such Registration
Statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
10
<PAGE> 11
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities or
the Exchange Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the making
of any changes in any Registration Statement so that (A) the
Registration Statement and any amendment thereto does not, when it
becomes effective, 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 not misleading or (B) any
prospectus forming part of any Registration Statement, and any
supplement to such prospectus, does not include 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.
(c) The Company and the Guarantors will use their reasonable best
efforts to obtain the withdrawal at the earliest possible time of any
order suspending the effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration
Statement, without charge, at least one conformed copy of such Shelf
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules and, if any such Holder so
requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within
the coverage of any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included
in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and the Company consents
to the use of such prospectus or any amendment or supplement thereto by
each of the selling Holders of Transfer Restricted Securities in
connection with the offer and sale of the Transfer Restricted Securities
covered by such prospectus or any amendment or supplement thereto.
11
<PAGE> 12
(f) The Company will furnish to each Purchaser and each Exchanging
Dealer, and to any other Holder who so requests, without charge, at least
one conformed copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules and, if any Purchaser or Exchanging Dealer or any such Holder
so requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(g) The Company will, during the Exchange Offer Registration Period or
the Shelf Registration Period, as applicable, promptly deliver to each
Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement or the Shelf Registration Statement
and any amendment or supplement thereto as such Purchaser, Exchanging
Dealer or other persons may reasonably request; and the Company and the
Guarantors consent to the use of such prospectus or any amendment or
supplement thereto by any such Purchaser, Exchanging Dealer or other
persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Company and the Guarantors will use their reasonable best efforts to
register or qualify, or cooperate with the Holders of Securities or
Exchange Securities included therein and their respective counsel in
connection with the registration or qualification of, such Securities or
Exchange Securities for offer and sale under the securities or blue sky
laws of such jurisdictions as any such Holder reasonably requests in
writing and do any and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the Securities or
Exchange Securities covered by such Registration Statement; provided that
neither the Company nor any Guarantor will be required to qualify
generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service
of process or to taxation in any such jurisdiction where it is not then
so subject.
(i) The Company and the Guarantors will cooperate with the Holders of
Securities or Exchange Securities to facilitate the timely preparation
and delivery of certificates representing Securities or Exchange
Securities to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such
names as the Holders thereof may request in writing prior to sales of
Securities or Exchange Securities pursuant to such Registration
Statement.
12
<PAGE> 13
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Company and the Guarantors are required
to maintain an effective Registration Statement, the Company and the
Guarantors will promptly prepare and file with the Commission a
post-effective amendment to the Registration Statement or a supplement to
the related prospectus or file any other required document so that, as
thereafter delivered to purchasers of the Securities or Exchange
Securities from a Holder, the prospectus will not include 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.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities and
the Exchange Securities, as the case may be, and provide the applicable
trustee with printed certificates for the Securities or the Exchange
Securities, as the case may be, in a form eligible for deposit with The
Depository Trust Company.
(l) The Company and the Guarantors will comply in all material
respects with all applicable rules and regulations of the Commission and
the Company will make generally available to its security holders as soon
as practicable after the effective date of the applicable Registration
Statement an earning statement satisfying the provisions of Section 11(a)
of the Securities Act; provided that in no event shall such earning
statement be delivered later than 45 days after the end of a 12-month
period (or 90 days, if such period is a fiscal year) beginning with the
first month of the Company's first fiscal quarter commencing after the
effective date of the applicable Registration Statement, which statement
shall cover such 12-month period.
(m) The Company and the Guarantors will cause the Indenture or the
Exchange Securities Indenture, as the case may be, to be qualified under
the Trust Indenture Act as required by applicable law in a timely manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration Statement
to furnish to the Company such information concerning the Holder and the
distribution of such Transfer Restricted Securities as the Company may
from time to time reasonably require for inclusion in such Shelf
Registration Statement, and the Company may exclude from such
registration the Transfer Restricted Securities of any Holder that fails
to furnish such information within a reasonable time after receiving such
request.
13
<PAGE> 14
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees
by acquisition of such Transfer Restricted Securities that, upon receipt
of any notice from the Company pursuant to Section 4(b)(ii) through (v),
such Holder will discontinue disposition of such Transfer Restricted
Securities until such Holder's receipt of copies of the supplemental or
amended prospectus or other document contemplated by Section 4(j) or
until advised in writing (the "Advice") by the Company that the use of
the applicable prospectus may be resumed. If the Company shall give any
notice under Section 4(b)(ii) through (v) during the period that the
Company is required to maintain an effective Registration Statement (the
"Effectiveness Period"), such Effectiveness Period shall be extended by
the number of days during such period from and including the date of the
giving of such notice to and including the date when each seller of
Transfer Restricted Securities covered by such Registration Statement
shall have received (x) the copies of the supplemental or amended
prospectus or other document contemplated by Section 4(j) (if an amended
or supplemental prospectus or other document is required) or (y) the
Advice (if no amended or supplemental prospectus or other document is
required).
(p) In the case of a Shelf Registration Statement, the Company and the
Guarantors shall enter into such customary agreements (including, if
requested, an underwriting agreement in customary form) and take all such
other action, if any, as Holders of a majority in principal amount at
maturity of the Securities and Exchange Securities being sold or the
managing underwriters (if any) shall reasonably request in order to
facilitate any disposition of Securities or Exchange Securities pursuant
to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and
Special Counsel (as defined in Section 5) acting for, Holders of a
majority in principal amount at maturity of the Securities and Exchange
Securities being sold and any underwriter participating in any
disposition of Securities or Exchange Securities pursuant to such Shelf
Registration Statement, all relevant financial and other records,
pertinent corporate documents and properties of the Company and the
Guarantors and (ii) use its reasonable best efforts to have its officers,
directors, employees, accountants and counsel supply all relevant
information reasonably requested by such representative, Special Counsel
or any such underwriter (an "Inspector") in connection with such Shelf
Registration Statement, in either case to the extent reasonably requested
by such representative, Special Counsel or underwriter for the purpose of
conducting customary due diligence with respect to the Company and the
Guarantors.
14
<PAGE> 15
(r) In the case of a Shelf Registration Statement, the Company shall,
if requested by Holders of a majority in principal amount at maturity of
the Securities and Exchange Securities being sold, their Special Counsel
or the managing underwriters (if any) in connection with such Shelf
Registration Statement, use its reasonable best efforts to cause (i) its
counsel to deliver an opinion relating to the Shelf Registration
Statement and the Securities or Exchange Securities, as applicable, in
customary form, (ii) its officers to execute and deliver all customary
documents and certificates requested by Holders of a majority in
principal amount at maturity of the Securities and Exchange Securities
being sold, their Special Counsel or the managing underwriters (if any)
and (iii) its independent public accountants to provide a comfort letter
or letters in customary form, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of
Auditing Standards No. 72.
5. Registration Expenses. The Company and the Guarantors will jointly
and severally bear all expenses incurred in connection with the performance of
their obligations under Sections 1, 2, 3 and 4 and the Company will reimburse
the Purchasers and the Holders for the reasonable fees and disbursements of one
firm of attorneys (in addition to any local counsel) chosen by the Holders of a
majority in principal amount at maturity of the Securities and the Exchange
Securities to be sold pursuant to each Registration Statement (the "Special
Counsel") acting for the Purchasers or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration Statement
or in connection with any prospectus delivery pursuant to an Exchange Offer
Registration Statement by a Purchaser or Exchanging Dealer, as applicable, the
Company and the Guarantors shall jointly and severally indemnify and hold
harmless each Holder (in the case of a Shelf Registration Statement, whose
Transfer Restricted Securities are registered thereunder) (including, without
limitation, any such Purchaser or Exchanging Dealer), its affiliates, their
respective officers, directors, employees, representatives and agents, and each
person, if any, who controls such Holder within the meaning of the Securities
Act or the Exchange Act (collectively referred to for purposes of this Section
6 and Section 7 as a Holder), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including,
without limitation, any loss, claim, damage, liability or action relating to
purchases and sales of Securities or Exchange Securities), to which that Holder
may become subject, whether commenced or threatened, under the Securities Act,
the Exchange Act, any other federal or state statutory law or regulation, at
common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order
15
<PAGE> 16
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, and shall reimburse each Holder promptly upon
demand for any legal or other expenses reasonably incurred by that Holder in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company and the Guarantors shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with any Holders' Information; and provided, further, that with
respect to any such untrue statement in or omission from any related
preliminary prospectus, the indemnity agreement contained in this Section 6(a)
shall not inure to the benefit of any Holder from whom the person asserting any
such loss, claim, damage, liability or action received Securities or Exchange
Securities to the extent that such loss, claim, damage, liability or action of
or with respect to such Holder results from the fact that both (A) a copy of
the final prospectus was not sent or given to such person at or prior to the
written confirmation of the sale of such Securities or Exchange Securities to
such person and (B) the untrue statement in or omission from the related
preliminary prospectus was corrected in the final prospectus unless, in either
case, such failure to deliver the final prospectus was a result of
non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement or in connection with any
prospectus delivery pursuant to an Exchange Offer Registration Statement by a
Purchaser or Exchanging Dealer, as applicable, each Holder shall indemnify and
hold harmless the Company and the Guarantors, their affiliates, their
respective officers, directors, employees, representatives and agents, and each
person, if any, who controls the Company or any Guarantor within the meaning of
the Securities Act or the Exchange Act (collectively referred to for purposes
of this Section 6(b) and Section 7 as the "Company"), from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof, to which the Company may become subject, whether commenced or
threatened, under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained
in any such Registration Statement or any prospectus forming part thereof or in
any amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with any Holders'
Information furnished to the Company by such Holder, and shall reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating
16
<PAGE> 17
or defending or preparing to defend against or appearing as a third party
witness in connection with any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that no such Holder shall be
liable for any indemnity claims hereunder in excess of the amount of net
proceeds received by such Holder from the sale of Securities or Exchange
Securities pursuant to such Shelf Registration Statement.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 or otherwise except
to the extent that it has been materially prejudiced by such failure. If any
such claim or action shall be brought against an indemnified party, and it
shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there
may be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying
party has not in fact employed counsel reasonably satisfactory to the
indemnified party to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be
at the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable
fees, disbursements and other charges of more than one separate firm of
attorneys (in addition to any local counsel) at any one time for all such
indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in
17
<PAGE> 18
Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnifying
party shall be liable for any settlement of any such action effected without
its written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party (which consent shall not be
unreasonably withheld), effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding and does not include a statement as to, or an admission of, fault,
culpability or failure to act, by or on behalf of any indemnified party.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in
respect thereof, (i) in such proportion as shall be appropriate to reflect the
relative benefits received by the Company from the initial offering and sale of
the Securities, on the one hand, and by a Holder from receiving Securities or
Exchange Securities, as applicable, registered under the Securities Act, on the
other, or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Guarantors, on the one hand, and such Holder, on the
other, with respect to the statements or omissions that resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative fault 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 the Company and the Guarantors or information supplied
by the Company and the Guarantors, on the one hand, or to any Holders'
Information supplied by such Holder, on the other, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such untrue statement or omission. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section 7
were to be determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 7 shall be deemed to include, for purposes of
this Section 7, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending or
18
<PAGE> 19
preparing to defend any such action or claim. Notwithstanding the provisions of
this Section 7, an indemnifying party that is a Holder of Securities or
Exchange Securities shall not be required to contribute any amount in excess of
the amount by which the total price at which the Securities or Exchange
Securities sold by such indemnifying party to any purchaser exceeds the amount
of any damages which such indemnifying party has otherwise paid or become
liable to pay by reason of any 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.
8. Rules 144 and 144A. The Company shall use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the written request of any Holder
of Transfer Restricted Securities, if a Shelf Registration Statement covering
such Transfer Restricted Securities is not then effective, make publicly
available other information so long as necessary to permit sales of such
Holder's securities pursuant to Rules 144 and 144A. The Company and the
Guarantors covenant that they will take such further action as any Holder of
Transfer Restricted Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Transfer Restricted
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rules 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). Upon the written request of
any Holder of Transfer Restricted Securities, the Company and the Guarantors
shall deliver to such Holder a written statement as to whether they have
complied with such requirements. Notwithstanding the foregoing, nothing in this
Section 8 shall be deemed to require the Company to register any of its
securities pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders
of a majority in principal amount at maturity of such Transfer Restricted
Securities included in such offering, subject to the consent of the Company
(which shall not be unreasonably withheld or delayed), and such Holders shall
be responsible for all underwriting commissions and discounts in connection
therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and
(ii) completes and executes all
19
<PAGE> 20
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
10. Miscellaneous. (a) 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, unless the Company
has obtained the written consent of Holders of a majority in principal amount
at maturity of the Securities and the Exchange Securities, taken as a single
class. 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 whose Securities or Exchange Securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of a majority in
principal amount at maturity of the Securities and the Exchange Securities
being sold by such Holders pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 10(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture;
(2) if to a Purchaser, initially at its address set forth in the
Purchase Agreement; and
(3) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon the
Company, the Guarantors and their respective successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties
20
<PAGE> 21
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.
(e) Definition of Terms. For purposes of this Agreement, (a) the term
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act and (c) except where otherwise expressly provided, the
term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) Remedies. In the event of a breach by the Company, any Guarantor
or by any Holder of any of their obligations under this Agreement, each Holder,
the Company or any Guarantor, as the case may be, in addition to being entitled
to exercise all rights granted by law, including recovery of damages (other
than the recovery of damages for a breach by the Company or any Guarantor of
its obligations under Sections 1 or 2 hereof for which Additional Amounts have
been paid pursuant to Section 3 hereof), will be entitled to specific
performance of its rights under this Agreement. The Company, the Guarantors and
each Holder agree that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by each such person of any of the
provisions of this Agreement and hereby further agree that, in the event of any
action for specific performance in respect of such breach, each such person
shall waive the defense that a remedy at law would be adequate.
(i) No Inconsistent Agreements. Other than in connection with the
Holdings Notes, the Company and each Guarantor represents, warrants and agrees
that (i) it has not entered into, and shall not on or after the date of this
Agreement, enter into any agreement that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof, (ii) it has not previously entered into any agreement which
remains in effect granting any registration rights with respect to any of its
debt securities to any person and (iii) (with respect to the Company) without
limiting the generality of the foregoing, without the written consent of the
Holders of a majority in principal amount at maturity of the then outstanding
Transfer Restricted Securities, it shall not grant to any person the right to
request the Company to register any debt securities of the Company under the
Securities Act unless the rights so granted are not in conflict or inconsistent
with the provisions of this Agreement.
21
<PAGE> 22
(j) No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Holders of Transfer Restricted Securities in
such capacity) shall have the right to include any securities of the Company in
any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
(k) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. 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 reasonable 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.
22
<PAGE> 23
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Guarantors and the Purchasers.
Very truly yours,
MAXXIM MEDICAL GROUP, INC.,
by /s/ Kenneth W. Davidson
--------------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President and
Chief Executive Officer
MAXXIM MEDICAL, INC., a Texas corporation,
by /s/ Kenneth W. Davidson
--------------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President and
Chief Executive Officer
MAXXIM MEDICAL, INC., a Delaware
corporation,
by /s/ Kenneth W. Davidson
--------------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President and
Chief Executive Officer
FABRITEK LA ROMANA, INC.,
by /s/ Kenneth W. Davidson
--------------------------------------
Name: Kenneth W. Davidson
Title: President, Secretary and
Treasurer
23
<PAGE> 24
MAXXIM INVESTMENT
MANAGEMENT, INC.,
by /s/ Peter M. Graham
--------------------------------------
Name: Peter M. Graham
Title: Chief Operating Officer,
Secretary and Senior
Executive Vice President
24
<PAGE> 25
Accepted:
GS MEZZANINE PARTNERS, L.P.
by GS MEZZANINE ADVISORS, L.P.,
its general partner,
by GS MEZZANINE ADVISORS, INC.,
its general partner,
by /s/ Melina Higgins
--------------------------------
Authorized Signatory
GS MEZZANINE PARTNERS OFFSHORE, L.P.
by GS MEZZANINE ADVISORS (CAYMAN), L.P.,
its general partner,
by GS MEZZANINE ADVISORS, INC.,
its general partner,
by /s/ Melina Higgins
--------------------------------
Authorized Signatory
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY,
by /s/ Stephen J. Blewitt
--------------------------------
Authorized Signatory
25
<PAGE> 26
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY,
by /s/ Stephen J. Blewitt
--------------------------------
Authorized Signatory
SIGNATURE 3 LIMITED,
by JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY, as Portfolio Advisor,
by /s/ Stephen J. Blewitt
--------------------------------
Authorized Signatory
MERRILL LYNCH INTERNATIONAL,
by JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY, as Manager under that
certain Bond Purchase and Asset Management
Agreement dated as of June 22, 1999,
by /s/ Stephen J. Blewitt
--------------------------------
Authorized Signatory
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY,
by /s/ Gary A. Poliner
--------------------------------
Authorized Signatory
26
<PAGE> 27
CHASE EQUITY ASSOCIATES, L.P.,
by CHASE CAPITAL PARTNERS,
its general partner,
by /s/ John O'Connor
--------------------------------
Authorized Signatory
CIBC WMC, INC.,
by /s/ Ken Kilgour
--------------------------------
Authorized Signatory
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
by /s/ Christopher K. Stout
--------------------------------
Authorized Signatory
NATIONWIDE LIFE INSURANCE COMPANY,
by /s/ Jerry D. Cohen
--------------------------------
Authorized Signatory
27
<PAGE> 28
DEUTSCHE BANK AG,
NEW YORK BRANCH,
by /s/ William W. Archer
--------------------------------
Authorized Signatory
CREDIT SUISSE FIRST BOSTON
CORPORATION,
by /s/ Richard Gallant
--------------------------------
Authorized Signatory
28
<PAGE> 29
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a 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
broker-dealer in connection with resales of Exchange Securities received in
exchange for Securities where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
consummation of the Registered Exchange Offer, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution".
<PAGE> 30
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution".
<PAGE> 31
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 90 days after the consummation of the Registered
Exchange Offer, it will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until [ ], 2000, all dealers effecting transactions in the
Exchange Securities may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Registered Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market,
in negotiated transactions, through the writing of options on the Exchange
Securities 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 at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to
the Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission 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 broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the consummation of the Registered
Exchange Offer the Company will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed to pay all expenses incident to the Registered Exchange
Offer (including the expenses of one counsel for the Holders of the Securities)
other than commissions or concessions of any broker-dealers and will indemnify
the Holders of the Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
<PAGE> 32
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it
is not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE> 1
Exhibit 4.5
MAXXIM MEDICAL, INC.
Senior Discount Notes due 2010
----------------------------------------------------------------
INDENTURE
Dated as of November 12, 1999
Wilmington Trust COMPANY
as Trustee
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 1 Definitions and Incorporation by Reference........................................1
SECTION 1.01. Definitions................................................................1
SECTION 1.02. Other Definitions.........................................................20
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.........................20
SECTION 1.04. Rules of Construction.....................................................21
ARTICLE 2 The Notes........................................................................22
SECTION 2.01. Form and Dating...........................................................22
SECTION 2.02. Execution and Authentication..............................................22
SECTION 2.03. Registrar and Paying Agent................................................22
SECTION 2.04. Paying Agent to Hold Money in Trust.......................................23
SECTION 2.05. Holder Lists..............................................................23
SECTION 2.06. Transfer and Exchange.....................................................24
SECTION 2.07. Replacement Notes.........................................................24
SECTION 2.08. Outstanding Notes.........................................................25
SECTION 2.09. Temporary Notes...........................................................25
SECTION 2.10. Cancellation..............................................................25
SECTION 2.11. Defaulted Interest........................................................26
SECTION 2.12. CUSIP Numbers.............................................................26
ARTICLE 3 Redemption.......................................................................26
SECTION 3.01. Notices to Trustee........................................................26
SECTION 3.03. Notice of Redemption......................................................27
SECTION 3.04. Effect of Notice of Redemption............................................28
SECTION 3.05. Deposit of Redemption Price...............................................28
SECTION 3.06. Notes Redeemed in Part....................................................28
ARTICLE 4 Covenants........................................................................29
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 4.01. Payment of Notes..........................................................29
SECTION 4.02. SEC Reports...............................................................29
SECTION 4.03. Limitation on Indebtedness................................................29
SECTION 4.04. Limitation on Restricted Payments.........................................32
SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries..34
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock........................36
SECTION 4.07. Limitation on Transactions with Affiliates................................39
SECTION 4.08. Change of Control.........................................................40
SECTION 4.09. Compliance Certificate....................................................42
SECTION 4.10. Further Instruments and Acts..............................................42
SECTION 4.11. Limitation on Lines of Business...........................................42
SECTION 4.12. Limitation on the Sale or Issuance of Capital Stock
of Restricted Subsidiaries...........................................42
SECTION 4.13. Calculation of Original Issue Discount....................................43
ARTICLE 5 Successor Company................................................................43
SECTION 5.01. When Holdings May Merge or Transfer Assets................................43
ARTICLE 6 Defaults and Remedies............................................................44
SECTION 6.01. Events of Default.........................................................44
SECTION 6.02. Acceleration..............................................................46
SECTION 6.03. Other Remedies............................................................46
SECTION 6.04. Waiver of Past Defaults...................................................46
SECTION 6.05. Control by Majority.......................................................46
SECTION 6.06. Limitation on Suits.......................................................47
SECTION 6.07. Rights of Holders to Receive Payment......................................47
SECTION 6.08. Collection Suit by Trustee................................................47
SECTION 6.09. Trustee May File Proofs of Claim..........................................48
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 6.10. Priorities................................................................48
SECTION 6.11. Undertaking for Costs.....................................................48
SECTION 6.12. Waiver of Stay or Extension Laws..........................................48
ARTICLE 7 Trustee..........................................................................49
SECTION 7.01. Duties of Trustee.........................................................49
SECTION 7.02. Rights of Trustee.........................................................50
SECTION 7.03. Individual Rights of Trustee..............................................51
SECTION 7.04. Trustee's Disclaimer......................................................51
SECTION 7.05. Notice of Defaults........................................................51
SECTION 7.06. Reports by Trustee to Holders.............................................51
SECTION 7.07. Compensation and Indemnity................................................51
SECTION 7.08. Replacement of Trustee....................................................52
SECTION 7.09. Successor Trustee by Merger...............................................53
SECTION 7.10. Eligibility; Disqualification.............................................54
SECTION 7.11. Preferential Collection of Claims Against Holdings........................54
ARTICLE 8 Discharge of Indenture; Defeasance...............................................54
SECTION 8.01. Discharge of Liability on Notes; Defeasance...............................54
SECTION 8.02. Conditions to Defeasance..................................................55
SECTION 8.03. Application of Trust Money................................................56
SECTION 8.04. Repayment to Holdings.....................................................56
SECTION 8.05. Indemnity for Government Obligations......................................56
SECTION 8.06. Reinstatement.............................................................57
ARTICLE 9 Amendments.......................................................................57
SECTION 9.01. Without Consent of Holders................................................57
SECTION 9.02. With Consent of Holders...................................................58
SECTION 9.03. Compliance with Trust Indenture Act.......................................59
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9.04. Revocation and Effect of Consents and Waivers............................59
SECTION 9.05. Notation on or Exchange of Notes.........................................59
SECTION 9.06. Trustee to Sign Amendments...............................................59
ARTICLE 10 Miscellaneous....................................................................60
SECTION 10.01. Trust Indenture Act Controls.............................................60
SECTION 10.06. When Notes Disregarded...................................................61
SECTION 10.07. Rules by Trustee, Paying Agent and Registrar.............................62
SECTION 10.08. Legal Holidays...........................................................62
SECTION 10.09. GOVERNING LAW............................................................62
SECTION 10.10. No Recourse Against Others...............................................62
SECTION 10.11. Successors...............................................................62
SECTION 10.12. Multiple Originals.......................................................62
SECTION 10.13. Table of Contents; Headings..............................................63
</TABLE>
Appendix A - Provisions Relating to Initial Notes and Exchange Notes
Exhibit A - Form of Initial Definitive Note
Exhibit B - Form of Exchange Note
iv
<PAGE> 6
INDENTURE dated as of November 12, 1999, between MAXXIM MEDICAL, INC.,
a Texas corporation ("Holdings") and Wilmington Trust Company, a Delaware
banking corporation (acting hereunder not in its individual capacity but solely
as trustee, "Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of (a) Holdings' Senior
Discount Notes due 2010 issued on the date hereof (the "Initial Notes") and (b)
if and when issued as provided in the Registration Agreement (as defined in
Appendix A hereto (the "Appendix")) or in this Indenture, Holdings' Senior
Discount Notes due 2010 issued in the Registered Exchange Offer in exchange for
any Initial Notes or otherwise as provided in this Indenture (the "Exchange
Notes" and together with the Initial Notes and any PIK Notes issued hereunder,
the "Notes"). Except as otherwise provided herein, the Notes shall be limited
to $98,473,000 in aggregate principal amount at maturity, plus any additional
PIK Notes issued hereunder.
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Accreted Value" means, as of any date (the "Specified Date"), the
amount provided below for each $1,000 principal amount at maturity of Notes:
(a) if the Specified Date occurs on one of the following dates on or
prior to November 15, 2004 (each, a "Semi-Annual Accrual Date"), the Accreted
Value shall equal the amount set forth below under the "Accreted Value" column
for such Semi-Annual Accrual Date:
<TABLE>
<CAPTION>
Semi-Annual Accrual Date Accreted Value
------------------------ --------------
<S> <C>
Issue Date $ 507.76
November 15, 1999 $ 508.35
May 15, 2000 $ 543.93
November 15, 2000 $ 582.01
May 15, 2001 $ 622.75
November 15, 2001 $ 666.34
May 15, 2002 $ 712.99
November 15, 2002 $ 762.90
May 15, 2003 $ 816.30
November 15, 2003 $ 873.44
May 15, 2004 $ 934.58
November 15, 2004 $1000.00
</TABLE>
; or
(b) if the Specified Date occurs between two Semi-Annual Accrual Dates,
the Accreted Value shall equal the sum of (i) the Accreted Value for the
Semi-Annual Accrual Date immediately preceding such Specified Date and (ii) an
amount equal to the product of (1) the Accreted Value for the immediately
following Semi-Annual Accrual Date less the Accreted Value for the immediately
preceding Semi-Annual Accrual Date multiplied by (2) a fraction, the
1
<PAGE> 7
numerator of which is the number of days elapsed from the immediately preceding
Semi-Annual Accrual Date to the Specified Date, using a 360-day year of twelve
30-day months, and the denominator of which is 180 (or, if the Semi-Annual
Accrual Date immediately preceding the Specified Date is the Issue Date, the
denominator of which is 3). In the event the Trustee is required to take any
action which requires the calculation described in the preceding sentence, upon
request by the Trustee, Holdings shall calculate such Accreted Value and set
forth such in an Officers' Certificate; or
(c) If the Specified Date occurs after November 15, 2004, the Accreted
Value shall equal $1,000.
"Additional Amounts" means any liquidated damages payable pursuant to
the Registration Agreement.
"Additional Assets" means (a) any property or assets (other than
Indebtedness and Capital Stock) to be used by Holdings or a Restricted
Subsidiary in a Permitted Business; (b) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by Holdings or another Restricted Subsidiary; or (c) Capital Stock
constituting a minority interest in any Person that at such time is a
Restricted Subsidiary; provided, however, that any such Restricted Subsidiary
described in clauses (b) or (c) above is primarily engaged in a Permitted
Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of shares representing 10% or more of the total voting power
of the Voting Stock (on a fully diluted basis) of Holdings or the Company or of
rights or warrants to purchase such Voting Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
Holdings or any Restricted Subsidiary, including any disposition by means of a
merger, consolidation or similar transaction (each referred to for the purposes
of this definition as a "disposition"), of (a) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than Holdings or a
Restricted Subsidiary), (b) all or substantially all the assets of any division
or line of business of Holdings or any Restricted Subsidiary, or (c) any other
assets of Holdings or any Restricted Subsidiary outside of the ordinary course
of business of Holdings or such Restricted Subsidiary; other than, in the case
of (a), (b) and (c) above, (i) a disposition by a Restricted Subsidiary to
Holdings or by Holdings or a Restricted Subsidiary to a Wholly Owned
Subsidiary, (ii) for purposes of Section 4.06 only, a disposition subject to
Section 4.04, (iii) a disposition of assets with a fair market value of less
than $100,000, (iv) a disposition of Temporary Cash Investments or obsolete
equipment or other
2
<PAGE> 8
obsolete assets in the course of business consistent with past practices of
Holdings and (v) the disposition of all or substantially all of the assets of
Holdings in a manner permitted in Section 5.01 or any disposition that
constitutes a Change of Control under the Indenture; provided that Section 5.01
or Section 4.08, as the case may be, is complied with.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at 14%,
compounded annually) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (a) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness
or redemption or similar payment with respect to such Preferred Stock
multiplied by the amount of such payment by (b) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in
respect of the Credit Agreement and the collateral documents relating thereto
and any Refinancing Indebtedness with respect thereto, as amended from time to
time, including principal, premium, if any, interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not a claim for post-filing
interest is allowed in such proceedings), fees, charges, expenses,
reimbursement obligations and all other amounts payable thereunder or in
respect thereof.
"Board of Directors" means the Board of Directors of Holdings or any
committee thereof duly authorized to act on behalf of the Board of Directors of
Holdings.
"Business Day" means each day that is not a Legal Holiday.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of
or interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Capitalized Lease Obligations" means an obligation that is required to
be classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined
in accordance with GAAP; and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be prepaid by the lessee without payment
of a penalty.
"Circon" means Circon Corporation, a Delaware corporation.
"Circon Note" means a promissory note that may be issued in connection
with, or prior to the consummation of, the Transactions by Circon to Holdings
or a Restricted Subsidiary as a dividend payment.
3
<PAGE> 9
"Change of Control" means the occurrence of any of the following events:
(a) prior to the first public offering of common stock of Holdings, the
Permitted Holders, taken together, cease to be the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of a majority in the aggregate of the total voting power of the
Voting Stock of Holdings, whether as a result of the issuance of securities of
Holdings, any merger, consolidation, liquidation or dissolution of Holdings,
any direct or indirect transfer of securities by any Permitted Holder or
otherwise (for purposes of this clause (a) and clause (b) below, the Permitted
Holders shall be deemed to beneficially own any Voting Stock of an entity (the
"specified entity") held by any other entity (the "parent entity") so long as
the Permitted Holders beneficially own, directly or indirectly, in the
aggregate a majority of the voting power of the Voting Stock of the parent
entity);
(b) (i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in clause (a) above, except that for purposes
of this clause (b) such person shall be deemed to have "beneficial ownership"
of all shares that any such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of the Voting Stock of
Holdings and (ii) the Permitted Holders "beneficially own" (as defined in
clause (a) above), directly or indirectly, in the aggregate a lesser percentage
of the total voting power of the Voting Stock of Holdings than such other
person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of Holdings (for the purposes of this clause (b), such other person
shall be deemed to beneficially own any Voting Stock of a specified entity held
by a parent entity, if such other person is the beneficial owner (as defined in
this clause (b)), directly or indirectly, of more than 35% of the voting power
of the Voting Stock of such parent entity and the Permitted Holders
"beneficially own" (as defined in clause (a) above), directly or indirectly, in
the aggregate a lesser percentage of the voting power of the Voting Stock of
such parent entity and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
board of directors of such parent entity);
(c) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of Holdings
(together with any new directors (i) whose election by such Board of Directors
of Holdings, or whose nomination for election by the shareholders of Holdings,
was approved by a majority vote of the directors of Holdings then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved or (ii) who are
designees of the Permitted Holders or were nominated by the Permitted Holders)
cease for any reason to constitute a majority of the Board of Directors of
Holdings then in office;
(d) the adoption of a plan relating to the liquidation or dissolution
of Holdings; or
(e) the merger or consolidation of Holdings with or into another Person
or the merger of another Person with or into Holdings, or the sale of all or
substantially all the assets of Holdings to another Person (other than a Person
that is controlled by the Permitted Holders), and, in the case of any such
merger or consolidation, the securities of Holdings that are outstanding
4
<PAGE> 10
immediately prior to such transaction and that represent 100% of the aggregate
voting power of the Voting Stock of Holdings are changed into or exchanged for
cash, securities or property, unless pursuant to such transaction such
securities are changed into or exchanged for, in addition to any other
consideration, securities of the surviving Person or transferee that represent
immediately after such transaction, at least a majority of the aggregate voting
power of the Voting Stock of the surviving Person or transferee.
"Closing Date" means the original date of this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Maxxim Medical Group, Inc., a Delaware corporation.
"Company Guarantor" means Holdings and each Subsidiary of the Company
which has at such time guaranteed the obligations of the Company under the
Company Notes.
"Company Indenture" means the Indenture, dated as of November 12, 1999,
among the Company, the Company Guarantors and The Bank of New York, as trustee,
providing for the issuance of the Company Notes.
"Company Note Guarantee" means each guarantee of the obligations with
respect to the Company Notes issued by a Company Guarantor pursuant to the
terms of the Company Indenture.
"Company Notes" means the Company's Senior Subordinated Discount Notes
due 2009 issued pursuant to the Company Indenture.
"Company Refinancing Indebtedness" means Refinancing Indebtedness as
defined in the Company Indenture as in effect on the date hereof.
"Consolidated Coverage Ratio" means, as of any date of determination,
the ratio of (a) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at the end of the most recent
fiscal quarter for which financial statements are publicly available or are
otherwise provided pursuant to the Purchase Agreement, to (b) Consolidated
Interest Expense for such four fiscal quarters; provided, however, that (i) if
Holdings or any Restricted Subsidiary has Incurred any Indebtedness since the
beginning of such period that remains outstanding on such date of determination
or if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds of such
new Indebtedness as if such discharge had occurred on the first day of such
period, (ii) if Holdings or any Restricted Subsidiary has repaid, repurchased,
defeased or otherwise discharged any Indebtedness since the beginning of such
period or if any Indebtedness is to be repaid, repurchased, defeased or
otherwise discharged on the date of the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest
Expense for such period shall be calculated on a pro forma
5
<PAGE> 11
basis as if such discharge had occurred on the first day of such period and as
if Holdings or such Restricted Subsidiary has not earned the interest income
actually earned during such period in respect of cash or Temporary Cash
Investments used to repay, repurchase, defease or otherwise discharge such
Indebtedness, (iii) if since the beginning of such period Holdings or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets that are the subject of such Asset
Disposition for such period or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of
Holdings or any Restricted Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to Holdings and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness of
such Restricted Subsidiary to the extent Holdings and its continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after such sale), (iv)
if since the beginning of such period Holdings or any Restricted Subsidiary (by
merger or otherwise) shall have made an Investment in any Restricted Subsidiary
(or any Person that subsequently became a Restricted Subsidiary or was merged
with or into Holdings or any Restricted Subsidiary since the beginning of such
period) or an acquisition of assets (including by acquisition of the Capital
Stock of an entity that becomes a Restricted Subsidiary), including any
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, a product line or a line of business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of such period
and (v) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into Holdings or any
Restricted Subsidiary since the beginning of such period) shall have made any
Asset Disposition or any Investment or acquisition of assets that would have
required an adjustment pursuant to clause (iii) or (iv) above if made by
Holdings or a Restricted Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition of
assets occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be
given to an Investment, acquisition of assets or Capital Stock or Asset
Disposition under clauses (iii), (iv) or (v) above, the pro forma calculations
shall be determined in good faith by a responsible financial or accounting
Officer of Holdings and shall include those adjustments permitted in accordance
with GAAP and/or Article XI of Regulation S-X (or any successor thereto)
promulgated by the SEC. Notwithstanding the foregoing, with respect to any
Investment or acquisition of assets or Capital Stock (in each case, by merger
or otherwise), any such pro forma calculations may include the annualized
amount of operating expense reductions (net of any annualized expenses
(including interest expense) incurred to achieve such operating expense
reductions) for such period resulting from the acquisition or other transaction
which is being given pro forma effect that have been realized or for which the
steps necessary for realization have been taken or are reasonably expected to
be taken within six months following any such acquisition or other transaction,
including but not limited to, the execution or termination of any contracts,
the termination of any
6
<PAGE> 12
personnel or the closing (or approval by the Board of Directors of Holdings of
the closing) of any facility, as applicable. In addition, and notwithstanding
the foregoing, for purposes of calculating the Consolidated Coverage Ratio, as
of any date of determination, pro forma effect may be given to the annualized
amount of operating expense reductions (net of any annualized expenses
(including interest expense) incurred to achieve such operating expense
reductions) resulting from any acquisitions or other transactions occurring in
either of the two fiscal quarters prior to the four quarter reference period
for which the Consolidated Coverage Ratio is being calculated, provided that
(1) such acquisition or other transaction would have been given pro forma
effect under clause (iv) or (v) above had it occurred in the four quarter
reference period for which the Consolidated Coverage Ratio is being calculated
and (2) such operating expense reductions have been realized, or the steps
necessary for realization have been taken or are reasonably expected to be
taken within six months following any such acquisition or other transaction,
including the steps described in the immediately preceding sentence. In
connection with any pro forma adjustment or adjustments made pursuant to either
of the two immediately preceding sentences, such adjustment or adjustments
shall be set forth in an Officers' Certificate signed by Holdings' Chief
Financial Officer and another Officer which states (x) the amount of such
adjustment or adjustments, (y) that such adjustment or adjustments are based on
the reasonable good faith beliefs of the Officers executing such Officers'
Certificate at the time of such execution and (z) that any related Incurrence
of Indebtedness is permitted pursuant to this Indenture.
If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term as at the date of determination in excess of twelve months). In
addition, for purposes of the computations referred to in clauses (i) and (ii)
above, interest expense on any Indebtedness under any revolving credit facility
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period.
"Consolidated Current Liabilities" as of any date of determination
means the aggregate amount of liabilities of Holdings and its Consolidated
Restricted Subsidiaries which may properly be classified as current liabilities
(including taxes accrued as estimated), on a Consolidated basis, after
eliminating: (a) all intercompany items between Holdings and any Restricted
Subsidiary; and (b) all current maturities of long-term Indebtedness, all as
determined in accordance with GAAP consistently applied.
"Consolidated Interest Expense" means, for any period, the total
interest expense of Holdings and its Consolidated Restricted Subsidiaries, to
the extent such interest expense was deducted in computing Consolidated Net
Income plus, to the extent Incurred by Holdings and its Consolidated Restricted
Subsidiaries in such period but not included in such interest expense, (a)
interest expense attributable to Capitalized Lease Obligations and interest
expense attributable to leases constituting part of a Sale/Leaseback
Transaction; (b) amortization of debt discount and debt issuance costs (other
than (i) debt issuance costs incurred in connection with the Transactions and
(ii) any other debt issuance costs incurred in amounts, and on terms, that are
customary and reasonable in light of then prevailing market conditions); (c)
capitalized interest;
7
<PAGE> 13
(d) noncash interest expense; (e) amortization of, or other charges for,
commissions, discounts and other fees and charges attributable to letters of
credit and bankers' acceptance financing; (f) interest accruing on any
Indebtedness of any other Person to the extent such Indebtedness is guaranteed
by Holdings or any Restricted Subsidiary; (g) amortization of net costs
associated with Hedging Obligations (including amortization of fees); (h)
dividends in respect of all Disqualified Stock of Holdings and all Preferred
Stock of any of the Subsidiaries of Holdings, to the extent held by Persons
other than Holdings or a Wholly Owned Subsidiary; (i) interest Incurred in
connection with investments in discontinued operations; and (j) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than Holdings and its Consolidated Restricted
Subsidiaries) in connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of
Holdings and its Consolidated Subsidiaries for such period; provided, however,
that there shall not be included in such Consolidated Net Income:
(a) any net income of any Person (other than Holdings) if such
Person is not a Restricted Subsidiary, except that (i) subject to the
limitations contained in clause (d) below, Holdings' equity in the net income
of any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash or the Fair Market Value of other
assets actually distributed by such Person during such period to Holdings or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution made to a Restricted Subsidiary, to the
limitations contained in clause (c) below) and (ii) the Holdings' equity in a
net loss of any such Person for such period shall be included in determining
such Consolidated Net Income (but only to the extent (cumulative of such
losses) of Holdings' Investment in such Person);
(b) any net income (or loss) of any Person acquired by Holdings or a
Subsidiary of Holdings in a pooling of interests transaction for any period
prior to the date of such acquisition;
(c) any net income of any Restricted Subsidiary (other than the
Company) to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of its net income is not, at the
date of determination, permitted without any prior governmental approval (which
has not been obtained) or, directly or indirectly, by the operation of the
terms of its charter, or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders (in either case other than the Company), unless
such restrictions with respect to the payment of dividends or similar
distributions have been legally waived, except that the net loss of any such
Restricted Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(d) any gain (but not loss) realized upon the sale or other
disposition of any asset of Holdings or its Consolidated Subsidiaries
(including pursuant to any Sale/Leaseback Transaction) that is not sold or
otherwise disposed of in the ordinary course of business and any gain (but not
loss) realized upon the sale or other disposition of any Capital Stock of any
Person;
8
<PAGE> 14
(e) any extraordinary or otherwise nonrecurring gain or loss; and
(f) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries
to Holdings or a Restricted Subsidiary to the extent such dividends, repayments
or transfers increase the amount of Restricted Payments permitted under Section
4.04(a)(iv)(3)(E)(x).
"Consolidated Net Tangible Assets" as of any date of determination,
means the total amount of assets (less accumulated depreciation and
amortization, allowances for doubtful receivables, other applicable reserves
and other properly deductible items) which would appear on a consolidated
balance sheet of Holdings and its Consolidated Restricted Subsidiaries,
determined on a Consolidated basis in accordance with GAAP, and after giving
effect to purchase accounting and after deducting therefrom Consolidated
Current Liabilities and, to the extent otherwise included, the amounts of: (a)
minority interests in Consolidated Subsidiaries held by Persons other than
Holdings or a Restricted Subsidiary; (b) excess of cost over fair value of
assets of businesses acquired, as determined in good faith by the Board of
Directors of Holdings; (c) any revaluation or other write-up in book value of
assets subsequent to the Closing Date as a result of a change in the method of
valuation in accordance with GAAP consistently applied; (d) unamortized debt
discount and expenses and other unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights, licenses,
organization or developmental expenses and other intangible items; (e) treasury
stock; (f) cash set apart and held in a sinking or other analogous fund
established for the purpose of redemption or other retirement of Capital Stock
to the extent such obligation is not reflected in Consolidated Current
Liabilities; and (g) Investments in and assets of Unrestricted Subsidiaries.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of Holdings in accordance with GAAP
consistently applied; provided, however, that "Consolidation" shall not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of Holdings or any Restricted Subsidiary in an Unrestricted Subsidiary shall be
accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Agreement" means the credit agreement dated as of November 12,
1999 among the Company, Holdings, The Chase Manhattan Bank, as administrative
agent and collateral agent, Bankers Trust Company, as co-syndication agent,
Merrill Lynch Capital Corporation, as co-syndication agent, Credit Suisse First
Boston, as co-documentation agent, Canadian Imperial Bank of Commerce, as
co-documentation agent, and the lenders party thereto, as amended, waived or
otherwise modified from time to time (except to the extent that any such
amendment, waiver or other modification thereto would be prohibited by the
terms of this Indenture, unless otherwise agreed to by the Holders of at least
a majority in aggregate principal amount at maturity of Notes at the time
outstanding).
9
<PAGE> 15
"Currency Agreement" means with respect to any Person any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement to which such Person is a party or of which it is a beneficiary.
"Debt Tender Offer" means the debt tender offer to acquire up to $100.0
million of Existing Notes in connection with the Transactions.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Designated Noncash Consideration" means noncash consideration received
by Holdings or a Restricted Subsidiary in connection with an Asset Disposition
that is so designated as Designated Noncash Consideration pursuant to an
Officers' Certificate that sets forth the basis for valuing such Designated
Noncash Consideration.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event: (a) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise; (b) is convertible or exchangeable for
Indebtedness or Disqualified Stock (excluding Capital Stock convertible or
exchangeable solely at the option of Holdings or a Restricted Subsidiary,
provided that any such conversion or exchange shall be deemed an issuance of
Indebtedness or Disqualified Stock, as applicable); or (c) is redeemable at the
option of the holder thereof, in whole or in part, in the case of each of
clauses (a), (b) and (c) on or prior to the first anniversary of the Stated
Maturity of the Notes; provided, however, that any Capital Stock that would not
constitute Disqualified Stock but for provisions thereof giving holders thereof
the right to require such Person to repurchase or redeem such Capital Stock
upon the occurrence of an "asset sale" or "change of control" occurring prior
to the first anniversary of the Stated Maturity of the Notes shall not
constitute Disqualified Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are not more favorable to the
holders of such Capital Stock than the provisions of Sections 4.06 and 4.08.
"EBITDA" for any period means the Consolidated Net Income for such
period, plus, without duplication, the following to the extent deducted in
calculating such Consolidated Net Income: (a) income tax expense of Holdings
and its Consolidated Restricted Subsidiaries, (b) Consolidated Interest
Expense, (c) depreciation expense of Holdings and its Consolidated Restricted
Subsidiaries, (d) amortization expense of Holdings and its Consolidated
Restricted Subsidiaries (excluding amortization expense attributable to a
prepaid cash item that was paid in a prior period) and (e) all other noncash
charges of Holdings and its Consolidated Restricted Subsidiaries (excluding any
such noncash charge to the extent it represents an accrual of or reserve for
cash expenditures in any future period, but that will not be expensed in such
future periods) less all noncash items of income of Holdings and its
Consolidated Restricted Subsidiaries (other than noncash items representing an
accrual or reserve for cash to be received in any future period but that will
not be treated as income in such future periods), in each case for such period.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and noncash charges less all
noncash items of income of, a Restricted Subsidiary of Holdings (other than the
Company) shall be added to Consolidated Net Income to compute EBITDA only to
the extent (and in the same proportion)
10
<PAGE> 16
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted
at the date of determination to be dividended to the Company by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Equity Offering" means any public or private sale of Capital Stock
(other than Disqualified Stock) of Holdings, other than offerings of Holdings
of the type that can be registered on Form S-8 (or any successor form) pursuant
to the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Notes" means the 10 1/2% Senior Subordinated Notes due 2006
of Holdings prior to the Closing Date and the Company from and after the
Closing Date.
"Fair Market Value" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length 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. Except as required by
the next sentence, Fair Market Value will be determined in good faith by the
Board of Directors of Holdings, whose determination shall be conclusive and
evidenced by a resolution of the Board of Directors of Holdings. For purposes
of the definition of "Consolidated Net Income" and Section 4.06, the Fair
Market Value of assets or property, other than cash, which involves an
aggregate amount in excess of $10.0 million, shall have been determined in
writing by a nationally recognized appraisal, accounting or investment banking
firm.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, including those set
forth in (a) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants, (b) statements and
pronouncements of the Financial Accounting Standards Board, (c) such other
statements by such other entities as approved by a significant segment of the
accounting profession and (d) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
All ratios and computations based on GAAP contained in this Indenture shall be
computed in conformity with GAAP, except as specifically provided herein.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and any obligation, direct or indirect, contingent or
otherwise, of any Person (a) 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 (b)
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); provided,
however, that
11
<PAGE> 17
the term "guarantee" shall not include endorsements for collection or deposit
in the ordinary course of business. The term "guarantee" used as a verb has a
corresponding meaning. The term "guarantor" shall mean any Person guaranteeing
any obligation.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" means the Person in whose name a Note is registered on the
registrar's books.
"Holdings" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Incur" means issue, assume, guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person is merged or consolidated with Holdings
or becomes a Subsidiary of Holdings (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by such Person at the
time of such merger or consolidation or at the time it becomes a Subsidiary of
Holdings. The term "Incurrence" when used as a noun shall have a correlative
meaning. The accretion of principal of a non-cash interest bearing or other
discount security or addition of interest to principal on a pay-in-kind
security (including the issuance of PIK Notes hereunder) shall not be deemed
the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination, without duplication:
(a) the principal of and premium (if any) in respect of indebtedness of
such Person for borrowed money;
(b) the principal of and premium (if any) in respect of obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments;
(c) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement obligations with respect
thereto);
(d) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables and contingent
obligations to pay earn-outs, which earn-out obligations are not reflected as
indebtedness on the balance sheet of such Person), which purchase price is due
more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services;
(e) all Capitalized Lease Obligations and all Attributable Debt of such
Person;
(f) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of such Person, any Preferred Stock (but excluding,
in each case, any accrued dividends);
(g) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount
12
<PAGE> 18
of Indebtedness of such Person shall be the lesser of (i) the Fair Market Value
of such asset at such date of determination and (ii) the amount of such
Indebtedness of such other Persons;
(h) to the extent not otherwise included in this definition, Hedging
Obligations of such Person; and
(i) all obligations of the type referred to in clauses (a) through
(h) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
guarantee.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
except as provided above, the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at
such date.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extension of credit (including by way of guarantee or similar arrangement) 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 of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and Section 4.04, (a) "Investment" shall include the
portion (proportionate to Holdings' equity interest in such Subsidiary) of the
Fair Market Value of the net assets of any Subsidiary of Holdings at the time
that such Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, Holdings shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(i) Holdings' "Investment" in such Subsidiary at the time of such redesignation
less (ii) the portion (proportionate to Holdings' equity interest in such
Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at
the time of such redesignation; and (b) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of
such transfer.
"Issue Date" means the date on which the Initial Notes are originally
issued.
13
<PAGE> 19
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Group" means the group consisting of current and former
directors and executive officers of the Company or Holdings.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and
proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of the assumption by the acquiring Person of
Indebtedness or other obligations relating to the properties or assets that are
the subject of such Asset Disposition or received in any other noncash form)
therefrom, in each case net of (a) all legal fees and expenses, title and
recording tax expenses, commissions and other fees and expenses incurred
(including any out-of-pocket expenses relating to the relocation of assets or
personnel, any severance or other personnel costs and any other out-of-pocket
expenses of a similar nature, in each case incurred within twelve months of
such Asset Disposition), and all federal, state, provincial, foreign and local
taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition, (b) all payments, including any
prepayment premiums or penalties, made on any Indebtedness that is secured by
any assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon or other security agreement of any kind with respect to such
assets, or which must by its terms, or in order to obtain a necessary consent
to such Asset Disposition, or by applicable law be repaid out of the proceeds
from such Asset Disposition, (c) all distributions and other payments required
to be made to minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition and (d) appropriate amounts to be provided by
the seller as a reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed of in such Asset
Disposition and retained by Holdings or any Restricted Subsidiary after such
Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees and expenses actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Officer" means the Chairman of the Board, the Chief Executive Officer,
the Chief Financial Officer, the President, any Vice President, the Treasurer
or the Secretary of Holdings.
"Officers' Certificate" means a certificate signed by two Officers,
except with respect to the Trustee, in which case it will mean a certificate
signed by a Trust Officer.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to
Holdings or the Trustee.
14
<PAGE> 20
"Permitted Business" means any business engaged in by Holdings or any
Restricted Subsidiary on the Closing Date and any Related Business.
"Permitted Holders" means Fox Paine Capital Fund, L.P. and its
Affiliates, FPC Investors, L.P., Maxxim Coinvestment Fund I, LLC, Maxxim
Coinvestment Fund II, LLC, Maxxim Coinvestment Fund III, LLC, Maxxim
Coinvestment Fund IV, LLC, Maxxim Coinvestment Fund V, LLC, any Person acting
in the capacity of an underwriter in connection with a public or private
offering of Holding's Capital Stock or, at any time that the Purchasers and
their Affiliates own less than a majority in aggregate principal amount of
Notes at maturity at the time outstanding, the Management Group.
"Permitted Investment" means an Investment by Holdings or any
Restricted Subsidiary in (a) Holdings, a Restricted Subsidiary or a Person that
will, upon the making of such Investment (including the purchase of its Capital
Stock), become a Restricted Subsidiary; provided, however, that the primary
business of such Restricted Subsidiary is a Permitted Business; (b) another
Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, Holdings or a Restricted Subsidiary; provided, however, that such
Person's primary business is a Permitted Business; (c) Temporary Cash
Investments; (d) receivables owing to Holdings or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however, that
such trade terms may include such concessionary trade terms as Holdings or any
such Restricted Subsidiary deems reasonable under the circumstances; (e)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (f) any loans or
advances to employees or consultants made in the ordinary course of business
consistent with past practices of Holdings or such Restricted Subsidiary and
not exceeding $5.0 million in the aggregate outstanding at any one time; (g)
stock, obligations or securities received in settlement of (or foreclosure with
respect to) debts created in the ordinary course of business and owing to
Holdings or any Restricted Subsidiary or in satisfaction of judgments; (h) any
Person to the extent such Investment represents the noncash or deemed cash
portion of the consideration received for an Asset Disposition that was made
pursuant to and in compliance with Section 4.06; (i) (x) any Investment
existing on the Closing Date and (y) in the case of loans and advances made to
employees or consultants and existing on the Closing Date, such loans and
advances and any extensions or Refinancings thereof; (j) Hedging Obligations
permitted under Section 4.03(b)(vii); (k) guarantees of Indebtedness permitted
under Section 4.03; (l) the Circon Note; (m) Investments which are made
exclusively with Capital Stock of Holdings (other than Disqualified Stock); and
(n) additional Investments having an aggregate Fair Market Value, taken
together with all other Investments made pursuant to this clause (n) that are
at the time outstanding, not to exceed $10.0 million at the time of such
Investment (with the Fair Market Value of each Investment being measured at the
time made and without giving effect to subsequent changes in value).
15
<PAGE> 21
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PIK Notes" has the meaning ascribed thereto in Exhibits A and B hereto.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"principal" of a Note at any time means the Accreted Value of the Note
at the relevant time, plus the premium, if any, payable on the Note which is
due or overdue or is to become due at the relevant time.
"Public Equity Offering" means an underwritten primary public offering
of common stock of Holdings pursuant to an effective registration statement
under the Securities Act.
"Purchase Agreement" means the Purchase Agreement, dated November 12,
1999, between Holdings and the Purchasers pursuant to which the Initial Notes
were issued.
"Purchasers" has the meaning ascribed thereto in the Purchase Agreement.
"Purchase Money Indebtedness" means Indebtedness (a) consisting of the
deferred purchase price of an asset or Capital Stock, conditional sale
obligations, obligations under any title retention agreement and other purchase
money obligations, in each case where the maturity of such Indebtedness does
not exceed the anticipated useful life of the asset being financed, and (b)
incurred to finance the acquisition by Holdings or a Restricted Subsidiary of
such asset or Capital Stock, including additions and improvements; provided,
however, that such Indebtedness is incurred within 180 days before or after the
acquisition by Holdings or such Restricted Subsidiary of such asset.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, replace, prepay, redeem, defease or retire, or to
issue other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, repay, redeem, retire, renew, repay or extend
(including pursuant to any defeasance or discharge mechanism) any Indebtedness
of Holdings or any Restricted Subsidiary existing on the Closing Date or
Incurred in compliance with this Indenture including Indebtedness of Holdings
or the Company that Refinances Refinancing Indebtedness; provided, however,
that (a) other than with respect to Bank Indebtedness or the Company Notes, the
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced; (b) other than with respect to
Bank Indebtedness or the Company Notes, the Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is Incurred that is
equal to or greater than the Average Life of the Indebtedness being Refinanced;
(c) such
16
<PAGE> 22
Refinancing Indebtedness is Incurred in an aggregate principal amount (or if
issued with original issue discount, an aggregate issue price) that is equal to
or less than the aggregate principal amount (or if issued with original issue
discount, the aggregate accreted value) then outstanding of the Indebtedness
being Refinanced (or, in the case of Bank Indebtedness, in an aggregate
principal amount of commitments or loans thereunder of up to $310.0 million
less the aggregate amount of prepayments of Bank Indebtedness pursuant to
Section 4.06); and (d) if the Indebtedness being Refinanced is subordinated in
right of payment to the Notes, such Refinancing Indebtedness is subordinated in
right of payment to the Notes at least to the same extent as the Indebtedness
being Refinanced; provided further, however, that Refinancing Indebtedness
shall not include (i) Indebtedness of a Restricted Subsidiary that Refinances
Indebtedness of Holdings or (ii) Indebtedness of Holdings or a Restricted
Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.
"Related Assets" means (a) assets used or useful in a Permitted
Business or (b) equity interests representing a majority of the Voting Stock of
Persons engaged in a Permitted Business.
"Related Business" means any business related, ancillary or
complementary to the businesses of Holdings and the Restricted Subsidiaries on
the Closing Date.
"Restricted Subsidiary" means any Subsidiary of Holdings other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired by Holdings or a Restricted Subsidiary whereby
Holdings or a Restricted Subsidiary transfers such property to a Person and
Holdings or such Restricted Subsidiary leases it from such Person, other than
leases between Holdings and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of Holdings secured by a
Lien.
"Securities Act" means the Securities Act of 1933, as amended.
"Services Agreement" means the Services Agreement to be entered into by
Circon, Circon Holdings Corporation, the Company and Holdings in connection
with the Transactions.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of Holdings within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
17
<PAGE> 23
"Subordinated Obligation" means any Indebtedness of Holdings (whether
outstanding on the Closing Date or thereafter Incurred) that is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.
"Subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as
any other corporation, limited liability company, partnership, association or
other entity: (a) of which securities or other ownership interests representing
more than 50% of the equity or more than 50% of the ordinary voting power or,
in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held; or (b) that is, as
of such date, otherwise controlled by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent.
"Temporary Cash Investments" means any of the following: (a) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (b) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company that is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital, surplus and
undivided profits aggregating in excess of $250.0 million (or the foreign
currency equivalent thereof) and whose long-term debt is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act), (c) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (a) above entered into
with a bank meeting the qualifications described in clause (b) above, (d)
investments in commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America or any foreign country recognized by the United States of America with
a rating at the time as of which any investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. ("Moody's") or "A-1" (or
higher) according to Standard and Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. ("S&P"), and (e) investments in securities with
maturities of six months or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or "A" by Moody's.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the Closing Date.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
18
<PAGE> 24
"Transactions" has the meaning set forth in the Purchase Agreement
relating to the sale of the Notes.
"Trustee" means the party named as such in this Indenture, not in its
individual capacity but solely as a trustee, until a successor replaces it and,
thereafter, means the successor.
"Trust Officer" means any officer or an authorized signatory within the
corporate trust department of the Trustee, including any vice president,
assistant vice president, assistant secretary, assistant treasurer, trust
officer or any other officer of the Trustee who customarily performs functions
similar to those performed by the persons who at the time shall be such
officer, respectively, or to whom any corporate trust matter is referred
because of such person's knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of the
Indenture.
"Uniform Commercial Code" means the New York Uniform Commercial Code as
in effect from time to time.
"Unrestricted Subsidiary" means (a) any Subsidiary of Holdings that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors of Holdings in the manner provided below and (b) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of Holdings
may designate any Subsidiary of Holdings (including any newly acquired or newly
formed Subsidiary of Holdings) to be an Unrestricted Subsidiary other than the
Company or any other Subsidiary that owns any Capital Stock or Indebtedness of,
or owns or holds any Lien on any property of, the Company or any other
Subsidiary of Holdings that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (i) the Subsidiary to be so
designated has total Consolidated assets of $1,000 or less or (ii) if such
Subsidiary has Consolidated assets greater than $1,000, then such designation
would be permitted under Section 4.04. The Board of Directors of Holdings may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that immediately after giving effect to such designation (i) Holdings
could Incur $1.00 of additional Indebtedness under Section 4.03(a) and (ii) no
Default shall have occurred and be continuing. Any such designation of a
Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary by the Board
of Directors of Holdings shall be evidenced to the Trustee by promptly filing
with the Trustee a copy of the resolution of the Board of Directors of Holdings
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
that are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
19
<PAGE> 25
"Wholly Owned Subsidiary" means a Restricted Subsidiary of Holdings all
the Capital Stock of which (other than directors' qualifying shares) is owned
Holdings or another Wholly Owned Subsidiary.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction" 4.07(a)
"Appendix" Preamble
"Bankruptcy Law" 6.01
"beneficially own" 1.01
"Change of Control Offer" 4.08(b)
"covenant defeasance option" 8.01(b)
"Custodian" 6.01
"Definitive Note" Appendix A
"Event of Default" 6.01
"Exchange Notes" Preamble
"Global Exchange Notes" Appendix A
"incorporated provision" 13.01
"Initial Notes" Preamble
"legal defeasance option" 8.01(b)
"Legal Holiday" 13.08
"Notes Custodian" Appendix A
"Notice of Default" 6.01
"Offer" 4.06(b)
"Offer Amount". 4.06(c)(ii)
"Offer Period". 4.06(c)(ii)
"protected purchaser" 2.07
"Purchase Date" 4.06(c)(i)
"Redemption Price" 3.03(a)(ii)
"Registered Exchange Offer" Appendix A
"Registrar".... 2.03
"Registration Agreement" Appendix A
"Restricted Payment" 4.04(a)
"Successor Company" 5.01(a)
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA, which
are incorporated by reference in and made a part of this Indenture. The
following TIA terms have the following meanings:
"Commission" means the SEC.
20
<PAGE> 26
"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 Holdings and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(c) "or" is not exclusive;
(d) "including" means including without limitation;
(e) words in the singular include the plural and words in the plural
include the singular;
(f) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(g) the principal amount of any noninterest bearing or other
discount security (other than the Notes) at any date shall be the principal
amount thereof that would be shown on a balance sheet of the issuer dated such
date prepared in accordance with GAAP; and
(h) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory
redemption or mandatory repurchase price with respect to such Preferred Stock,
whichever is greater.
21
<PAGE> 27
ARTICLE 2
The Notes
SECTION 2.01. Form and Dating.
Provisions relating to the Initial Notes and the Exchange Notes are set
forth in the Appendix, which is hereby incorporated in and expressly made a
part of this Indenture. The Initial Notes and the Trustee's certificate of
authentication shall each be substantially in the form of Exhibit A hereto,
which is hereby incorporated in and expressly made a part of this Indenture.
The Exchange Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit B hereto, which is hereby incorporated in
and expressly made a part of this Indenture. The Notes may have notations,
legends or endorsements required by law, stock exchange rule, agreements to
which Holdings is subject, if any, or usage (provided that any such notation,
legend or endorsement is in a form acceptable Holdings). Each Note shall be
dated the date of its authentication. The Notes shall be issuable only in
registered form without interest coupons and only in denominations of $1,000
(in principal amount at maturity) and integral multiples thereof.
SECTION 2.02. Execution and Authentication.
One Officer shall sign the Notes for Holdings by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee authenticates the Note, the Note shall be valid
nevertheless.
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 and make available for delivery Notes as
set forth in the Appendix.
The Trustee may appoint an authenticating agent reasonably acceptable
to Holdings to authenticate the Notes. Any such appointment shall be evidenced
by an instrument signed by a Trust Officer, a copy of which shall be furnished
to Holdings. Unless limited by the terms of such 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
agent. An authenticating agent has the same rights as any Registrar, Paying
Agent or agent for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent.
(a) Holdings shall maintain an office or agency, which shall be
located in the Borough of Manhattan, The City of New York, where Notes may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency where Notes may be presented for payment (the "Paying Agent").
The Registrar shall keep a register of the Notes and of their
22
<PAGE> 28
transfer and exchange. Holdings may have one or more co-registrars and one or
more additional paying agents. The term "Paying Agent" includes any additional
paying agent, and the term "Registrar" includes any co-registrars. Holdings
initially appoints the Trustee as (i) Registrar and Paying Agent in connection
with the Notes (however, for the purpose of meeting the requirement of an
office in the Borough of Manhattan, Harris Trust Company of New York shall
serve in such capacity) and (ii) the Notes Custodian with respect to the Global
Exchange Notes.
(b) Holdings shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall
incorporate the terms of the TIA. The agreement shall implement the provisions
of this Indenture that relate to such agent. Holdings shall notify the Trustee
of the name and address of any such agent. If Holdings fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such (however, the
requirement of an office in New York shall not apply to Wilmington Trust
Company) and shall be entitled to appropriate compensation therefor pursuant to
Section 7.07. Holdings or any of its domestically organized Wholly Owned
Subsidiaries may act as Paying Agent or Registrar.
(c) Holdings may remove any Registrar or Paying Agent upon written
notice to such Registrar or Paying Agent and to the Trustee; provided, however,
that no such removal shall become effective until (i) acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered
into by Holdings and such successor Registrar or Paying Agent, as the case may
be, and delivered to the Trustee or (ii) notification to the Trustee that the
Trustee shall serve as Registrar or Paying Agent until the appointment of a
successor in accordance with clause (i) above. The Registrar or Paying Agent
may resign at any time upon written notice to Holdings and the Trustee;
provided, however, that the Trustee may resign as Paying Agent or Registrar
only if the Trustee also resigns as Trustee in accordance with Section 7.08.
SECTION 2.04. Paying Agent to Hold Money in Trust.
Prior to each due date of the principal of and interest on, any Note,
Holdings shall deposit with the Paying Agent (or if Holdings or a Subsidiary is
acting as Paying Agent, segregate and hold in trust for the benefit of the
Persons entitled thereto) a sum sufficient to pay such principal and interest
when so becoming due. Holdings shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Notes and shall notify the Trustee
of any default by Holdings in making any such payment. If Holdings or a
Subsidiary of Holdings acts as Paying Agent, it shall segregate the money held
by it as Paying Agent and hold it as a separate trust fund. Holdings at any
time may require a Paying Agent to pay all money held by it to the Trustee and
to account for any funds disbursed by the Paying Agent. Upon complying with
this Section 2.04, the Paying Agent shall have no further liability for the
money delivered to the Trustee.
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
Holders. If the Trustee is not the Registrar, Holdings shall furnish, or cause
the Registrar to furnish, to the Trustee, in writing at least five Business
Days before each interest payment date and at such other times as the Trustee
23
<PAGE> 29
may request in writing, a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of Holders.
SECTION 2.06. Transfer and Exchange.
The Notes shall be issued in registered form and shall be transferable
only upon the surrender of a Note for registration of transfer and in
compliance with the Appendix. When a Note is presented to the Registrar with a
request to register a transfer, the Registrar shall register the transfer as
requested if its requirements therefor are met. When Notes are presented to the
Registrar with a request to exchange them for an equal principal amount at
maturity of Notes of other denominations, the Registrar shall make the exchange
as requested if the same requirements are met. To permit registration of
transfers and exchanges, Holdings shall execute and the Trustee shall
authenticate Notes at the Registrar's request. The Registrar and Holdings may
require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section 2.06. Holdings shall not be required to make and the Registrar
need not register transfers or exchanges of Notes selected for redemption
(except, in the case of Notes to be redeemed in part, the portion thereof not
to be redeemed) or any Notes for a period of 15 days before a selection of
Notes to be redeemed.
Prior to the due presentation for registration of transfer of any Note,
Holdings, the Trustee, the Paying Agent and the Registrar may deem and treat
the Person in whose name a Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and (subject to
paragraph 2 of the Notes) interest, if any, on such Note and for all other
purposes whatsoever, whether or not such Note is overdue, and none of Holdings,
the Paying Agent, the Trustee or the Registrar shall be affected by notice to
the contrary.
Any Holder of a Global Exchange Note shall, by acceptance of such
Global Exchange Note, agree that transfers of beneficial interest in such
Global Exchange Note may be effected only through a book-entry system
maintained by (a) the Holder of such Global Exchange Note (or its agent) or (b)
any Holder of a beneficial interest in such Global Exchange Note, and that
ownership of a beneficial interest in such Global Exchange Note shall be
required to be reflected in a book entry.
All Notes issued upon any transfer or exchange pursuant to the terms of
this Indenture shall evidence the same debt and shall be entitled to the same
benefits under this Indenture as the Notes surrendered upon such transfer or
exchange.
SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Registrar or if the Holder of
a Note claims that the Note has been lost, destroyed or wrongfully taken,
Holdings shall issue, if the requirements of Section 8-405 of the Uniform
Commercial Code are met, and the Trustee shall authenticate, a replacement
Note, such that the Holder (a) satisfies Holdings or the Trustee within a
reasonable time after such Holder has notice of such loss, destruction or
wrongful taking and the Registrar does not register a transfer prior to
receiving such notification, (b) makes such request to Holdings or the Trustee
prior to the Note being acquired by a protected purchaser as defined in
24
<PAGE> 30
Section 8-303 of the Uniform Commercial Code (a "protected purchaser") and (c)
satisfies any other reasonable requirements of Holdings or the Trustee, as the
case may be. If required by the Trustee or Holdings, such Holder shall furnish
an indemnity bond sufficient in the judgment of the Trustee to protect
Holdings, the Trustee, the Paying Agent and the Registrar from any loss that
any of them may suffer if a Note is replaced. Holdings and the Trustee may
charge the Holder for their expenses in replacing a Note. In the event any such
mutilated, lost, destroyed or wrongfully taken Note has become or is about to
become due and payable, Holdings in its discretion may pay such Note instead of
issuing a new Note in replacement thereof.
Every replacement Note is an additional obligation of Holdings.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes.
SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation
and those described in this Section 2.08 as not outstanding. Subject to Section
10.06, a Note does not cease to be outstanding because Holdings or an Affiliate
of Holdings holds the Note.
If a Note is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and Holdings receive proof satisfactory to them
that the replaced Note is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and interest and Additional Amounts, if any, payable on that date
with respect to the Notes (or portions thereof) to be redeemed or maturing, as
the case may be, and the Paying Agent is not notified that it is prohibited
from paying such money to the Holders on that date pursuant to the terms of
this Indenture, then on and after that date such Notes (or portions thereof)
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Temporary Notes.
Until Definitive Notes are ready for delivery, Holdings may prepare and
the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of Definitive Notes but may have variations that
Holdings considers appropriate for temporary Notes. Without unreasonable delay,
Holdings shall prepare and the Trustee shall authenticate Definitive Notes and
deliver them in exchange for temporary Notes upon surrender of such temporary
Notes at the office or agency of the Registrar without charge to the Holder.
SECTION 2.10. Cancellation.
Holdings 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 registration
25
<PAGE> 31
of transfer, exchange or payment. The Trustee and no one else shall cancel all
Notes surrendered for registration of transfer, exchange, payment or
cancellation and deliver canceled Notes to Holdings. Holdings may not issue new
Notes to replace Notes it has redeemed, paid or delivered to the Trustee for
cancellation. The Trustee shall not authenticate Notes in place of canceled
Notes other than pursuant to the terms of this Indenture.
SECTION 2.11. Defaulted Interest.
If Holdings defaults in a payment of interest on the Notes, Holdings
shall pay the defaulted interest (plus interest on such defaulted interest to
the extent lawful) in any lawful manner. Holdings may pay the defaulted
interest to the Persons who are Holders on a subsequent special record date.
Holdings shall fix or cause to be fixed any such special record date and
payment date to the reasonable satisfaction of the Trustee and shall promptly
mail or cause to be mailed to each Holder and the Trustee a notice that states
the special record date, the payment date and the amount of defaulted interest
to be paid.
SECTION 2.12. CUSIP Numbers.
Holdings in issuing the Notes may use "CUSIP" or "Private Placement"
numbers (as applicable) and, if so, the Trustee shall use "CUSIP" or "Private
Placement" numbers (as applicable) in notices of redemption as a convenience to
Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Notes or as contained in any notice of a redemption and that reliance
may be placed only on the other identification numbers printed on the Notes,
and any such redemption shall not be affected by any defect in or omission of
such numbers. Holdings will promptly notify the Trustee of any change in the
"CUSIP" or "Private Placement" numbers (as applicable).
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee.
If Holdings elects to redeem Notes pursuant to Section 4.08(e) or
paragraph 5 of the Notes, it shall notify the Trustee in writing of the
redemption date and the principal amount at maturity of Notes to be redeemed.
Holdings shall give each notice to the Trustee provided for in this
Section 3.01 at least 30 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate specifying the Accreted Value calculated as described in this
Indenture and an Opinion of Counsel from Holdings to the effect that such
redemption will comply with the conditions herein. If fewer than all the Notes
are to be redeemed, the record date relating to such redemption shall be
selected by Holdings and given to the Trustee, which record date shall be not
fewer than 15 days after the date of notice to the Trustee. Any such notice may
be canceled at any time prior to notice of such redemption being mailed to any
Holder and shall thereby be void and of no effect.
26
<PAGE> 32
SECTION 3.02. Selection of Notes To Be Redeemed. If fewer than all the
Notes are to be redeemed, the Trustee shall select the Notes to be redeemed pro
rata or by lot or by a method that the Trustee in its sole discretion shall
deem to be fair and appropriate (and in such manner as complies with applicable
legal requirements). The Trustee shall make the selection from outstanding
Notes not previously called for redemption. The Trustee may select for
redemption portions of the principal amount at maturity of Notes that have
denominations larger than $1,000. Notes and portions thereof that the Trustee
selects shall be in principal amounts at maturity of $1,000 or a whole multiple
thereof. Provisions of this Indenture that apply to Notes called for redemption
also apply to portions of Notes called for redemption. The Trustee shall notify
Holdings promptly of the Notes or portions of Notes to be redeemed.
SECTION 3.03. Notice of Redemption.
(a) At least 30 days but not more than 60 days before a date for
redemption of Notes, Holdings shall mail or cause to be mailed a notice of
redemption by first-class mail to each Holder of Notes to be redeemed at such
Holder's registered address.
The notice shall identify the Notes to be redeemed and shall state:
(i) the redemption date;
(ii) the redemption price, stated as a percentage of principal
amount (a "Redemption Price") and, in the case of any redemption date on or
after November 15, 2004, and the amount of accrued and unpaid interest to the
redemption date;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(v) if fewer than all the outstanding Notes are to be
redeemed, the certificate numbers and principal amount at maturity of the
particular Notes to be redeemed;
(vi) that if any Note is being redeemed in part, after the
redemption date upon surrender of such Note, a new Note or Notes in principal
amount at maturity equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(vii) that, unless Holdings defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant to
the terms of this Indenture, Accreted Value of Notes (or portion thereof)
called for redemption shall cease to accrete and interest on Notes (or portion
thereof) called for redemption shall cease to accrete or accrue, as the case
may be, on and after the redemption date;
(viii) the CUSIP or Private Placement number, if any, printed on
the Notes being redeemed; and
27
<PAGE> 33
(ix) that no representation is made as to the correctness or
accuracy of the CUSIP or Private Placement number, if any, listed in such
notice or printed on the Notes.
(x) the paragraph of the Notes and the Section of the
Indenture pursuant to which the Notes are being redeemed.
(b) At Holdings' request, the Trustee shall give the notice of
redemption in Holdings' name and at Holdings' expense; provided, however, that
Holdings shall have delivered to the Trustee notice as specified in Section
3.01 of this Indenture with the information set forth in this Section 3.03. In
such event, Holdings shall provide the Trustee with the information required by
this Section 3.03.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed, Notes called for redemption become
due and payable on the redemption date and at the Redemption Price stated in
the notice. Upon surrender to the Paying Agent, such Notes shall be paid at the
Redemption Price stated in the notice, and, after November 15, 2004, plus
accrued and unpaid cash interest and Additional Amounts, if any, to the
redemption date; provided, however, that if, after November 15, 2004, the
redemption date is after a regular record date and on or prior to the interest
payment date, accrued and unpaid cash interest and Additional Amounts, if any,
shall be payable to the Holder of the redeemed Notes registered on the relevant
record date. Failure to give notice or any defect in the notice to any Holder
shall not affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price.
Prior to 10:00 a.m. on the redemption date, Holdings shall deposit with
the Paying Agent (or, if Holdings or a subsidiary is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the Redemption Price and
after November 15, 2004, accrued and unpaid cash interest and Additional
Amounts, if any, on all Notes to be redeemed on that date other than Notes or
portions of Notes called for redemption that have been delivered by Holdings to
the Trustee for cancellation. On and after the redemption date, Accreted Value
will cease to accrete or, after November 15, 2004, interest shall cease to
accrue, as the case may be, on Notes or portions thereof called for redemption
so long as Holdings has deposited with the Paying Agent funds sufficient to pay
the Redemption Price, and after November 15, 2004, accrued and unpaid cash
interest and Additional Amounts, if any, on, the Notes to be redeemed, unless
the Paying Agent is prohibited from making such payment pursuant to the terms
of this Indenture.
SECTION 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, Holdings shall
execute and the Trustee shall authenticate for the Holder (at Holdings'
expense) a new Note equal in principal amount at maturity to the unredeemed
portion of the Note surrendered.
28
<PAGE> 34
ARTICLE 4
Covenants
SECTION 4.01. Payment of Notes
(a) Holdings shall promptly pay the principal of and cash interest,
Redemption Price and Additional Amounts, if any, on the Notes on the dates and
in the manner provided in the Notes and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee
or the Paying Agent holds in accordance with this Indenture money sufficient to
pay all principal of and interest then due and the Trustee or the Paying Agent,
as the case may be, is not prohibited from paying such money to the Holders on
that date pursuant to the terms of this Indenture.
(b) Holdings shall pay interest on overdue principal of the Notes at
the rate specified therefor in the Notes and shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports.
Notwithstanding that Holdings may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, Holdings shall from
and after the consummation of any Registered Exchange Offer or the
effectiveness of a Shelf Registration Statement filed with the Commission,
pursuant to the Registration Agreement, file with the SEC, and provide the
Trustee, Holders and prospective Holders (upon request) within 15 days after it
files them with the SEC, copies of its annual report and the information,
documents and other reports that are specified in Section 13 and 15(d) of the
Exchange Act. In addition, following a Public Equity Offering, Holdings shall
furnish to the Trustee and the Holders, promptly upon their becoming available,
copies of the annual report to shareholders and any other information provided
by Holdings to its public shareholders generally. Holdings also shall comply
with the other provisions of TIA ss. 314(a).
SECTION 4.03. Limitation on Indebtedness.
(a) Holdings shall not, and shall not permit any Restricted
Subsidiary to, Incur any Indebtedness; provided, however, that Holdings or any
Restricted Subsidiary may Incur Indebtedness if on the date of such Incurrence
and after giving effect thereto, the Consolidated Coverage Ratio would be
greater than 1.6:1 if such Indebtedness is Incurred on or prior to November 15,
2002 or 1.8:1 if such Indebtedness is Incurred thereafter.
(b) Notwithstanding Section 4.03(a), Holdings and its Restricted
Subsidiaries may Incur the following Indebtedness:
(i) Bank Indebtedness of the Company in an aggregate principal
amount not to exceed $310.0 million less the aggregate amount of all
prepayments of principal of such Indebtedness pursuant to Section 4.06;
29
<PAGE> 35
(ii) Indebtedness of the Company owed to and held by any Wholly
Owned Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by
the Company or any Wholly Owned Subsidiary; provided, however, that any
subsequent issuance or transfer of any Capital Stock or any other event that
results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of any such Indebtedness (except to the
Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer thereof;
(iii) Indebtedness (1) represented by Notes, the Company Notes
and the Company Note Guarantees, (2) outstanding on the Closing Date (other
than the Indebtedness described in clauses (i) and (ii) above), (3) consisting
of Refinancing Indebtedness or Company Refinancing Indebtedness Incurred in
respect of any Indebtedness described in this clause (iii) (including
Indebtedness that is Refinancing Indebtedness) or Section 4.03(a) or (4)
consisting of guarantees of any Indebtedness permitted under this Section 4.03;
(iv) (1) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted Subsidiary was
acquired by Holdings (other than Indebtedness Incurred as consideration in, or
to provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Subsidiary of or was otherwise acquired by
Holdings); provided, however, that if $10.0 million in the aggregate of
Indebtedness Incurred by Restricted Subsidiaries and/or other Persons pursuant
to this clause (iv)(1) and clause (viii)(1) of this Section 4.03(b) remains
outstanding, Indebtedness may be Incurred under this clause (iv)(1) only if, on
the date that such Restricted Subsidiary is acquired by Holdings, Holdings
would have been able to Incur $1.00 of additional Indebtedness pursuant to
Section 4.03(a) after giving effect to the Incurrence of such Indebtedness
pursuant to this clause (iv)(1) and (2) Refinancing Indebtedness Incurred by
Holdings or a Restricted Subsidiary in respect of Indebtedness Incurred
pursuant to clause (iv)(1);
(v) Indebtedness in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by Holdings
and the Restricted Subsidiaries in the ordinary course of their business;
(vi) Indebtedness (including Capitalized Lease Obligations and
Attributable Debt) Incurred by Holdings or any Restricted Subsidiary to finance
the purchase, lease or improvement of property (real or personal) or equipment
(whether through the direct purchase of assets or Capital Stock of any Person
owning such assets that becomes a Wholly Owned Subsidiary) in an aggregate
principal amount, which when aggregated with the principal amount of all other
Indebtedness then outstanding and Incurred pursuant to this clause (vi), does
not exceed $20.0 million;
(vii) Hedging Obligations of Holdings or any Restricted
Subsidiary entered into in the ordinary course of business for the purpose of
fixing or hedging interest rate risk or currency fluctuations;
(viii) (1) Indebtedness of another Person Incurred and
outstanding on or prior to the date on which such Person consolidates with or
merges with or into Holdings or the
30
<PAGE> 36
Company (other than Indebtedness Incurred as consideration in, or to provide
all or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Person
consolidates with or merges with or into Holdings or the Company); provided,
however, that (a) such transaction complies with Section 5.01 and (b) if $10.0
million in the aggregate of Indebtedness Incurred by any Persons and/or
Restricted Subsidiaries pursuant to this clause (viii)(1) and clause (iv)(1) of
this Section 4.03(b) remains outstanding, Indebtedness may be Incurred under
this clause (viii)(1) only if, on the date that such transaction is
consummated, Holdings would have been able to Incur $1.00 of additional
Indebtedness pursuant to Section 4.03(a) after giving effect to the Incurrence
of such Indebtedness pursuant to this clause (viii)(1) and (2) Refinancing
Indebtedness Incurred by Holdings or the Company or the Successor Company (as
defined) in respect of Indebtedness Incurred pursuant to subclause (1) of this
clause (viii); or
(ix) Indebtedness (other than Indebtedness permitted to be
Incurred pursuant to Section 4.03(a) or any other clause of this Section
4.03(b)) in an aggregate principal amount on the date of Incurrence that, when
added to all other Indebtedness Incurred pursuant to this clause (ix) and then
outstanding, shall not exceed $10.0 million.
(c) Notwithstanding the foregoing, Holdings shall not Incur any
Indebtedness pursuant to Sections 4.03(a) or (b), other than guarantees of Bank
Indebtedness of the Company pursuant to Section 4.03(b)(i) unless such
Indebtedness constitutes Subordinated Obligations and Holdings shall not incur
any Indebtedness if the proceeds thereof are used, directly or indirectly, to
repay, prepay, redeem, defease, retire, refund or Refinance any Subordinated
Obligations unless such Indebtedness shall be subordinated to the Notes to at
least the same extent as such Subordinated Obligations being repaid, prepaid,
redeemed, defeased, retired, refunded or refinanced. In addition, Holdings
shall not incur any Secured Indebtedness that is a Subordinated Obligation
unless, contemporaneously therewith, effective provision is made to secure the
Notes on a senior basis in right of payment to such Subordinated Obligations
for so long as such Secured Indebtedness is secured by a Lien.
(d) Notwithstanding any other provision of this Section 4.03, an
increase in the dollar amount of Indebtedness of Holdings or any Restricted
Subsidiary that comes about solely as a result of fluctuations in the exchange
rates of currencies shall not be deemed to be the Incurrence by Holdings or
such Restricted Subsidiary of additional Indebtedness.
For purposes of determining the outstanding principal amount of any
particular Indebtedness Incurred pursuant to this Section 4.03, (i)
Indebtedness Incurred pursuant to the Credit Agreement prior to or on the
Closing Date shall be treated as Incurred pursuant to Section 4.03(b)(i), (ii)
Indebtedness permitted by this Section 4.03 need not be permitted solely by
reference to one provision permitting such Indebtedness but may be permitted in
part by one such provision and in part by one or more other provisions of this
Section 4.03 permitting such Indebtedness and (iii) in the event that
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in this Section 4.03, Holdings, in its sole discretion, shall
classify such Indebtedness and only be required to include the amount of such
Indebtedness in one of such clauses.
31
<PAGE> 37
SECTION 4.04. Limitation on Restricted Payments.
(a) Holdings shall not, and shall not permit any Restricted
Subsidiary, directly or indirectly, to (i) declare or pay any dividend, make
any distribution on or in respect of its Capital Stock or make any similar
payment (including any payment in connection with any merger or consolidation
involving the Company) to the holders of its Capital Stock except (1) dividends
or distributions payable solely in its Capital Stock (other than Disqualified
Stock) and (2) dividends or distributions payable to Holdings or another
Restricted Subsidiary (and, if such Restricted Subsidiary has shareholders
other than Holdings or other Restricted Subsidiaries, to its other shareholders
on a pro rata basis), (ii) purchase, repurchase, redeem or otherwise acquire or
retire for value any Capital Stock of Holdings or any Restricted Subsidiary
held by Persons other than Holdings or another Restricted Subsidiary, (iii)
purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment any Subordinated Obligations (other than the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value of
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within
one year of the date of acquisition or payment) or (iv) make any Investment
(other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment referred to in clauses (i) through (iv) of this
Section 4.04(a) being herein referred to as a "Restricted Payment") if at the
time Holdings or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would
result therefrom);
(2) Holdings could not Incur at least $1.00 of additional
Indebtedness under Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors of Holdings, whose
determination shall be conclusive and evidenced by a resolution of the Board of
Directors of Holdings) declared or made subsequent to the Closing Date would
exceed the sum, without duplication, of:
(A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the beginning of the
fiscal quarter immediately following the fiscal quarter during which
the Closing Date occurs to the end of the most recent fiscal quarter
for which financial statements are publicly available or are otherwise
provided pursuant to the Purchase Agreement (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit); plus
(B) the aggregate Net Cash Proceeds received by Holdings
from the issue or sale of its Capital Stock (other than Disqualified
Stock) subsequent to the Closing Date (other than (x) an issuance or
sale to a Subsidiary of Holdings or (y) an issuance or sale to an
employee stock ownership plan or other trust established by
32
<PAGE> 38
Holdings or any of its Subsidiaries or (z) to the extent used in
accordance with Section 4.04(b)(v)(b)); plus
(C) the aggregate Net Cash Proceeds received by Holdings or
a Restricted Subsidiary from the sale or other disposition (other than
to (x) Holdings or a Subsidiary of Holdings or (y) an employee stock
ownership plan or other trust established by Holdings or any of its
Subsidiaries) of any Investments previously made by Holdings or a
Restricted Subsidiary and treated as a Restricted Payment; provided
that the amount added pursuant to this clause (C) shall not (x) exceed
the amount of such Investments previously made by Holdings or any
Restricted Subsidiary, which amount was included in the calculation of
the amount of Restricted Payments and (y) include any amounts from such
sale or disposition previously included in Section 4.04(a)(iv)(3); plus
(D) the amount by which Indebtedness of Holdings or its
Restricted Subsidiaries is reduced on Holdings' balance sheet upon the
conversion or exchange (other than by a Subsidiary of Holdings)
subsequent to the Closing Date of any Indebtedness of Holdings or its
Restricted Subsidiaries issued after the Closing Date which is
convertible or exchangeable for Capital Stock (other than Disqualified
Stock) of Holdings (less the amount of any cash or the Fair Market
Value of other property distributed by Holdings or any Restricted
Subsidiary upon such conversion or exchange); plus
(E) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (x) payments of dividends,
repayments of the principal of loans or advances or other transfers of
assets to Holdings or any Restricted Subsidiary from Unrestricted
Subsidiaries or (y) the redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the
definition of "Investment") not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made by
Holdings or any Restricted Subsidiary in such Unrestricted Subsidiary,
which amount was included in the calculation of the amount of
Restricted Payments; plus
(F) $5.0 million.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Capital Stock or Subordinated
Obligations of Holdings made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of Holdings (other than
Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary
of Holdings or an employee stock ownership plan or other trust established by
Holdings or any of its Subsidiaries); provided, however, that (1) such
purchase, repurchase, redemption, defeasance or other acquisition or retirement
for value will be excluded in the calculation of the amount of Restricted
Payments; and (2) the Net Cash Proceeds from such sale applied in the manner
set forth in this clause (i) will be excluded from the calculation of amounts
under Section 4.04(a)(iv)(3)(B);
33
<PAGE> 39
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of Holdings
made by exchange for, or out of the proceeds of the substantially concurrent
sale of, Indebtedness of Holdings that is permitted to be Incurred pursuant to
Section 4.03(b); provided, however, that such purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value shall be excluded in
the calculation of the amount of Restricted Payments;
(iii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of Holdings
from Net Available Cash to the extent permitted by Section 4.06; provided,
however, that such purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in the calculation of the
amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividends would have complied with
Section 4.04(a); provided, however, that such dividends shall be included in
the calculation of the amount of Restricted Payments; and
(v) any purchase, repurchase, redemption or other acquisition or
retirement for value of shares of, or options to purchase shares of, common
stock of Holdings or any of its Subsidiaries from employees, former employees,
consultants, former consultants, directors or former directors of Holdings or
any of its Subsidiaries (or permitted transferees of such employees, former
employees, consultants, former consultants, directors or former directors),
pursuant to the terms of the agreements (including employment agreements) or
plans (or amendments thereto) approved by the Board of Directors of Holdings
under which such individuals purchase or sell, or are granted the option to
purchase or sell, such shares of common stock or such options; provided,
however, that the aggregate amount of such purchases, repurchases, redemptions
and other acquisitions or retirements for value, shall not exceed in any
calendar year the sum of (a) $5.0 million plus (b) the Net Cash Proceeds
received since the Closing Date and not previously credited to any purchase,
repurchase, redemption or other acquisition of such shares or options to
purchase shares or common stock pursuant to this Section 4.04(b)(v)(b) by
Holdings from the sale of Capital Stock to employees, consultants and directors
of Holdings or the Company; provided, further, however, that such purchase,
repurchase, redemption or other acquisition or retirement for value shall be
included in the calculation of the amount of Restricted Payments (unless made
with Net Cash Proceeds excluded pursuant to Section 4.04(a)(iv)(3)(B)(z)).
(vi) any payment of dividends from the Company to Holdings on or
prior to the Closing Date in order to consummate the Transactions (as defined
in the Purchase Agreement) provided, however, that any such dividend shall be
excluded in the calculation of the amount of Restricted Payments.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries.
Holdings shall not, and shall not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the
34
<PAGE> 40
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on its Capital Stock or pay any Indebtedness or other obligations
owed to Holdings or any of its Restricted Subsidiaries, (b) make any loans or
advances to Holdings or any of its Restricted Subsidiaries or (c) transfer any
of its property or assets to Holdings or any of its Restricted Subsidiaries,
except:
(i) any encumbrance or restriction pursuant to applicable law or
an agreement in effect at or entered into on the Closing Date;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by
such Restricted Subsidiary prior to the date on which such Restricted
Subsidiary was acquired by Holdings (other than Indebtedness Incurred as
consideration in, in contemplation of, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was otherwise acquired by Holdings) and outstanding on
such date;
(iii) (1) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this Section 4.05 or this clause (iii) or
contained in any amendment to an agreement referred to in clause (i) or (ii) of
this Section 4.05 or this clause (iii) or (2) pursuant to any other agreement
regarding Indebtedness otherwise permitted by Section 4.03; provided, however,
that the encumbrances and restrictions contained in any such Refinancing
agreement, amendment or other agreement are no less favorable to the Holders
than the encumbrances and restrictions contained in such predecessor agreements
or, with respect to agreements entered into after the Closing Date referred to
in clause (2) above, the most restrictive agreement in existence at the Closing
Date;
(iv) in the case of clause (c), any encumbrance or restriction (1)
that restricts in a customary manner the subletting, assignment or transfer of
any property or asset that is subject to a lease, license or similar contract
or (2) contained in security agreements securing Indebtedness of a Restricted
Subsidiary to the extent such encumbrance or restriction restricts the transfer
of the property subject to such security agreements;
(v) with respect to a Restricted Subsidiary, any restriction
imposed pursuant to an agreement entered into for the sale or disposition of
all or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition;
(vi) any encumbrance or restriction relating to Purchase Money
Indebtedness or Capitalized Lease Obligations for property acquired in the
ordinary course of business that imposes restrictions on the ability of
Holdings or a Restricted Subsidiary to sell, lease or transfer the acquired
property to Holdings or its Restricted Subsidiaries;
(vii) restrictions on cash or other deposits imposed by customers
under contracts entered into in the ordinary course of business; and
35
<PAGE> 41
(viii) any encumbrance or restriction contained in joint venture
agreements and other similar agreements entered into in the ordinary course of
business and customary for such types of agreements.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
(a) Holdings shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Disposition unless (i) Holdings or such
Restricted Subsidiary receives consideration (including by way of relief from,
or by any other Person assuming sole responsibility for, any liabilities,
contingent or otherwise) at the time of such Asset Disposition at least equal
to the Fair Market Value of the shares and assets subject to such Asset
Disposition, (ii) at least 75% of the consideration therefor received by
Holdings or such Restricted Subsidiary is in the form of cash; provided that
the following shall be deemed to be cash for purposes of this clause (ii) (but
not for purposes of the definition of Net Available Cash): (1) the amount of
any liabilities (as shown on the Holdings' or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto) of Holdings or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Notes) that are assumed by the transferee of any such assets, (2) the amount of
any securities received by Holdings or such Restricted Subsidiary from such
transferee that are converted or scheduled to be converted by Holdings or such
Restricted Subsidiary into cash (to the extent of the cash received or
scheduled to be received) within 90 days following the closing of such Asset
Disposition, (3) the Fair Market Value of any Related Assets received by
Holdings or any Restricted Subsidiary in such Asset Disposition and (4) any
Designated Noncash Consideration received by Holdings or such Restricted
Subsidiary in such Asset Disposition having an aggregate Fair Market Value,
taken together with all other Designated Noncash Consideration received
pursuant to this clause (4) that has not been converted into cash or cash
equivalents, not to exceed 10% of Consolidated Net Tangible Assets as of the
end of the most recent fiscal quarter for which financial statements are
publicly available or are otherwise provided pursuant to the Purchase Agreement
at the time such Designated Noncash Consideration is received (with the Fair
Market Value of each item of Designated Noncash Consideration being measured at
the time received and without giving effect to subsequent changes in value);
and (iii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by Holdings (or such Restricted Subsidiary, as the case
may be) (1) first, to the extent Holdings elects (or is required by the terms
of any Indebtedness), to prepay, repay, redeem, purchase, repurchase, defease
or otherwise acquire or retire for value Indebtedness (other than obligations
in respect of any Preferred Stock) of a Wholly Owned Subsidiary (in each case,
other than Indebtedness owed to Holdings or an Affiliate of Holdings and other
than obligations in respect of any Disqualified Stock) within 360 days of the
later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (2) second, to the extent of the balance of Net Available Cash
after application in accordance with clause (1) of this Section 4.06(a)(iii),
to the extent Holdings or such Restricted Subsidiary elects to, or enters into
a binding agreement to, reinvest in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with cash in an
amount equal to the amount of Net Available Cash received by, or to be received
by, Holdings or another Restricted Subsidiary) within 360 days of the later of
such Asset Disposition or the receipt of such Net Available Cash; and (3)
third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (1) and (2) of this Section
4.06(a)(iii), to make an Offer to purchase Notes pursuant to and subject to
36
<PAGE> 42
the conditions set forth in Section 4.06(b); provided, however that, in
connection with any prepayment, repayment, purchase, repurchase, defeasance or
other acquisition or retirement for value of Indebtedness pursuant to clauses
(1) or (3) of this Section 4.06(a)(iii), Holdings or such Restricted Subsidiary
shall retire such Indebtedness and shall cause the related loan commitment (if
any) to be permanently reduced in an amount equal to the principal amount so
prepaid, repaid, purchased, repurchased, defeased or otherwise acquired or
retired for value.
Upon completion of any Offer, the amount of Net Available Cash shall be
reset at zero and Holdings shall be entitled to use any remaining proceeds for
any corporate purposes to the extent permitted under this Indenture.
Notwithstanding the foregoing provisions of this Section 4.06, Holdings
and the Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this Section 4.06 except to the extent that
the aggregate Net Available Cash from all Asset Dispositions that is not
applied in accordance with this Section 4.06 exceeds $10.0 million.
(b) In the event of an Asset Disposition that requires the purchase
of Notes pursuant to Section 4.06(a)(iii)(3), Holdings shall be required to
offer to purchase Notes tendered pursuant to an offer by Holdings for the Notes
(an "Offer") at a purchase price of 100% of their Accreted Value (or, if after
November 15, 2004, plus accrued and unpaid interest thereon) and Additional
Amounts in respect thereof, if any, to the date of purchase (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date) in accordance with the procedures
(including prorating in the event of oversubscription) set forth in Section
4.06(c). Holdings shall not be required to make an Offer for Notes pursuant to
this Section 4.06 if the Net Available Cash available therefor (after
application of the proceeds as provided in Sections 4.06(a)(iii)(1) and
4.06(a)(iii)(2) is less than $10.0 million for any particular Asset Disposition
(which lesser amount shall be carried forward for purposes of determining
whether an Offer is required with respect to the Net Available Cash from any
subsequent Asset Disposition).
(c) (i) Promptly, and in any event within 10 days after Holdings
becomes obligated to make an Offer, Holdings shall be obligated to deliver to
the Trustee and send, by first-class mail to each Holder, a written notice
stating that the Holder may elect to have his Notes purchased by Holdings
either in whole or in part (subject to prorating as hereinafter described in
the event the Offer is oversubscribed) in integral multiples of $1,000 of
principal amount at maturity, at the applicable purchase price. The notice
shall specify a purchase date not less than 30 days nor more than 60 days after
the date of such notice (the "Purchase Date") and shall contain such
information concerning the business of Holdings which Holdings in good faith
believes will enable such Holders to make an informed decision (which at a
minimum shall include (1) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of Holdings, the most
recent subsequently filed Quarterly Report on Form 10-Q and any Current Report
on Form 8-K of Holdings filed subsequent to such Quarterly Report, other than
Current Reports describing Asset Dispositions otherwise described in the
offering materials (or corresponding successor reports), in each case, if any,
(2) a description of material developments in Holdings' business subsequent to
the date of the latest of such reports, and (3) if material, appropriate pro
forma financial information) and all instructions and materials
37
<PAGE> 43
necessary to tender Notes pursuant to the Offer, together with the address
referred to in clause (iii).
(ii) Not later than the date upon which written notice of an Offer
is delivered to the Trustee as provided above, Holdings shall deliver to the
Trustee an Officers' Certificate as to (1) the amount of the Offer (the "Offer
Amount"), (2) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (3) the compliance
of such allocation with the provisions of Section 4.06(a). On such date,
Holdings shall also irrevocably deposit with the Trustee or with a paying agent
(or, if Holdings is acting as its own paying agent, segregate and hold in
trust) an amount equal to the Offer Amount to be invested pursuant to the
specific written directions of Holdings in Temporary Cash Investments and to be
held for payment in accordance with the provisions of this Section 4.06. Upon
the expiration of the period for which the Offer remains open (the "Offer
Period"), Holdings shall deliver to the Trustee for cancellation the Notes or
portions thereof that have been properly tendered to and are to be accepted by
Holdings. The Trustee (or the Paying Agent, if not the Trustee) shall, on the
date of purchase, mail or deliver payment to each tendering Holder in the
amount of the purchase price. In the event that the Offer Amount delivered by
Holdings to the Trustee is greater than the purchase price of the Notes
tendered, the Trustee shall deliver the excess to Holdings immediately after
the expiration of the Offer Period for application in accordance with this
Section 4.06.
(iii) Holders electing to have a Note purchased shall be required
to surrender the Note, with an appropriate form duly completed, to Holdings at
the address specified in the notice at least three Business Days prior to the
Purchase Date. Holders shall be entitled to withdraw their election if the
Trustee or Holdings receives not later than one Business Day prior to the
Purchase Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount at maturity of the Note
which was delivered by the Holder for purchase and a statement that such Holder
is withdrawing his election to have such Note purchased. If at the expiration
of the Offer Period the aggregate principal of the Notes plus accrued and
unpaid interest thereon and any Additional Amounts in respect thereof, if any,
exceeds the Offer Amount, Holdings shall select the Notes to be purchased on a
pro rata basis (with such adjustments as may be deemed appropriate by Holdings
so that only Notes in denominations of $1,000 (principal at maturity), or
integral multiples thereof are purchased). Holders whose Notes are purchased
only in part shall be issued new Notes equal in principal amount at maturity to
the unpurchased portion of the Notes surrendered.
(iv) At the time Holdings delivers Notes to the Trustee which are
to be accepted for purchase, Holdings shall also deliver an Officers'
Certificate stating that such Notes are to be accepted by Holdings pursuant to
and in accordance with the terms of this Section 4.06. A Note shall be deemed
to have been accepted for purchase at the time the Trustee, directly or through
an agent, mails or delivers payment therefor to the surrendering Holder.
(v) Holdings shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 4.06. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.06, Holdings shall
38
<PAGE> 44
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.06 by virtue
thereof.
SECTION 4.07. Limitation on Transactions with Affiliates.
(a) Holdings shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into or conduct any transaction or
series of related transactions (including the purchase, sale, lease or exchange
of any property or the rendering of any service) with any Affiliate of Holdings
(an "Affiliate Transaction") unless such Affiliate Transaction is on terms (i)
that are no less favorable to Holdings or such Restricted Subsidiary, as the
case may be, than those that could be obtained at the time of such transaction
in arm's-length dealings with a Person who is not such an Affiliate, (ii) that,
in the event that such Affiliate Transaction involves an aggregate amount in
excess of $10.0 million, (1) are set forth in writing and (2) have been
approved by a majority of the members of the Board of Directors of Holdings
having no personal stake, other than as a holder of Capital Stock of Holdings
or such Restricted Subsidiary, in such Affiliate Transaction and (iii) that, in
the event that such Affiliate Transaction involves an amount in excess of $25.0
million or does not comply with Section 4.07(a)(ii), have been determined by a
nationally recognized appraisal, accounting or investment banking firm to be
fair, from a financial standpoint, to Holdings and its Restricted Subsidiaries.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors of
Holdings or the Company, (iii) the grant of stock options or similar rights to
employees, consultants and directors of Holdings or any of its Subsidiaries
pursuant to plans approved by the Board of Directors of Holdings or the
Company, (iv) (A) extensions and Refinancings of loans or advances existing on
the Closing Date that were made to employees, consultants or directors and (B)
loans or advances to employees, consultants or directors in the ordinary course
of business in accordance with past practices of Holdings, but in any event in
the case of this clause (B) not to exceed $10.0 million in the aggregate
outstanding at any one time, (v) the payment of reasonable fees to directors of
Holdings, the Company and the Subsidiaries of the Company who are not employees
of Holdings, the Company or such Subsidiaries, (vi) any transaction between
Holdings and a Restricted Subsidiary or between Restricted Subsidiaries; (vii)
customary indemnification and insurance arrangements in favor of officers,
directors, employees and consultants of Holdings or any of the Restricted
Subsidiaries; (viii) the purchase and sale of inventory in the ordinary course
of business on an arm's-length basis consistent with customary market pricing;
(ix) marketing and/or distribution arrangements on arm's-length terms; (x)
payments by Holdings or any of its Restricted Subsidiaries to Fox Paine and its
Affiliates for any financial advisory, management, financing, underwriting or
other placement services or in respect of other investment banking activities,
including, without limitation, in connection with acquisitions or divestitures
which payments are approved by a majority of the members of the Board of
Directors of the Company referred to in Section 4.07(a)(ii)(2) in good faith;
(xi) the existence of, or the performance by Holdings or any Restricted
Subsidiary of the obligations under the terms of, any stockholders' agreements
(including any registration rights agreement or purchase agreement related
thereto) to which any of them is a party as of the Closing Date, as
39
<PAGE> 45
such agreements may be amended from time to time pursuant to the terms thereof;
provided, however, that the terms of any such amendment are no less favorable
to the Holders than the terms of any such agreements in effect as of the
Closing Date; (xii) the issuance of Capital Stock (other than Disqualified
Stock) of Holdings for cash to any Permitted Holder; (xiii) any transaction
between Circon and the Company or a Restricted Subsidiary in respect of the
Circon Note in connection with the Transactions; and (xiv) the performance of
the Services Agreement as in effect on the Closing Date (or any addition or
deletion of services thereunder on substantially similar terms) or any other
amendment or modification thereto or replacement thereof so long as any such
other amendment, modification or replacement agreement is not materially more
disadvantageous to the Holders than the original agreement as in effect on the
Closing Date.
SECTION 4.08. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder shall
have the right to require that Holdings repurchase all or any part of such
Holder's Notes at a purchase price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest thereon and, in each case,
Additional Amounts in respect thereof, if any, to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest and Additional Amounts, if any, due on the relevant interest
payment date), in accordance with the terms contemplated in Section 4.08(b);
provided, however, that notwithstanding the occurrence of a Change of Control,
Holdings shall not be obligated to repurchase the Notes pursuant to this
Section 4.08 in the event that it has exercised its right to redeem all the
Notes pursuant to Section 4.08(e) or paragraph 5 of the Notes.
In the event that at the time of such Change of Control the terms of
the Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to
this Section 4.08, then prior to the mailing of the notice to Holders provided
for in Section 4.08(b) below, but in any event within 30 days following any
Change of Control, Holdings shall (i) repay in full all Bank Indebtedness or,
if doing so will allow the repurchase of Notes, offer to repay in full all Bank
Indebtedness and repay the Bank Indebtedness of each lender who has accepted
such offer or (ii) obtain the requisite consent under the agreements governing
the Bank Indebtedness to permit the repurchase of the Notes as provided for in
Section 4.08(b).
(b) Within 30 days following any Change of Control (except as
provided in the proviso to the first sentence of Section 4.08(a)), Holdings
shall mail a notice to each Holder with a copy to the Trustee (the "Change of
Control Offer") stating:
(i) that a Change of Control has occurred and that such Holder
has the right to require Holdings to purchase all or a portion of such Holder's
Notes at a purchase price in cash equal to 101% of the principal amount
thereof, plus accrued and unpaid interest and Additional Amounts, in respect
thereof, if any, to the date of purchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date);
(ii) the circumstances and relevant facts and financial
information regarding such Change of Control;
40
<PAGE> 46
(iii) the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(iv) the instructions determined by Holdings, consistent with this
Section 4.08, that a Holder must follow in order to have its Notes purchased.
(c) Holders electing to have a Note purchased shall be required to
surrender the Note, with an appropriate form duly completed, to Holdings at the
address specified in the notice at least three Business Days prior to the
purchase date. Holders shall be entitled to withdraw their election if the
Trustee or Holdings receives not later than one Business Day prior to the
purchase date a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount at maturity of the Note which was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Note purchased. Holders whose Notes are
purchased only in part will be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered.
(d) On the purchase date, all Notes purchased by Holdings under this
Section 4.08 shall be delivered to the Trustee for cancellation, and Holdings
shall pay the purchase price plus accrued and unpaid interest, if any, to the
Holders entitled thereto (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).
(e) In the event that Holders of not less than 98% of the principal
amount at maturity of the outstanding Notes accept a Change of Control Offer
and Holdings purchases all of the Notes held by such Holders, Holdings shall
have the right, on not less than 30 nor more than 60 days' prior notice, given
not more than 30 days following the purchase pursuant to the Change of Control
Offer, to redeem all the Notes that remain outstanding following such purchase
at the purchase price specified in the Change of Control Offer plus, to the
extent not included in the purchase price specified in the Change of Control
Offer, accrued and unpaid interest thereon and Additional Amounts in respect
thereof, if any, to the date of redemption (subject to the right of Holders of
record on the relevant record date to receive interest on the relevant interest
payment date).
(f) Notwithstanding the foregoing provisions of this Section 4.08,
Holdings will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in
Section 4.08(b) applicable to a Change of Control Offer made by Holdings and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
(g) At the time Holdings delivers Notes to the Trustee which are to
be accepted for purchase, Holdings shall also deliver an Officers' Certificate
stating that such Notes are to be accepted by Holdings pursuant to and in
accordance with the terms of this Section 4.08. A Note shall be deemed to have
been accepted for purchase at the time the Trustee, directly or through an
agent, mails or delivers payment therefor to the surrendering Holder.
41
<PAGE> 47
(h) Prior to any Change of Control Offer, Holdings shall deliver to
the Trustee an Officers' Certificate stating that all conditions precedent
contained herein to the right of Holdings to make such offer have been complied
with.
(i) Holdings shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 4.08. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.08, Holdings shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.08 by virtue
thereof.
(j) Holdings shall, no later than ten Business Days prior to the
termination of a Change of Control Offer, mail a notice to each Holder with a
copy to the Trustee stating whether Holdings will redeem the Notes as a result
of the Change of Control.
SECTION 4.09. Compliance Certificate.
Holdings shall deliver to the Trustee within 120 days after the end of
each fiscal year of Holdings an Officers' Certificate stating that in the
course of the performance by the signers of their duties as Officers of
Holdings they would normally have knowledge of any Default and whether or not
the signers know of any Default that occurred during such period. If they do,
the certificate shall describe the Default, its status and what action Holdings
is taking or proposes to take with respect thereto. Holdings also shall comply
with Section 314(a)(4) of the TIA.
SECTION 4.10. Further Instruments and Acts.
Upon request of the Trustee, Holdings shall execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
SECTION 4.11. Limitation on Lines of Business.
Holdings shall not, and shall not permit any Restricted Subsidiary to,
engage in any business, other than a Permitted Business. Holdings shall not
engage in any activity or business other than the ownership of the Capital
Stock of the Company which shall at all times remain a Wholly Owned Subsidiary
of Holdings.
SECTION 4.12. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries.
Holdings shall not sell or otherwise dispose of any shares of Capital
Stock of the Company unless the Notes concurrently with the consummation of
such transaction are being redeemed in compliance with provisions of this
Indenture. Holdings shall not permit the Company to sell or otherwise dispose
of any shares of Capital Stock of any other Restricted Subsidiary, and shall
not permit any other Restricted Subsidiary, directly or indirectly, to issue or
sell or otherwise dispose of any shares of its Capital Stock except: (a) to the
Company or a Wholly Owned Subsidiary; (b) if, immediately after giving effect
to such issuance, sale or other
42
<PAGE> 48
disposition, neither the Company nor any of its Subsidiaries owns any Capital
Stock of such Restricted Subsidiary or (c) if, immediately after giving effect
to such issuance or sale, such Restricted Subsidiary would no longer constitute
a Restricted Subsidiary and any Investment in such Person remaining after
giving effect thereto would have been permitted to be made under Section 4.04
if made on the date of such issuance, sale or other disposition. The cash
proceeds of any sale of such Capital Stock permitted hereby shall be treated as
cash proceeds from an Asset Disposition and shall be applied in accordance with
Section 4.06.
SECTION 4.13. Calculation of Original Issue Discount.
Holdings shall file with the Trustee promptly at the end of each
calendar year through December 31, 2004 (i) a written notice specifying the
amount of original issue discount (including daily rates and accrual periods)
accrued on outstanding Notes as of the end of such year and (ii) such other
specific information relating to such original issue discount as may then be
required under the Internal Revenue Code of 1986, as amended from time to time.
ARTICLE 5
Successor Company
SECTION 5.01. When Holdings May Merge or Transfer Assets.
Holdings shall not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a corporation organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and the
Successor Company (if not Holdings) shall expressly assume, by a supplemental
indenture hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, all the obligations of Holdings under the Notes and this
Indenture;
(ii) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or any
Restricted Subsidiary as a result of such transaction as having been Incurred
by the Successor Company or such Restricted Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of Indebtedness
pursuant to Section 4.03(a);
(iv) Holdings shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with this
Indenture; and
(v) Holdings shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Holders will not recognize income, gain or loss
for Federal income tax purposes as a result of such transaction 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 transaction had not
occurred.
43
<PAGE> 49
The Successor Company shall succeed to, and be substituted for, and may
exercise every right and power of, Holdings under this Indenture, but Holdings
in the case of a conveyance, transfer or lease of all or substantially all its
assets shall not be released from the obligation to pay the principal of and
interest on the Notes.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(a) Holdings defaults in any payment of interest on, or Additional
Amounts in respect of, any Note when the same becomes due and payable and such
default continues for a period of 30 days;
(b) Holdings (i) defaults in the payment of the principal of any
Note when the same becomes due and payable at its Stated Maturity, upon
required redemption or repurchase, upon declaration or otherwise or (ii) fails
to redeem or purchase Notes when required pursuant to this Indenture or the
Notes;
(c) Holdings fails to comply with Section 5.01;
(d) Holdings fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, 4.08, 4.11 or 4.12 (other than a failure to purchase Notes when
required under Section 4.06 or 4.08) and such failure continues for 30 days
after the notice to Holdings and the Trustee specified below;
(e) Holdings fails to comply with any of its agreements in the Notes
or this Indenture (other than those referred to in (a), (b), (c) or (d) above)
and such failure continues for 60 days after the notice to Holdings and the
Trustee specified below;
(f) (i) An event of default after expiration of any applicable grace
period shall occur with respect to Indebtedness of Holdings for borrowed money
(other than Indebtedness for borrowed money owing to a Subsidiary of Holdings)
or (ii) Indebtedness of any Subsidiary of Holdings (other than Indebtedness
owing to Holdings or a Subsidiary of Holdings) is not paid within any
applicable grace period after final maturity of all Indebtedness issued under
the same facility or the acceleration of any such Indebtedness by the holders
thereof because of a default if the total amount of such Indebtedness referred
to in clauses (i) or (ii) exceeds $5.0 million or its foreign currency
equivalent at the time and such failure continues for 10 days after the notice
to Holdings and the Trustee specified below;
(g) Holdings or any Significant Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in an
involuntary case;
44
<PAGE> 50
(iii) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(iv) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to insolvency;
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against Holdings or any Significant Subsidiary
in an involuntary case;
(ii) appoints a Custodian of Holdings or any Significant
Subsidiary or for any substantial part of its property; or
(iii) orders the winding up or liquidation of Holdings or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or decree
remains unstayed and in effect for 60 days; or
(i) any judgment or decree for the payment of money in excess of $5.0
million or its foreign currency equivalent is rendered against Holdings or any
Restricted Subsidiary, to the extent such judgment or decree is not covered by
insurance or is in excess of insurance coverage, if there is a period of 60
days following the entry of such judgment or decree during which such judgment
or decree is not discharged, waived or the execution thereof stayed.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar
official under any Bankruptcy Law.
A Default under clause (d), (e) or (f) above is not an Event of Default
until the Trustee or the Holders of at least 25% in principal amount at
maturity of the outstanding Notes notify Holdings and the Trustee of the
Default and Holdings does not cure such Default within the time specified after
receipt of such notice. Such notice must specify the Default, demand that it be
remedied and state that such notice is a "Notice of Default".
Under clause (d), (e), (f) or (i) above, Holdings shall deliver to the
Trustee, within 30 days after the occurrence thereof, written notice in the
form of an Officers' Certificate of any event which with the giving of notice
or the lapse of time would become an Event of Default, its status and what
action Holdings is taking or proposes to take with respect thereto.
45
<PAGE> 51
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 6.01(g) or (h) with respect to Holdings) occurs and is continuing, the
Holders of at least 25% aggregate in principal amount at maturity of the
outstanding Notes by notice to Holdings and the Trustee, may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest will be due and
payable immediately. If an Event of Default specified in Section 6.01(g) or (h)
with respect to Holdings occurs, principal of and interest on all the 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 Holders. The Holders
of a majority in aggregate principal amount at maturity of the outstanding
Notes by notice to the Trustee may rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except nonpayment of
principal of or interest on Notes that has become due solely because of
acceleration. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.03. Other Remedies.
Notwithstanding any other provision of this Indenture, if an Event of
Default occurs and is continuing, the Trustee may pursue any available remedy
to collect the payment of principal of or interest on the Notes or to enforce
the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding in its own name and as trustee of
an express trust 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.
SECTION 6.04. Waiver of Past Defaults.
The Holders of a majority in principal amount at maturity of the Notes
by notice to the Trustee may waive an existing Default and its consequences
except (a) a Default in the payment of principal of or interest on a Note, (b)
a Default arising from the failure to redeem or purchase any Note when required
pursuant to the terms of this Indenture or (c) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Holder affected. When a Default is waived, it is deemed cured, but no such
waiver shall extend to any subsequent or other Default or impair any consequent
right.
SECTION 6.05. Control by Majority.
The Holders of a majority in principal amount at maturity of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust
or power conferred on the Trustee. However, the Trustee may refuse to follow
any direction that conflicts with law or this Indenture or, subject to Section
7.01,
46
<PAGE> 52
that the Trustee determines is unduly prejudicial to the rights of other
Holders or would involve the Trustee in personal liability; provided, however,
that the Trustee may take any other action deemed proper by the Trustee that is
not inconsistent with such direction. Prior to taking any action hereunder, the
Trustee shall be entitled to indemnification satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
SECTION 6.06. Limitation on Suits.
(a) Except to enforce the right to receive payment of principal of
or interest on the Notes when due, no Holder may pursue any remedy with respect
to this Indenture or the Notes unless:
(i) the Holder has previously given to the Trustee written notice
stating that an Event of Default is continuing;
(ii) the Holders of at least 25% in aggregate principal amount at
maturity of the outstanding Notes make a written request to the Trustee to
pursue the remedy;
(iii) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(v) the Holders of a majority in principal amount at maturity of
the outstanding Notes do not give the Trustee a direction inconsistent with the
request during such 60-day period.
(b) A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and Additional Amounts and interest
on the Notes held by such Holder, on or after the respective due dates
expressed or provided for in the Notes, or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against Holdings or any other obligor on the Notes for the
whole amount then due and owing (together with interest on overdue principal
and (to the extent lawful) on any unpaid interest at the rate provided for in
the Notes) and the amounts provided for in Section 7.07.
47
<PAGE> 53
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 and
the Holders allowed in any judicial proceedings relative to Holdings or any
Subsidiary, their creditors or their property and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder
to make payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and its counsel, and any
other amounts due the Trustee under Section 7.07.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this Article
6, it shall pay out the money or property in the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, and any Additional Amounts without preference
or priority of any kind, according to the amounts due and payable on the Notes
for principal, any Additional Amounts and interest, respectively; and
THIRD: to Holdings.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.10. At least 15 days before such record
date, the Trustee shall mail to each Holder and Holdings a notice that states
the record date, the payment date and amount to be paid.
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 in its discretion may 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 a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 or a suit by Holders of more than 10% in principal
amount at maturity of the Notes.
SECTION 6.12. Waiver of Stay or Extension Laws.
Holdings (to the extent it may lawfully do so) agrees that it shall not
at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law wherever enacted, now or
at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and Holdings (to the extent that it may lawfully
48
<PAGE> 54
do so) hereby expressly waives all benefit or advantage of any such law, and
shall not hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(ii) 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, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) 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:
(i) this paragraph does not limit the effect of Section 7.01(b);
(ii) 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; and
(iii) 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 6.05.
(iv) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur 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 to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to Sections 7.01(a), 7.01(b) and 7.01(c).
49
<PAGE> 55
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with Holdings.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01 and to the provisions of the
TIA.
(h) The Trustee is under no duty to make any filings, including UCC
and applicable tax filings (unless requested by written instruction and
provided in execution form) and no obligation as to the perfection or priority
of any security interest.
SECTION 7.02. Rights of Trustee.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.
(c) At the expense of Holdings, Trustee may act through agents and
shall not be responsible for the misconduct or negligence of any agent
appointed in good faith.
(d) The Trustee shall not be liable for any action it takes or omits
to take (i) in good faith which it believes to be authorized or within its
rights or powers and (ii) in the event that it requests instructions when
unable to decide between alternative courses of action or ambiguous provisions,
and when no instruction is received, the Trustee may, but is not obligated to
take any such action; provided, however, that the Trustee's conduct does not
constitute willful misconduct or negligence.
(e) At the expense of Holdings, Trustee may consult with counsel,
and the advice or opinion of counsel with respect to legal matters relating to
this Indenture and the Notes shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered
by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(f) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other paper or document or as to whether or not an Event of
Default shall have occurred unless requested in writing to do so by the Holders
of not less than a majority in principal amount at maturity of the Notes at the
time outstanding, but the Trustee, in its discretion, may make such further
inquiry or
50
<PAGE> 56
investigation into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of Holdings, personally or
by agent or attorney.
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 Holdings or its
Affiliates with the same rights it would have if it were not Trustee. Any
Paying Agent, Registrar or co-paying 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, sufficiency or adequacy of this Indenture or the Notes, it
shall not be accountable for Holdings' use of the proceeds from the Notes, and
it shall not be responsible for any statement (other than as to itself) in this
Indenture or in any document issued in connection with the sale of the Notes or
in the Notes other than the Trustee's certificate of authentication. The
Trustee shall not be responsible for any conduct or omission by Holdings or the
occurrence of any Event of Default.
SECTION 7.05. Notice of Defaults.
If a Default occurs and is continuing and if the Trustee has actual
knowledge of it, the Trustee shall mail to each Holder notice of the Default
within the earlier of 90 days after it occurs or 30 days after it is actually
known to a trust officer or written notice of it is received by the Trustee.
SECTION 7.06. Reports by Trustee to Holders.
As promptly as practicable after each May 15 beginning with the May 15
following the date of this Indenture, the Trustee shall mail to each Holder a
brief report dated as of May 15 that complies with Section 313(a) of the TIA.
The Trustee shall also comply with Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Holders shall be
filed by or on behalf of Holdings with the SEC and each stock exchange (if any)
on which the Notes are listed. Holdings agrees to notify promptly the Trustee
whenever the Notes become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity.
Holdings shall pay to the Trustee from time to time compensation for
its services as agreed to in a separate fee agreement between Holdings and the
Trustee. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. Holdings shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses incurred or made
by it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. Holdings shall indemnify the Trustee (including in its individual
capacity) against any and all loss, liability, cost, claims or
51
<PAGE> 57
expense (including reasonable attorneys' fees) incurred by or in connection
with the administration of this trust and the performance of its duties
hereunder. The Trustee shall notify Holdings of any claim for which it may seek
indemnity promptly upon obtaining actual knowledge thereof; provided, however,
that any failure so to notify Holdings shall not relieve Holdings of its
indemnity obligations hereunder. Holdings shall defend the claim and the
indemnified party shall provide reasonable cooperation at Holdings' expense in
the defense. Such indemnified parties may have separate counsel and Holdings
shall pay the fees and expenses of such counsel; provided, however, that
Holdings shall not be required to pay such fees and expenses if it assumes such
indemnified parties' defense and, in such indemnified parties' reasonable
judgment, there is no conflict of interest between Holdings and such parties in
connection with such defense. Holdings need not reimburse any expense or
indemnify against any loss, liability or expense incurred by an indemnified
party through such party's own willful misconduct, negligence or bad faith.
To secure Holdings' payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee other than money or property held in trust to pay
principal of and interest and any Additional Amounts, if any, on particular
Notes.
Holdings' obligations pursuant to this Section 7.07 shall survive the
satisfaction or discharge of this Indenture, any rejection or termination of
this Indenture under any bankruptcy law or the resignation or removal of the
Trustee. Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses after the occurrence of a
Default specified in Section 6.01(g) or (h) with respect to Holdings, the
expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
(a) The Trustee may resign at any time by so notifying Holdings in
writing in accordance with the provisions of Section 13.02. Any resignation of
the Trustee shall be effective immediately upon receipt by Holdings of such
notice (unless such notice shall specify a later time as the effective time of
such resignation, in which case such later time shall be the effective time),
and the resignation of the Trustee shall not prejudice any rights of the
Trustee to receive any compensation, any reimbursement of any expenses or any
indemnity or right to being defended and held harmless under this Indenture.
The Holders of a majority in principal amount at maturity of the Notes may
remove the Trustee by so notifying the Trustee and may appoint a successor
Trustee. Holdings shall remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the
Trustee or its property; or
(iv) the Trustee otherwise becomes incapable of acting.
52
<PAGE> 58
(b) If the Trustee resigns, is removed by Holdings or by the Holders
of a majority in principal amount at maturity of the Notes and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), Holdings shall promptly appoint a successor
Trustee. Trustee shall be deemed to have discharged its duties to the extent
that a successor Trustee has agreed to perform such duties. The Trustee is not
responsible for monitoring the performance of such successor Trustee or for the
failure of such successor Trustee in performing their duties.
(c) A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to Holdings. Thereupon 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 a notice of its succession to
Holders. The retiring Trustee shall promptly transfer all property held by it
as Trustee to the successor Trustee, subject to the lien provided for in
Section 7.07.
(d) If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee or the Holders
of 10% in principal amount at maturity of the Notes may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(e) If the Trustee fails to comply with Section 7.10, unless the
Trustee's duty to resign is stayed as provided in TIA ss. 310(b), any Holder
who has been a bona fide Holder of a Note for at least six months may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(f) Notwithstanding the replacement of the Trustee pursuant to this
Section 7.08, Holdings' obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Notes so authenticated; and in case
at that time any of the Notes shall not have been authenticated, any successor
to the Trustee may authenticate such Notes either in the name of any
predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Notes or in this Indenture provided that the certificate of the Trustee
shall have.
53
<PAGE> 59
SECTION 7.10. Eligibility; Disqualification.
The Trustee shall at all times satisfy the requirements of TIA ss.
310(a). The Trustee shall have a combined capital and surplus of at least
$100.0 million as set forth in its most recent published annual report of
condition. The Trustee shall comply with TIA ss. 310(b), subject to its right
to apply for a stay of its duty to resign under the penultimate paragraph of
TIA ss. 310(b); provided, however, that there shall be excluded from the
operation of TIA ss. 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
Holdings are outstanding if the requirements for such exclusion set forth in
TIA ss. 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Holdings.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Notes; Defeasance.
(a) When (i) all outstanding Notes (other than Notes replaced or
paid pursuant to Section 2.07) have been cancelled or delivered to the Trustee
for cancellation or (ii) all outstanding Notes have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article 3 hereof, and Holdings irrevocably deposits with the
Trustee funds in an amount sufficient, or U.S. Government Obligations, the
principal of and interest on which will be sufficient, or a combination thereof
sufficient, in the written opinion of a nationally recognized firm of
independent public accountants delivered to the Trustee (which delivery shall
only be required if U.S. Government Obligations have been so deposited) to pay
the principal of and interest on the outstanding Notes when due at maturity or
upon redemption of all outstanding Notes, including interest thereon to
maturity or such redemption date (other than Notes replaced or paid pursuant to
Section 2.07), and Additional Amounts, if any, and if in either case Holdings
pays all other sums payable hereunder by Holdings, then this Indenture shall,
subject to Section 8.01(c), cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of Holdings
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of Holdings.
(b) Subject to Sections 8.01(c) and 8.02, Holdings at any time may
terminate (i) all of its obligations under the Notes and this Indenture ("legal
defeasance option") or (ii) its obligations under Sections 4.02, 4.03, 4.04,
4.05, 4.06, 4.07, 4.08, 4.09, 4.11, 4.12 and 4.13 and the operation of Section
5.01(a)(iii), 6.01(d), 6.01(f), 6.01(g) (with respect to Significant
Subsidiaries only), 6.01(h) (with respect to Significant Subsidiaries only) and
6.01(i) ("covenant defeasance option"). Holdings may exercise its legal
defeasance option notwithstanding its prior exercise of its covenant defeasance
option.
54
<PAGE> 60
If Holdings exercises its legal defeasance option, payment of the Notes
may not be accelerated because of an Event of Default. If Holdings exercises
its covenant defeasance option, payment of the Notes may not be accelerated
because of an Event of Default specified in Section 6.01(d), 6.01(f), 6.01(g)
(with respect to Significant Subsidiaries only), 6.01(h) (with respect to
Significant Subsidiaries only) or 6.01(i) or because of the failure of Holdings
to comply with Section 5.01(a)(iii).
Upon satisfaction of the conditions set forth herein and upon request
of Holdings, the Trustee shall acknowledge in writing the discharge of those
obligations that Holdings terminates.
(c) Notwithstanding clauses (a) and (b) above, Holdings' obligations
in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07, 7.08 and in this Article
8 shall survive until the Notes have been paid in full. Thereafter, Holdings'
obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance.
(a) Holdings may exercise its legal defeasance option or its covenant
defeasance option only if:
(i) Holdings irrevocably deposits in trust with the Trustee money
in an amount sufficient or U.S. Government Obligations the principal of and
interest on which will be sufficient, or a combination thereof sufficient, to
pay the principal of and interest on the Notes when due at maturity or
redemption, as the case may be, including interest thereon to maturity or such
redemption date and Additional Amounts, if any;
(ii) Holdings delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their opinion
that the payments of principal and interest when due and without reinvestment
on the deposited U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts as will be
sufficient to pay principal and interest when due on all the Notes to maturity
or redemption, as the case may be;
(iii) 123 days pass after the deposit is made and during the
123-day period no Default specified in Section 6.01(g) or (h) with respect to
Holdings occurs which is continuing at the end of the period;
(iv) the deposit does not constitute a default under any other
agreement binding on Holdings;
(v) Holdings delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company Act
of 1940;
(vi) in the case of the legal defeasance option, Holdings shall
have delivered to the Trustee an Opinion of Counsel stating that (1) Holdings
has received from, or there has been published by, the Internal Revenue Service
a ruling, or (2) 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
55
<PAGE> 61
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 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
defeasance had not occurred;
(vii) in the case of the covenant defeasance option, Holdings shall
have delivered to the Trustee an Opinion of Counsel to the effect 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; and
(viii) Holdings delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Notes as contemplated by this Article 8 have
been complied with.
(b) Before or after a deposit, Holdings may make arrangements
satisfactory to the Trustee for the redemption of Notes at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article 8. It shall apply the deposited
money and the money from U.S. Government Obligations through the Paying Agent
and in accordance with this Indenture to the payment of principal of and
interest on the Notes.
SECTION 8.04. Repayment to Holdings.
The Trustee and the Paying Agent shall promptly turn over to Holdings
upon request any money or U.S. Government Obligations held by it as provided in
this Article which, in the written opinion of a nationally recognized firm of
independent public accountants delivered to the Trustee (which delivery shall
only be required if U.S. Government Obligations have been so deposited), are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent discharge or defeasance in accordance with this Article.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to Holdings upon written request any money held by them
for the payment of principal or interest on the Notes that remains unclaimed
for two years, and, thereafter, Holders entitled to the money must look to
Holdings for payment as general creditors, and the Trustee and the Paying Agent
shall have no further liability with respect to such monies.
SECTION 8.05. Indemnity for Government Obligations.
Holdings shall pay and shall indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against deposited U.S. Government
Obligations or the principal and interest received on such U.S. Government
Obligations.
56
<PAGE> 62
SECTION 8.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Article 8 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,
Holdings' obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to this Article 8 until
such time as the Trustee or Paying Agent is permitted to apply all such money
or U.S. Government Obligations in accordance with this Article 8; provided,
however, that, if Holdings has made any payment of interest on, or principal of
any Notes because of the reinstatement of its obligations, Holdings shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders.
Holdings and the Trustee may amend this Indenture or the Notes without
notice to or consent of any Holder:
(i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to comply with Article 5;
(iii) to provide for uncertificated Notes in addition to or in
place of certificated Notes; provided, however, that the uncertificated Notes
are issued in registered form for purposes of Section 163(f) of the Code or in
a manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Code;
(iv) to provide for the issuance of the PIK Notes and exchange
notes for such PIK Notes;
(v) to secure the Notes;
(vi) to add to the covenants of Holdings for the benefit of the
Holders or to surrender any right or power herein conferred upon Holdings;
(vii) to comply with any requirement of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the TIA;
(viii) to make any change that does not adversely affect the rights
of any Holder;
(ix) to provide for the issuance of the Exchange Notes, which
shall have terms substantially identical in all material respects to the
Initial Notes (except that the transfer restrictions contained in the Initial
Notes shall be modified or eliminated, as appropriate), and
57
<PAGE> 63
which shall be treated, together with any outstanding Initial Notes, and any
PIK Notes issued on the Initial Notes or the Exchange Notes, as a single issue
of securities; or
(x) to change the name or title of the Initial Notes, the PIK
Notes or the Exchange Notes and make any conforming changes related thereto.
After an amendment under this Section 9.01 becomes effective, Holdings
shall mail to Holders a notice briefly describing such amendment. The failure
to give such notice to all Holders, or any defect therein, shall not impair or
affect the validity of an amendment under this Section 9.01.
SECTION 9.02. With Consent of Holders.
(a) Holdings and the Trustee may amend this Indenture or the Notes
without notice to any Holder but with the written consent of the Holders of at
least a majority in aggregate principal amount at maturity of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes). However, without the consent of each Holder affected,
an amendment may not:
(i) reduce the aggregate principal amount at maturity of Notes
whose Holders must consent to an amendment;
(ii) reduce the rate of or extend the time for payment of interest
or any Additional Amounts on any Note;
(iii) reduce the principal amount at maturity of or extend the
Stated Maturity of any Note;
(iv) reduce the premium payable upon the redemption of any Note or
change the time at which any Note may be redeemed in accordance with Article 3;
(v) make any Note payable in money other than that stated in the
Note;
(vi) impair the right of any holder to receive payment of
principal of, and interest or any Additional Amounts on, such Holder's Notes on
or after the due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's Notes; or
(vii) make any change in Section 6.04 or 6.07 or the second
sentence of this Section 9.02.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section 9.02 becomes effective, Holdings
shall mail to Holders a notice briefly describing such amendment. The failure
to give such notice to all
58
<PAGE> 64
Holders, or any defect therein, shall not impair or affect the validity of an
amendment under this Section 9.02.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Notes shall comply with the
TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers.
(a) A consent to an amendment or a waiver by a Holder of a Note
shall bind the Holder and every subsequent Holder of that Note or portion of
the Note that evidences the same debt as the consenting Holder's Note, even if
notation of the consent or waiver is not made on the Note. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Note or portion of the Note if the Trustee receives the notice of
revocation before the date on which the Trustee receives an Officers'
Certificate from Holdings certifying that the requisite number of consents have
been received. After an amendment or waiver becomes effective, it shall bind
every Holder. An amendment or waiver becomes effective upon the (i) receipt by
Holdings or the Trustee of the requisite number of consents, (ii) satisfaction
of conditions to effectiveness as set forth in this Indenture and any indenture
supplemental hereto containing such amendment or waiver and (iii) execution of
such amendment or waiver (or supplemental indenture) by Holdings and the
Trustee.
(b) Holdings may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding 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 give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. Notation on or Exchange of Notes.
If an amendment changes the terms of a Note, the Trustee may require
the Holder of the Note to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Note regarding the changed terms and return it to
the Holder. Alternatively, if Holdings or the Trustee so determines, Holdings
in exchange for the Note shall issue and the Trustee shall authenticate a new
Note that reflects the changed terms. Failure to make the appropriate notation
or to issue a new Note shall not affect the validity of such amendment.
SECTION 9.06. Trustee to Sign Amendments.
The Trustee shall sign any amendment authorized pursuant to this
Article 9 if the amendment does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may but need
not sign it. In signing such amendment the Trustee shall be entitled to receive
indemnity reasonably satisfactory to it and to receive, and (subject to Section
59
<PAGE> 65
7.01) shall be fully protected in relying upon, an Officers' Certificate and an
Opinion of Counsel stating that such amendment is authorized or permitted by
this Indenture and that such amendment is the legal, valid and binding
obligation of Holdings enforceable against it in accordance with its terms,
subject to customary exceptions, and complies with the provisions hereof
(including Section 9.03).
ARTICLE 10
Miscellaneous
SECTION 10.01. Trust Indenture Act Controls.
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by, or with another provision
(an "incorporated provision") included in this Indenture by operation of TIA
ss.ss. 310 to 318, inclusive, such imposed duties or incorporated provision
shall control.
SECTION 10.02. Notices.
Any notice or communication shall be in writing and delivered in person
or mailed by first-class mail addressed as follows:
if to Holdings:
Maxxim Medical, Inc.
10300 49th Street North
Clearwater, Florida 33762
Attention of: Corporate Secretary
Telecopier: 727-561-2180
if to the Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention of: Corporate Trust Administration
Telecopier: 302-651-8882
Holdings or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed first
class mail, to the Holder at the Holder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
60
<PAGE> 66
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 10.03. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. Holdings, the
Trustee, the Registrar and anyone else shall have the protection of TIA ss.
312(c).
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Holdings to the Trustee to take or
refrain from taking any action under this Indenture, Holdings shall furnish to
the Trustee:
(a) an Officers' Certificate in form reasonably satisfactory to the
Trustee stating that, in the opinion of the signers, all conditions precedent,
if any, provided for in this Indenture relating to the proposed action have
been complied with; and
(b) an Opinion of Counsel in form reasonably satisfactory to the
Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
SECTION 10.05. Statements Required in Certificate or Opinion.
Each Officers' Certificate or opinion with respect to compliance with a
covenant or condition provided for in this Indenture (other than pursuant to
Section 4.09) shall include:
(a) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 10.06. When Notes Disregarded.
In determining whether the Holders of the required principal amount at
maturity of Notes have concurred in any direction, waiver or consent, Notes
owned by Holdings or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with Holdings shall be
disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or
61
<PAGE> 67
consent, only Notes which the Trustee knows are so owned shall be so
disregarded. Subject to the foregoing, only Notes outstanding at the time shall
be considered in any such determination.
SECTION 10.07. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 10.08. Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions are not required by law or regulation to be open in the State of
New York or Wilmington, Delaware. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period. If a regular record date is a
Legal Holiday, the record date shall not be affected.
SECTION 10.09. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE 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 LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 10.10. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of Holdings
shall not have any liability for any obligations of Holdings under the Notes or
this Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Note, each Holder shall waive and
release all such liability. The waiver and release shall be part of the
consideration for the issue of the Notes.
SECTION 10.11. Successors.
All agreements of Holdings in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 10.12. Multiple Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement. One signed copy is enough to prove this Indenture.
62
<PAGE> 68
SECTION 10.13. Table of Contents; Headings.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not intended to be considered a part hereof and shall not
modify or restrict any of the terms or provisions hereof.
63
<PAGE> 69
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
MAXXIM MEDICAL, INC., a Texas corporation
By: /s/ Kenneth W. Davidson
-------------------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President, Chief Executive
Officer
Accepted:
WILMINGTON TRUST COMPANY, AS TRUSTEE
By: /s/ James J. McGinley
------------------------
Name: James J. McGinley
Title: Authorized Signer
64
<PAGE> 70
APPENDIX A
PROVISIONS RELATING TO INITIAL NOTES
AND EXCHANGE NOTES
1. Definitions
1.1 Definitions
For the purposes of this Appendix A the following terms shall
have the meanings indicated below:
"Definitive Note" means a certificated Initial Note, PIK Note or
Exchange Note (bearing the Restricted Notes Legend if the transfer of such Note
is restricted by applicable law) that does not include the Global Notes Legend.
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Global Notes Legend" means the legend set forth under that
caption in Exhibit B to this Indenture.
"IAI" means an institutional "accredited investor" as described
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Notes Custodian," who shall initially be the Trustee, means the
custodian with respect to a Global Exchange Note (as appointed by the
Depositary) or any successor person thereto.
"Notes" under the Indenture include the Initial Notes and any
Exchange Notes issued in exchange for Initial Notes and, in each case, any PIK
Notes issued thereon.
"Purchase Agreement" means the Purchase Agreement dated November
12, 1999, among Holdings and the Purchasers.
"Purchasers" means GS Mezzanine Partners, L.P. and GS Mezzanine
Partners Offshore, L.P.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Registered Exchange Offer" means the offer by Holdings,
pursuant to the Registration Agreement, to certain Holders of Notes, to issue
and deliver to such Holders, in exchange for their Notes, a like aggregate
principal amount at maturity of Exchange Notes registered under the Securities
Act.
"Registration Agreement" means the Exchange and Registration
Rights Agreement dated November 12, 1999, among Holdings and the Purchasers.
"Regulation S" means Regulation S under the Securities Act.
A-1
<PAGE> 71
"Restricted Notes Legend" means the legend set forth in
paragraph 2.3(d)(i) herein.
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means a registration statement
filed by Holdings in connection with the offer and sale of Initial Notes
pursuant to the Registration Agreement.
"Transfer Restricted Notes" means Definitive Notes and any other
Notes that bear or are required to bear the Restricted Notes Legend.
"Trigger Date" as defined in the Registration Agreement.
1.2 Other Definitions
<TABLE>
<CAPTION>
Term: Defined in Section:
----- -------------------
<S> <C>
"Agent Members" 2.1(c)
"Initial Definitive Notes" 2.1(b)
"Global Exchange Note" 2.1(b)
</TABLE>
2. The Notes
2.1 Form and Dating
(a) The Initial Notes issued on the date hereof will be sold
by Holdings pursuant to the Purchase Agreement to the Purchasers. Such Initial
Notes may thereafter be transferred to, among others, QIBs, purchasers in
reliance on Regulation S and, except as set forth below, IAIs in accordance
with Rule 501.
(b) The Initial Notes and any PIK Notes issued thereon shall
be issued in the form of Definitive Notes, in fully registered form (the
"Initial Definitive Notes") bearing the Restricted Notes Legend and shall be
issued to and registered in the name of the applicable Purchaser and duly
executed by Holdings and authenticated by the Trustee as provided in this
Indenture.
Initial Notes and any PIK Notes issued thereon will be exchanged for
Exchange Notes in the Registered Exchange Offer pursuant to the Registration
Agreement. Exchange Notes will also be issued upon the sale of Initial Notes
and any PIK Notes issued thereon (i) under a Shelf Registration Statement or
(ii) at any time that the Initial Notes being sold are not Transfer Restricted
Notes. Exchange Notes and any PIK Notes issued thereon shall, except as
provided in Sections 2.3 and 2.4, be issued in global form bearing the Global
Notes Legend (the "Global Exchange Notes"). The aggregate principal amount at
maturity of the Global Exchange Notes
A-2
<PAGE> 72
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee and on the schedules
thereto as hereinafter provided.
(c) Book-Entry Provisions. This Section 2.1(c) shall apply
only to a Global Exchange Note deposited with or on behalf of the Depositary.
Holdings shall execute and the Trustee shall, in accordance with this
Section 2.1(c) and Section 2.2 and pursuant to an order of Holdings signed by
one Officer, authenticate and deliver one Global Exchange Note that (i) shall
be registered in the name of the Depositary for such Global Exchange Note or
the nominee of such Depositary and (ii) shall be delivered by the Trustee to
such Depositary or pursuant to such Depositary's instructions or held by the
Trustee as Notes Custodian.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Exchange Note
held on their behalf by the Depositary or by the Trustee as Notes Custodian or
under such Global Exchange Note, and the Depositary may be treated by Holdings,
the Trustee and any agent of Holdings or the Trustee as the absolute owner of
such Global Exchange Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent Holdings, the Trustee or any agent of
Holdings or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices of such
Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Exchange Note.
(d) Definitive Notes. Except as provided in Sections 2.3 or
2.4, owners of beneficial interests in Global Exchange Notes will not be
entitled to receive physical delivery of certificated Notes.
2.2 Authentication. The Trustee shall authenticate and make
available for delivery upon a written order of Holdings signed by one Officer
(a) Initial Definitive Notes for original issue on the date hereof in an
aggregate principal amount at maturity of $98,473,000, plus any PIK Notes
issued hereunder, (b) subject to the terms of this Indenture, Exchange Notes in
the form of Global Exchange Notes for issue in a Registered Exchange Offer
pursuant to the Registration Agreement in a like principal amount at maturity
of the Initial Notes (including any PIK Notes issued thereon) exchanged
pursuant thereto, (c) subject to the terms of this Indenture, Exchange Notes in
the form of Global Exchange Notes in lieu of Initial Notes (including any PIK
Notes issued thereon) upon the sale of such Initial Notes (i) under a Shelf
Registration Statement or (ii) at any time that such Initial Notes (including
any PIK Notes issued thereon) being sold are not Transfer Restricted Notes and
(d) subject to the terms of this Indenture, upon presentation to the Trustee of
Initial Notes (including any PIK Notes issued thereon) that are not Transfer
Restricted Notes. Such order shall specify the amount of the Notes to be
authenticated, the date on which the original issue of Notes is to be
authenticated and whether the Notes are to be Initial Notes or Exchange Notes.
The aggregate principal amount at maturity of Notes outstanding at any time may
not exceed $98,473,000, plus any PIK Notes issued hereunder, except as provided
in Sections 2.07 and 2.08 of this Indenture.
A-3
<PAGE> 73
2.3 Transfer and Exchange.
(a) Transfer and Exchange of Definitive Notes. When
Definitive Notes are presented to the Registrar with a request:
(i) to register the transfer of such Definitive Notes;
or
(ii) to exchange such Definitive Notes for an equal
principal amount at maturity of Definitive Notes of other
authorized denominations, the Registrar shall register the
transfer or make the exchange as requested if its reasonable
requirements for such transaction are met; provided, however,
that the Definitive Notes surrendered for transfer or exchange:
(1) shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably
satisfactory to Holdings and the Registrar, duly
executed by the Holder thereof or his attorney duly
authorized in writing; and
(2) in the case of Transfer Restricted Notes are
accompanied by the following additional information and
documents, as applicable:
(A) if such Definitive Notes are being
delivered to the Registrar by a Holder for
registration in the name of such Holder, without
transfer, a certification from such Holder to that
effect (in the form set forth on the reverse side
of the Initial Note); or
(B) if such Definitive Notes are being
transferred to Holdings, a certification to that
effect (in the form set forth on the reverse side
of the Initial Note); or
(C) if such Definitive Notes are being
transferred pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act or in reliance upon another
exemption from the registration requirements of
the Securities Act, (x) a certification to that
effect (in the form set forth on the reverse side
of the Initial Note) and (y) if Holdings so
requests, an opinion of counsel or other evidence
reasonably satisfactory to it as to the compliance
with the restrictions set forth in the legend set
forth in Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Note for a
Beneficial Interest in a Global Exchange Note. A Definitive Note may not be
exchanged for a beneficial interest in a Global Exchange Note except (i) as
part of a Registered Exchange Offer, (ii) upon sale of the Definitive Note
under the Shelf Registration Statement, (iii) upon sale of the Definitive Note
at the time such Definitive Note is not a Transfer Restricted Note or (iv) upon
presentation to the Trustee of Definitive Notes that are not Transfer
Restricted Notes. Upon receipt by the Trustee of a Definitive Note, duly
endorsed or accompanied by a written
A-4
<PAGE> 74
instrument of transfer in form reasonably satisfactory to Holdings and the
Registrar, together with written instructions directing the Trustee to make, or
to direct the Notes Custodian to make, an adjustment on its books and records
with respect to such Global Exchange Note to reflect an increase in the
aggregate principal amount at maturity of the Notes represented by the Global
Exchange Note, such instructions to contain information regarding the
Depositary account to be credited with such increase, then the Trustee shall
cancel such Definitive Note and cause, or direct the Notes Custodian to cause,
in accordance with the standing instructions and procedures existing between
the Depositary and the Notes Custodian, the aggregate principal amount at
maturity of Notes represented by the Global Exchange Note to be increased by
the aggregate principal amount at maturity of the Definitive Note to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Exchange
Note equal to the principal amount at maturity of the Definitive Note so
canceled. If no Global Exchange Notes are then outstanding and the Global
Exchange Note has not been previously exchanged for certificated Notes pursuant
to Section 2.4, Holdings shall issue and the Trustee shall authenticate, upon
written order of Holdings in the form of an Officers' Certificate, a new Global
Exchange Note in the appropriate principal amount at maturity.
(c) Transfer and Exchange of Global Exchange Notes.
(i) The transfer of the Global Exchange Note or
beneficial interests therein shall be effected through the
Depositary, in accordance with this Indenture and the procedures
of the Depositary therefor. A transferor of a beneficial
interest in a Global Exchange Note shall deliver a written order
given in accordance with the Depositary's procedures containing
information regarding the participant account of the Depositary
to be credited with a beneficial interest in such Global
Exchange Note and such account shall be credited in accordance
with such order with a beneficial interest in the applicable
Global Exchange Note and the account of the Person making the
transfer shall be debited by an amount equal to the beneficial
interest in the Global Exchange Note being transferred.
(ii) Notwithstanding any other provisions of this
Appendix (other than the provisions set forth in Section 2.4), a
Global Exchange Note may not be transferred as a whole except by
the Depositary to a nominee of the Depositary or by a nominee of
the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(d) Legend.
(i) Except as permitted by the following paragraphs
(ii), (iii) or (iv), each Definitive Note (and all Notes issued
in exchange therefor or in substitution thereof) shall bear a
legend in substantially the following form (each defined term in
the legend being defined as such for purposes of the legend
only):
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
A-5
<PAGE> 75
STATE OR OTHER JURISDICTION. NEITHER THIS NOTE NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH MAXXIM MEDICAL, INC., A TEXAS
CORPORATION ("HOLDINGS") OR ANY AFFILIATE OF HOLDINGS WAS THE OWNER OF THIS
NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A) TO HOLDINGS, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE NOTE
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT AT MATURITY OF THE NOTES
OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR
SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR
(F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO HOLDINGS' AND THE TRUSTEE'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR
(F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
FOR PURPOSES OF SECTIONS *1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE REGULATIONS THEREUNDER, HOLDERS MAY OBTAIN
INFORMATION CONCERNING THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT
AND THE YIELD TO MATURITY FROM THE CORPORATE SECRETARY OF THE COMPANY AT 1300
49TH STREET NORTH, CLEARWATER, FLORIDA 33762.
Each Definitive Note shall bear the following additional legend:
A-6
<PAGE> 76
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES
WITH THE FOREGOING RESTRICTIONS.
(ii) Upon any sale or transfer of a Transfer Restricted
Note that is a Definitive Note, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Note for a
Definitive Note that does not bear the legends set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Note if the Holder certifies in writing to the
Registrar that its request for such exchange was made in
reliance on Rule 144 (such certification to be in the form set
forth on the reverse of the Initial Note).
(iii) After a transfer of any Initial Notes during the
period of the effectiveness of and pursuant to a Shelf
Registration Statement with respect to such Initial Notes all
requirements pertaining to the Restricted Notes Legend on such
Initial Notes shall cease to apply and the requirements that any
such Initial Notes be issued in global form shall become
applicable.
(iv) Upon the consummation of a Registered Exchange
Offer with respect to the Initial Notes pursuant to which
Holders of such Initial Notes are offered Exchange Notes in
exchange for their Initial Notes, Exchange Notes in global form
without the Restricted Notes Legend shall be available to
Holders that exchange such Initial Notes in such Registered
Exchange Offer.
(e) Cancellation or Adjustment of Global Exchange Note. At
such time as all beneficial interests in a Global Exchange Note have either
been exchanged for Definitive Notes, transferred, redeemed, repurchased or
canceled, such Global Exchange Note shall be returned by the Depositary to the
Trustee for cancellation or retained and canceled by the Trustee. At any time
prior to such cancellation, if any beneficial interest in a Global Exchange
Note is exchanged for Definitive Notes, transferred in exchange for an interest
in another Global Exchange Note, redeemed, repurchased or canceled, the
principal amount at maturity of Notes represented by such Global Exchange Note
shall be reduced and an adjustment shall be made on the books and records of
the Trustee (if it is then the Notes Custodian for such Global Exchange Note)
with respect to such Global Exchange Note, by the Trustee or the Notes
Custodian, to reflect such reduction.
(f) Obligations with Respect to Transfers and Exchanges of
Notes.
(i) To permit registrations of transfers and exchanges,
Holdings shall execute and the Trustee shall authenticate,
Definitive Notes and Global Exchange Notes at the Registrar's
request.
(ii) No service charge shall be made for any
registration of transfer or exchange, but Holdings may require
payment of a sum sufficient to cover any transfer tax,
assessments, or similar governmental charge payable in
connection therewith
A-7
<PAGE> 77
(other than any such transfer taxes, assessments or similar
governmental charge payable upon exchanges pursuant to Sections
3.06, 4.06, 4.08 and 9.05 of this Indenture).
(iii) Prior to the due presentation for registration of
transfer of any Note, Holdings, the Trustee, the Paying Agent or
the Registrar may deem and treat the person in whose name a Note
is registered as the absolute owner of such Note for the purpose
of receiving payment of principal of, and interest on, and
Additional Amounts, if any, with respect to, such Note and for
all other purposes whatsoever, whether or not such Note is
overdue, and none of Holdings, the Trustee, the Paying Agent or
the Registrar shall be affected by notice to the contrary.
(iv) All Notes issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same
debt and shall be entitled to the same benefits under this
Indenture as the Notes surrendered upon such transfer or
exchange.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Exchange Note, a
member of, or a participant in the Depositary or any other
Person with respect to the accuracy of the records of the
Depositary or its nominee or of any participant or member
thereof, with respect to any ownership interest in the Notes or
with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depositary) of
any notice (including any notice of redemption or repurchase) or
the payment of any amount, under or with respect to such Notes.
All notices and communications to be given to the Holders and
all payments to be made to Holders under the Notes shall be
given or made only to the registered Holders (which shall be the
Depositary or its nominee in the case of a Global Exchange
Note). The rights of beneficial owners in any Global Exchange
Note shall be exercised only through the Depositary subject to
the applicable rules and procedures of the Depositary. The
Trustee may rely and shall be fully protected in relying upon
information furnished by the Depositary with respect to its
members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under
applicable law with respect to any transfer of any interest in
any Note (including any transfers between or among Depositary
participants, members or beneficial owners in any Global
Exchange Note) other than to require delivery of such
certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly
required by, the terms of this Indenture, and to examine the
same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Definitive Notes
(a) A Global Exchange Note deposited with the Depositary or
with the Trustee as Notes Custodian pursuant to Section 2.1 or issued in
connection with a Registered
A-8
<PAGE> 78
Exchange Offer shall be transferred to the beneficial owners thereof in the
form of Definitive Notes in an aggregate principal amount at maturity equal to
the principal amount at maturity of such Global Exchange Note, in exchange for
such Global Exchange Note, only if such transfer complies with Section 2.3 and
(i) the Depositary notifies Holdings that it is unwilling or unable to continue
as a Depositary for such Global Exchange Note or if at any time the Depositary
ceases to be a "clearing agency" registered under the Exchange Act, and a
successor depositary is not appointed by Holdings within 90 days of such notice
or after Holdings becomes aware of such cessation, or (ii) an Event of Default
has occurred and is continuing or (iii) Holdings, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Notes under this Indenture.
(b) Any Global Exchange Note that is transferable to the
beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by
the Depositary to the Trustee, to be so transferred, in whole or from time to
time in part, without charge, and the Trustee shall authenticate and deliver,
upon such transfer of each portion of such Global Exchange Note, an equal
aggregate principal amount at maturity of Definitive Notes of authorized
denominations. Any portion of a Global Exchange Note transferred pursuant to
this paragraph shall be executed, authenticated and delivered only in
denominations of $1,000 (in principal amount at maturity) and any integral
multiple thereof and registered in such names as the Depositary shall direct.
Any certificated Initial Note in the form of a Definitive Note delivered in
exchange for an interest in the Global Exchange Note shall, except as otherwise
provided by Section 2.3(d), bear the Restricted Notes Legend.
(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Exchange 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.
(d) In the event of the occurrence of any of the events
specified in Section 2.4(a)(i), (ii) or (iii), Holdings will promptly make
available to the Trustee a reasonable supply of Definitive Notes in fully
registered form without interest coupons.
A-9
<PAGE> 79
EXHIBIT A
FORM OF FACE OF INITIAL NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH MAXXIM MEDICAL, INC., A TEXAS
CORPORATION ("HOLDINGS") OR ANY AFFILIATE OF HOLDINGS WAS THE OWNER OF THIS
NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A) TO HOLDINGS, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE NOTE
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT AT MATURITY OF THE NOTES
OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR
SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR
(F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO HOLDINGS' AND THE TRUSTEE'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR
(F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES
WITH THE FOREGOING RESTRICTIONS.
A-2-1
<PAGE> 80
FOR PURPOSES OF SECTIONS *1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE REGULATIONS THEREUNDER, HOLDERS MAY OBTAIN
INFORMATION CONCERNING THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT
AND THE YIELD TO MATURITY FROM THE CORPORATE SECRETARY OF THE COMPANY AT 1300
49TH STREET NORTH, CLEARWATER, FLORIDA 33762.
A-2-2
<PAGE> 81
No. [___________] $__________
Senior Discount Note due 2010
MAXXIM MEDICAL, INC., a Texas corporation, promises to pay to
[___________] or registered assigns, the principal sum of [ ] Dollars on
November 15, 2010.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
A-2-3
<PAGE> 82
Additional provisions of this Note are set forth on the other side of
this Note.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
MAXXIM MEDICAL, INC.,
By:
-------------------------------------------
Name:
Title:
Dated: November 12, 1999
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
WILMINGTON TRUST COMPANY
as Trustee, certifies
that this is one of
the Notes referred
to in the Indenture.
By:
------------------------------------
Authorized Signatory
A-2-4
<PAGE> 83
FORM OF REVERSE SIDE OF INITIAL NOTE
Senior Discount Note due 2010
1. Interest
(a) MAXXIM MEDICAL, INC., a Texas corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called "Holdings"), promises to pay interest on the Accreted Value
of this Note at the rate of 14% per annum. Interest on the Notes shall accrue
from the most recent date to which interest has been paid or duly provided for
or, if no interest has been paid or duly provided for, from November 15, 2004
until the principal hereof is due. Interest shall accrete through November 15,
2004 (as provided in the definition of "Accreted Value") and no cash interest
shall be due or accrue prior to such date. Holdings shall pay cash interest in
arrears semiannually on May 15th and November 15th of each year commencing May
15, 2005; provided that in the event that Holdings does not have the cash or
Temporary Cash Investments with which to make a cash interest payment on any
such interest payment date and the distribution by Maxxim Medical Group, Inc.,
a Delaware corporation and a Wholly Owned Subsidiary of Holdings (the
"Company"), of funds sufficient to make such cash interest payment on such
interest payment date would violate the provisions of the Bank Indebtedness or
the Company Note Indenture or any Refinancing Indebtedness with respect
thereto, then Holdings shall pay cash interest on such interest payment date
only in such amount as is on hand and can be so paid or distributed without
violating such provisions and the balance of the cash interest otherwise
payable on such interest payment date shall be paid by Holdings through the
issuance of additional Notes, each dated as of such interest payment date, in
an aggregate principal amount equal to the portion of such cash interest
payment which cannot so be paid in cash (such additional Notes sometimes
referred to as "PIK Notes"). Interest shall be computed on the basis of a
360-day year of twelve 30-day months. Holdings shall pay interest on overdue
principal at the rate of 16% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
(b) Additional Amounts. The holder of this Note is entitled to the
benefits of the Registration Agreement, dated as of November 12, 1999, among
Holdings and the Purchasers named therein. Capitalized terms used in this
paragraph (b) but not defined herein have the meanings assigned to them in the
Registration Agreement. If (i) the Shelf Registration Statement or Exchange
Offer Registration Statement, as applicable under the Registration Agreement,
is not filed with the Commission on or prior to 75 days after the Trigger Date,
(ii) the Exchange Offer Registration Statement or the Shelf Registration
Statement, as the case may be, is not declared effective on or prior to 150
days after the Trigger Date (or in the case of a Shelf Registration Statement
required to be filed in response to a change in law or the applicable
interpretation of the Commission's staff, if later, on or prior to 60 days
after publication of the change in law or interpretation), (iii) the Registered
Exchange Offer is not consummated on or prior to 180 days after the Trigger
Date, or (iv) the Shelf Registration Statement is filed and declared effective
on or prior to 150 days after the Trigger Date (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretation of the Commission's staff, if later, on or prior
to 60 days after publication of the change in law or interpretation) but shall
thereafter cease to be effective (at any time that Holdings is obligated to
A-2-5
<PAGE> 84
maintain the effectiveness thereof) without being succeeded within 45 days by
an additional Registration Statement filed and declared effective (each such
event referred to in clauses (i) through (iv), a "Registration Default"),
Holdings shall be obligated to pay Additional Amounts to each holder of
Transfer Restricted Notes, during the period of one or more such Registration
Defaults, in an amount equal to $0.192 per week per $1,000 of Accreted Value as
of the most recent interest payment date, or if no interest has been paid, the
Trigger Date of Transfer Restricted Notes held by such holder until (i) the
applicable Registration Statement is filed, (ii) the Exchange Offer
Registration Statement is declared effective, the Registered Exchange Offer is
consummated or the Shelf Registration Statement again becomes effective, as the
case may be. All accrued Additional Amounts shall be paid to holders in the
same manner as interest payments on the Notes on semi-annual payment dates
which correspond to interest payment dates for the Notes. Following the cure of
all Registration Defaults, the accrual of Additional Amounts shall cease. The
Trustee shall have no responsibility with respect to the determination of the
amount of any such Additional Amounts. For purposes of the foregoing, "Transfer
Restricted Notes" means (i) each Initial Note (including any PIK Notes issued
thereon) until the date on which such Initial Note has been exchanged for a
freely transferable Exchange Note in the Registered Exchange Offer, (ii) each
Initial Note (including any PIK Notes issued thereon) until the date on which
such Initial Note has been effectively registered under the Securities Act and
disposed of in accordance with a Shelf Registration Statement or (iii) each
Initial Note (including any PIK Notes issued thereon) until the date on which
such Initial Note is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.
2. Method of Payment
Holdings shall pay interest on the Notes (except defaulted interest) to
the Persons who are registered holders of Notes at the close of business on the
May 1 or November 1 next preceding the interest payment date beginning with May
15, 2005 even if Notes are cancelled after the record date and on or before the
interest payment date. Holders must surrender Notes to a Paying Agent to
collect principal payments. Holdings shall pay principal, Additional Amounts,
if any, and interest in money of the United States of America that at the time
of payment is legal tender for payment of public and private debts. Holdings
will make all payments payable in cash in respect of a certificated Note
(including principal and interest), by mailing a check to the registered
address of each Holder thereof; provided, however, that payments on the Notes
may also be made, in the case of a Holder of at least $1,000,000 aggregate
principal amount at maturity of Notes, by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder
elects payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 30 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Holdings shall maintain an office or agency, which shall be located in
the Borough of Manhattan, The City of New York, where Notes may be presented
for registration of transfer or for exchange (the "Registrar") and an office or
agency where Notes may be presented for
A-2-6
<PAGE> 85
payment (the "Paying Agent"). Initially, Wilmington Trust Company, a Delaware
banking corporation (acting not in its capacity but solely as trustee, the
"Trustee"), will act as Paying Agent and Registrar (however, for the purpose of
meeting the requirement of an office in the Borough of Manhattan, Harris Trust
Company of New York shall serve in such capacity). Holdings may appoint and
change any Paying Agent, Registrar or co-registrar without notice. Holdings or
any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. Indenture
Holdings issued the Notes under an Indenture dated as of November 10,
1999 (the "Indenture"), between Holdings and the Trustee. 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.C. ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms
defined in the Indenture used but not defined herein have the meanings ascribed
thereto in the Indenture. The Notes are subject to all terms and provisions of
the Indenture, and Holders (as defined in the Indenture) are referred to the
Indenture and the TIA for a statement of such terms and provisions.
The Notes are senior unsecured discount obligations of Holdings limited
to $98,473,000, in aggregate principal amount at maturity at any one time
outstanding plus any PIK Notes issued hereunder, (subject to Section 2.07 of
the Indenture). This Note is one of the Initial Notes referred to in the
Indenture issued in an aggregate principal amount at maturity of $98,473,000
exclusive of any additional PIK Notes issued hereunder. The Notes include the
Initial Notes and any Exchange Notes issued in exchange for Initial Notes and,
in each case, any PIK Notes issued thereon. The Initial Notes, the Exchange
Notes and the PIK Notes are treated as a single class of Notes under the
Indenture. The Indenture imposes certain limitations on the ability of Holdings
and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
issue or sell shares of capital stock of such Restricted Subsidiaries, enter
into or permit certain transactions with Affiliates and make asset sales. The
Indenture also imposes limitations on the ability of Holdings to consolidate or
merge with or into any other Person or convey, transfer or lease all or
substantially all of the property of Holdings.
5. Optional Redemption.
Except as set forth in the following paragraph, the Notes shall not be
redeemable at the option of Holdings prior to November 15, 2002. Thereafter,
the Notes shall be redeemable at the option of Holdings, in whole or in part,
on not less than 30 nor more than 60 days' prior notice, at the following
redemption prices (expressed as percentages of Accreted Value), plus an amount
equal to accrued and unpaid interest thereon and Additional Amounts, if any, in
respect thereof to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest and Additional Amounts,
if any due on the relevant interest payment date), if redeemed during the
twelve-month period commencing on November 15 of the years set forth below:
A-2-7
<PAGE> 86
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2002 107.000%
2003 106.000%
2004 105.000%
2005 104.000%
2006 and thereafter 100.000%
</TABLE>
Prior to November 15, 2002, Holdings may, at its option, on one or more
occasions, redeem Notes representing up to a maximum of 30% of the aggregate
principal amount at maturity of the Notes with the Net Cash Proceeds of one or
more Public Equity Offerings by Holdings of its Capital Stock (other than
Disqualified Stock) at a redemption price equal to 110% of the Accreted Value
thereof, plus the Additional Amounts, if any, in respect thereof to the
redemption date (subject to the right of holders of record on the relevant
record date to receive Additional Amounts, if any, due on the relevant interest
payment date); provided, however, that after giving effect to any such
redemption, (i) at least 70% of the aggregate principal amount at maturity of
the Notes remains outstanding; and (ii) any such redemption shall be made
within 90 days of such Public Equity Offering by Holdings, upon not less than
30 nor more than 60 days' notice mailed to each holder of Notes being redeemed
and otherwise in accordance with the procedures set forth in the Indenture; and
provided further that any such single redemption shall be of a minimum of $5.0
million of Accreted Value of Notes.
Prior to November 15, 2002, Holdings may, at its option, redeem all but
not less than all of the Notes concurrently with the consummation of a Change
in Control (provided that each of the references to 35% in clause (b) of the
definition of such term in the Indenture shall solely for purposes of this
sentence be 50.1%), including without limitation the sale of all of the Capital
Stock of the Company, at a redemption price equal to (i) the principal amount
thereof plus Additional Amounts thereon, if any, to the redemption date plus
(ii) the Make Whole Premium, as defined below.
As used herein, "Make Whole Premium" means, with respect to a Note, the
greater of (i) 1.0% of the then outstanding Accreted Value of such Note and
(ii) (a) the present value of all remaining required interest and principal
payments due on such Note and all premium payments relating thereto assuming a
redemption date of November 15, 2002, computed using a discount rate equal to
the Treasury Rate plus 50 basis points minus (b) the then outstanding Accreted
Value of such Note minus (c) accrued interest thereon paid on the redemption
date; provided, however, that in no case shall the Make Whole Premium be less
than zero. For purposes of this definition, the "Treasury Rate" shall mean a
rate equal to the then current yield to maturity on the most actively traded
U.S. Treasury security having a maturity equal to the remaining average life
A-2-8
<PAGE> 87
of this Note. In the event there are not actively traded U.S. Treasury
securities with a maturity equal to the remaining average life of this Note,
then the yield to maturity shall be determined by linear interpolation using
the closest, but shorter, maturity for actively traded U.S. Treasury securities
and the closest, but longer, maturity for actively traded U.S. Treasury
maturities.
6. Sinking Fund
The Notes are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 (in principal amount at maturity) may be
redeemed in part but only in whole multiples of $1,000 (in principal amount at
maturity). If money sufficient to pay the redemption price of and accrued and
unpaid cash interest and Additional Amounts, if any, on all Notes (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date, the Accreted Value ceases to accrete or cash
interest ceases to accrue, as applicable, on such Notes (or such portions
thereof) called for redemption.
8. Repurchase of Notes at the Option of Holders upon Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes shall
have the right, subject to certain conditions specified in the Indenture, to
require Holdings to repurchase all or any part of the Notes of such Holder at a
purchase price in cash equal to 101% of the Accreted Value of the Notes to be
repurchased plus an amount equal to accrued and unpaid interest thereon and
Additional Amounts, if any, in respect thereof to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest and Additional Amounts, if any, due on the relevant interest
payment date that is on or prior to the date of purchase) as provided in, and
subject to the terms of, the Indenture.
In accordance with Section 4.06 of the Indenture, Holdings will be
required to offer to purchase Notes upon the occurrence of certain events.
9. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in denominations of
$1,000 (in principal amount at maturity) and integral multiples thereof. A
Holder may transfer or exchange Notes in accordance with the Indenture. Upon
any transfer or exchange, the Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements or transfer documents
and to pay any taxes required by law or permitted by the Indenture. Holdings
shall not be required to make and the Registrar need not register transfers or
exchanges of Notes selected for redemption (except, in the case of a Note to be
redeemed in part, the portion of the Note not to be redeemed) or to transfer or
exchange any Notes for a period of 15 days prior to a selection of Notes to be
redeemed.
A-2-9
<PAGE> 88
10. Persons Deemed Owners
Except as provided in paragraph 2 hereof, the registered Holder of this
Note may be treated as the owner of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest on the Notes remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back
to Holdings at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to Holdings and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, Holdings at any time may terminate some
of or all its obligations under the Notes and the Indenture if Holdings
deposits with the Trustee money or U.S. Government Obligations for the payment
of principal of and interest on the Notes to redemption or maturity, as the
case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (a) the
Indenture or the Notes may be amended without prior notice to any Holder but
with the written consent of the Holders of at least a majority in aggregate
principal amount at maturity of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange for the Notes) and (b)
any default may be waived with the written consent of the Holders of at least a
majority in aggregate principal amount at maturity of the outstanding Notes.
Subject to certain exceptions set forth in the Indenture, without the consent
of any Holder of Notes, Holdings and the Trustee may amend the Indenture or the
Notes (a) to cure any ambiguity, omission, defect or inconsistency; (b) to
comply with Article 5 of the Indenture; (c) to provide for uncertificated Notes
in addition to or in place of certificated Notes (provided, however, that the
uncertificated Notes are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code); (d) to secure the Notes; (e) to
add to the covenants of Holdings for the benefit of the Holders or to surrender
any right or power conferred on Holdings in the Indenture; (f) to comply with
any requirement of the SEC in connection with qualifying, or maintaining the
qualification of the Indenture under the TIA; (g) to make any change that does
not adversely affect the rights of any Holder; (h) to provide for the issuance
of the Exchange Notes which shall have terms substantially identical in all
material respects to the Initial Notes (except that the transfer restrictions
contained in the Initial Notes shall be modified or eliminated, as
appropriate), and which shall be treated, together with any outstanding Initial
Notes, and any PIK Notes issued on the Initial Notes or the Exchange Notes, as
a single issue of securities; (i) to change the name of title of the Notes or
the Exchange Notes and to make conforming changes related thereto or (j) to
provide for the issuance of PIK Notes and exchange notes for such PIK Notes.
14. Defaults, Remedies and Acceleration
A-2-10
<PAGE> 89
If an Event of Default (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of Holdings) occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount at maturity of the outstanding Notes may declare the principal of and
accrued but unpaid interest on all the Notes to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of Holdings occurs, the principal of and interest on all the
Notes shall become and be immediately due and payable without any declaration
or other act on the part of the Trustee or any Holders. Under certain
circumstances, the Holders of a majority in principal amount at maturity of the
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
In case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any rights or powers under the Indenture at
the request or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Notes unless (i) such Holder has previously given to the
Trustee written notice stating that an Event of Default is continuing, (ii)
Holders of at least 25% in principal amount at maturity of the outstanding
Notes have requested the Trustee in writing to pursue the remedy, (iii) such
Holder or Holders have offered to the Trustee reasonable security or indemnity
against any loss, liability or expense, (iv) the Trustee has not complied with
such request within 60 days after receipt of the request and the offer of
security or indemnity and (v) the Holders of a majority in principal amount at
maturity of the outstanding Notes have not given the Trustee a direction
inconsistent with such request during such 60-day period. Subject to certain
restrictions, the Holders of a majority in principal amount at maturity of the
outstanding Notes are given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or,
that the Trustee determines is unduly prejudicial to the rights of other
Holders or would involve the Trustee in personal liability. Prior to taking any
action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses
caused by taking or not taking such action.
15. Trustee Dealings with Holdings
Subject to certain limitations imposed by the TIA, 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 and collect obligations owed to it
by Holdings or its Affiliates and may otherwise deal with Holdings or its
Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of Holdings
shall not have any liability for any obligations of Holdings under the Notes or
the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Note, each Holder waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
A-2-11
<PAGE> 90
17. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
18. Abbreviations
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. Governing Law
THIS NOTE SHALL BE 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 LAWS
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
20. CUSIP or Private Placement Numbers
Holdings has caused Private Placement or CUSIP numbers to be printed on
the Notes and has directed the Trustee to use Private Placement or CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
HOLDINGS WILL FURNISH TO ANY HOLDER OF NOTES UPON WRITTEN REQUEST AND
WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT
OF THIS NOTE.
A-2-12
<PAGE> 91
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Note on the books of Holdings. The agent may substitute another to act for him.
_________________________________________________________________
Date: ________________ Your Signature: __________________________
_________________________________________________________________
Sign exactly as your name appears on the other side of this Note.
A-2-13
<PAGE> 92
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER
RESTRICTED NOTES
This certificate relates to $_________ principal amount at maturity of
Notes held in definitive form by the undersigned.
The undersigned has requested the Trustee by written order to exchange
or register the transfer of a Note or Notes.
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Notes are
being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [ ] to Holdings; or
(2) [ ] to the Registrar for registration in the name of the Holder, without
transfer; or
(3) [ ] pursuant to an effective registration statement under the Securities
Act of 1933; or
(4) [ ] inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that purchases
for its own account or for the account of a qualified institutional
buyer to whom notice is given that such transfer is being made in
reliance on Rule 144A, in each case pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or
(5) [ ] outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance with
Rule 904 under the Securities Act of 1933; or
(6) [ ] to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has
furnished to the Trustee a signed letter containing certain
representations and agreements; or
(7) [ ] pursuant to another available exemption from registration provided
by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Notes evidenced by this certificate in the name of any Person other
than the registered holder thereof; provided, however, that if box (5), (6) or
(7) is checked, the Trustee may require, prior to registering any such transfer
of the Notes, such legal opinions, certifications and other information as
Holdings has reasonably requested 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 of 1933.
-------------------------------------------
Your Signature
A-2-14
<PAGE> 93
Signature Guarantee:
Date: _________________________ __________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
______________________________________________________________
TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding Holdings
as the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: ________________ _________________________________
NOTICE: To be executed by
an executive officer
A-2-15
<PAGE> 94
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS NOTE PURCHASED BY HOLDINGS PURSUANT
TO SECTION 4.06 (LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK) OR 4.08
(CHANGE OF CONTROL) OF THE INDENTURE, CHECK THE BOX:
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK (CHANGE OF CONTROL)
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS NOTE PURCHASED BY
HOLDINGS PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE PRINCIPAL
AMOUNT AT MATURITY ($1,000 OR AN INTEGRAL MULTIPLE THEREOF):
$
DATE: __________________ YOUR SIGNATURE: __________________
(SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE NOTE)
SIGNATURE GUARANTEE:________________________________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A RECOGNIZED SIGNATURE
GUARANTY MEDALLION PROGRAM OR OTHER SIGNATURE GUARANTOR ACCEPTABLE TO THE
TRUSTEE
A-2-16
<PAGE> 95
EXHIBIT B
FORM OF FACE OF EXCHANGE NOTE
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO MAXXIM MEDICAL, INC., A TEXAS CORPORATION ("HOLDINGS") 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 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 EXCHANGE NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL EXCHANGE NOTE
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
FOR PURPOSES OF SECTIONS *1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE REGULATIONS THEREUNDER, HOLDERS MAY OBTAIN
INFORMATION CONCERNING THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT
AND THE YIELD TO MATURITY FROM THE CORPORATE SECRETARY OF THE COMPANY AT 10300
49TH STREET NORTH, CLEARWATER, FLORIDA 33762.
B-1
<PAGE> 96
No. $__________
Senior Discount Note due 2010
CUSIP No. ______
MAXXIM MEDICAL, INC., a Texas corporation, promises to pay to Cede &
Co., or registered assigns, the principal sum at maturity [of Dollars] [listed
on the Schedule of Increases or Decreases in Global Exchange Note attached
hereto]1 on November 15, 2010.
Interest Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
- --------
1 Use the Schedule of Increases and Decreases language if Note is in
Global Form
B-2
<PAGE> 97
Additional provisions of this Note are set forth on the other side of
this Note.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
MAXXIM MEDICAL, INC.,
By: _______________________________________
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
WILMINGTON TRUST COMPANY
as Trustee, certifies
that this is one of
the Notes referred
to in the Indenture.
By: _____________________________
Name:
Title:
_____________________________
*/ If the Note is to be issued in global form, add the Global Notes Legend and
the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL EXCHANGE
NOTES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL EXCHANGE NOTE".
B-3
<PAGE> 98
FORM OF REVERSE SIDE OF EXCHANGE NOTE
Senior Discount Note due 2010
1. Interest
MAXXIM MEDICAL, INC., a Texas corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being
herein called "Holdings"), promises to pay interest on the Accreted Value of
this Note at the rate of 14% per annum. Holdings shall pay interest
semiannually on May 15th and November 15th of each year. Such interest on the
Notes shall accrue from the most recent date to which interest has been paid or
duly provided for or, if no interest has been paid or duly provided for, from
November 15, 2004 until the principal hereof is due. Interest shall accrete
through November 15, 2004 (as provided in the definition of "Accreted Value")
and no cash interest shall be due or accrue prior to such date. Holdings shall
pay cash interest in arrears semi-annually on May 15 and November 15 of each
year commencing May 15, 2005; provided that in the event that Holdings does not
have the cash or Temporary Cash Investments with which to make a cash interest
payment on any such interest payment date and the distribution by Maxxim
Medical Group, Inc., a Delaware corporation and a Wholly Owned Subsidiary of
Holdings (the "Company"), of funds sufficient to make such cash interest
payment on such interest payment date would violate the provisions of the Bank
Indebtedness or the Company Note Indenture or any Refinancing Indebtedness with
respect thereto, then Holdings shall pay cash interest on such interest payment
date only in such amount as is on hand or can be so paid or distributed without
violating such provisions and the balance of the cash interest otherwise
payable on such interest payment date shall be paid by Holdings through the
issuance of additional Notes, each dated as of such interest payment date, in
an aggregate principal amount equal to the portion of such cash interest
payment which cannot so be paid in cash (such additional Notes sometimes
referred to as "PIK Notes"). Interest shall be computed on the basis of a
360-day year of twelve 30-day months. Holdings shall pay interest on overdue
principal at the rate of 16% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. Method of Payment
Holdings shall pay interest on the Notes (except defaulted interest) to
the Persons who are registered holders of Notes at the close of business on the
May 1st or November 1st next preceding the interest payment date beginning with
May 15, 2005 even if Notes are cancelled after the record date and on or before
the interest payment date. Holders must surrender Notes to a Paying Agent to
collect principal payments. Holdings shall pay principal, Additional Amounts
and interest in money of the United States of America that at the time of
payment is legal tender for payment of public and private debts. Payments in
respect of the Notes represented by a Global Exchange Note (including
principal, Additional Amounts and interest) shall be made by wire transfer of
immediately available funds to the accounts specified by The Depository Trust
Company. Holdings will make all payments in respect of a certificated Note
(including principal and interest), by mailing a check to the registered
address of each Holder thereof; provided, however, that payments on the Notes
may also be made, in the case of a Holder of at least $1,000,000 aggregate
principal amount at maturity of Notes, by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder
elects payment
B-4
<PAGE> 99
by wire transfer by giving written notice to the Trustee or the Paying Agent to
such effect designating such account no later than 30 days immediately
preceding the relevant due date for payment (or such other date as the Trustee
may accept in its discretion).
3. Paying Agent and Registrar
Holdings shall maintain an office or agency, which shall be located in
the Borough of Manhattan, The City of New York, where Notes may be presented
for registration of transfer or for exchange (the "Registrar") and an office or
agency where Notes may be presented for payment (the "Paying Agent").
Initially, Wilmington Trust Company, a Delaware banking corporation (the
"Trustee"), will act as Paying Agent and Registrar (however, for the purpose of
meeting the requirement of an office in the Borough of Manhattan, Harris Trust
Company of New York shall serve in such capacity). Holdings may appoint and
change any Paying Agent, Registrar or co-registrar without notice. Holdings or
any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. Indenture
Holdings issued the Notes under an Indenture dated as of November 12,
1999 (the "Indenture"), among Holdings and the Trustee. 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.C. ss.ss. 77aaa-77bbbb) as
in effect on the date of the Indenture (the "TIA"). Terms defined in the
Indenture used but not defined herein have the meanings ascribed thereto in the
Indenture. The Notes are subject to all terms and provisions of the Indenture,
and Holders (as defined in the Indenture) are referred to the Indenture and the
TIA for a statement of such terms and provisions.
The Notes are senior unsecured discount obligations of Holdings limited
to $98,473,000 in an aggregate principal amount at maturity at any one time
outstanding, together with any additional PIK Notes issued hereunder, (subject
to Section 2.07 of the Indenture). This Note is one of the Exchange Notes
referred to in the Indenture issued in an aggregate principal amount at
maturity of $98,473,000, exclusive of any additional PIK Notes issued
hereunder. The Notes include the Initial Notes and any Exchange Notes issued in
exchange for Initial Notes and in each case any PIK Notes issued thereon. The
Initial Notes, the Exchange Notes and the PIK Notes are treated as a single
class of Notes under the Indenture. The Indenture imposes certain limitations
on the ability of Holdings and its Restricted Subsidiaries to, among other
things, make certain Investments and other Restricted Payments, pay dividends
and other distributions, incur Indebtedness, enter into consensual restrictions
upon the payment of certain dividends and distributions by such Restricted
Subsidiaries, issue or sell shares of capital stock of such Restricted
Subsidiaries and enter into or permit certain transactions with Affiliates and
make asset sales. The Indenture also imposes limitations on the ability of
Holdings to consolidate or merge with or into any other Person or convey,
transfer or lease all or substantially all of the property of Holdings.
B-5
<PAGE> 100
5. Optional Redemption
Except as set forth in the following paragraph, the Notes shall not be
redeemable at the option of Holdings prior to November 15, 2002. Thereafter,
the Notes shall be redeemable at the option of Holdings, in whole or in part,
on not less than 30 nor more than 60 days' prior notice, at the following
redemption prices (expressed as percentages of Accreted Value), plus an amount
equal to accrued and unpaid interest thereon and Additional Amounts, if any, in
respect thereof to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest and Additional Amounts,
if any due on the relevant interest payment date), if redeemed during the
twelve-month period commencing on November 15 of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2002 107.000%
2003 106.000%
2004 105.000%
2005 104.000%
2006 and thereafter 100.000%
</TABLE>
Prior to November 15, 2002, Holdings may, at its option, on one or more
occasions, redeem Notes representing up to a maximum of 30% of the aggregate
principal amount at maturity of the Notes with the Net Cash Proceeds of one or
more Public Equity Offerings by Holdings of its Capital Stock (other than
Disqualified Stock) at a redemption price equal to 110% of the Accreted Value
thereof, plus accrued and unpaid interest thereon and Additional Amounts, if
any, in respect thereof to the redemption date (subject to the right of holders
of record on the relevant record date to receive Additional Amounts, if any,
due on the relevant interest payment date); provided, however, that after
giving effect to any such redemption, (i) at least 70% of the aggregate
principal amount at maturity of the Notes remains outstanding; and (ii) any
such redemption shall be made within 90 days of such Public Equity Offering by
Holdings upon not less than 30 nor more than 60 days' notice mailed to each
holder of Notes being redeemed and otherwise in accordance with the procedures
set forth in the Indenture; and provided further that any such single
redemption shall be a minimum of $5.0 million of Accreted Value of Notes.
Prior to November 15, 2002, Holdings may, at its option, redeem all but
not less than all of the Notes concurrently with the consummation of a Change
in Control (provided that each of the references to 35% in clause (b) of the
definition of such term in the Indenture shall solely for purposes of this
sentence be 50.1%), including without limitation the sale of all of the Capital
Stock of the Company, at a redemption price equal to (i) principal thereof plus
Additional Amounts thereon, if any, to the redemption date plus (ii) the Make
Whole Premium, as defined below.
B-6
<PAGE> 101
As used herein, "Make Whole Premium" means, with respect to a Note, the
greater of (i) 1.0% of the then outstanding Accreted Value of such Note and
(ii) (a) the present value of all remaining required interest and principal
payments due on such Note and all premium payments relating thereto assuming a
redemption date of November 15, 2002, computed using a discount rate equal to
the Treasury Rate plus 50 basis points minus (b) the then outstanding Accreted
Value of such Note minus (c) accrued interest thereon paid on the redemption
date; provided, however, that in no case shall the Make Whole Premium be less
than zero. For purposes of this definition, the "Treasury Rate" shall mean a
rate equal to the then current yield to maturity on the most actively traded
U.S. Treasury security having a maturity equal to the remaining average life of
this Note. In the event there are not actively traded U.S. Treasury securities
with a maturity equal to the remaining average life of this Note, then the
yield to maturity shall be determined by linear interpolation using the
closest, but shorter, maturity for actively traded U.S. Treasury securities and
the closest, but longer, maturity for actively traded U.S. Treasury maturities.
6. Sinking Fund
The Notes are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 (in principal amount at maturity) may be
redeemed in part but only in whole multiples of $1,000 (in principal amount at
maturity). If money sufficient to pay the redemption price of and accrued and
unpaid cash interest and Additional Amounts, if any, on all Notes (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date, the Accreted Value ceases to accrete or cash
interest ceases to accrue, as applicable, on such Notes (or such portions
thereof) called for redemption.
8. Repurchase of Notes at the Option of Holders upon Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will
have the right, subject to certain conditions specified in the Indenture, to
require Holdings to repurchase all or any part of the Notes of such Holder at a
purchase price in cash equal to 101% of the Accreted Value of the Notes to be
repurchased, plus accrued and unpaid interest thereon) and, in each case
Additional Amounts, if any, in respect thereof to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest and Additional Amounts, if any, due on the relevant interest
payment date) as provided in, and subject to the terms of, the Indenture.
In accordance with Section 4.06 of the Indenture, Holdings will be
required to offer to purchase Notes upon the occurrence of certain events.
B-7
<PAGE> 102
9. Denominations; Transfer; Exchange
The Notes are in certificated form without coupons in denominations of
$1,000 in principal amount at maturity and integral multiples thereof. A Holder
may transfer or exchange Initial Notes in accordance with the Indenture. Upon
any transfer or exchange, the Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements or transfer documents
and to pay any taxes required by law or permitted by the Indenture. Holdings
shall not be required to make and the Registrar need not register transfers or
exchanges of any Notes selected for redemption (except, in the case of a Note
to be redeemed in part, the portion of the Note not to be redeemed) or any
Notes for a period of 15 days prior to a selection of Notes to be redeemed.
10. Persons Deemed Owners
Except as provided in paragraph 2 hereof, the registered Holder of this
Note may be treated as the owner of it for all purposes.
11. Unclaimed Money
If money for the payment of principal of or interest on the Notes
remains unclaimed for two years, the Trustee or Paying Agent shall pay the
money back to Holdings at its written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the
money must look only to Holdings and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, Holdings at any time may terminate some
of or all its obligations under the Notes and the Indenture if Holdings
deposits with the Trustee money or U.S. Government Obligations for the payment
of Accreted Value, principal and interest on the Notes to redemption or
maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (a) the
Indenture or the Notes may be amended without prior notice to any Holder but
with the written consent of the Holders of at least a majority in aggregate
principal amount at maturity of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange for the Notes) and (b)
any default may be waived with the written consent of the Holders of at least a
majority in aggregate principal amount at maturity of the outstanding Notes.
Subject to certain exceptions set forth in the Indenture, without the consent
of any Holder of Notes, Holdings and the Trustee may amend the Indenture or the
Notes (a) to cure any ambiguity, omission, defect or inconsistency; (b) to
comply with Article 5 of the Indenture; (c) to provide for uncertificated Notes
in addition to or in place of certificated Notes (provided, however, that the
uncertificated Notes are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code); (d) to secure the Notes; (e) to
add to the covenants of Holdings for the benefit of the Holders or to surrender
any right or power conferred on Holdings in the Indenture; (f) to comply with
any requirement of the SEC in connection with qualifying, or maintaining the
qualification of the
B-8
<PAGE> 103
Indenture under the TIA; (g) to make any change that does not adversely affect
the rights of any Holder; or (h) to provide for the issuance of the Exchange
Notes which shall have terms substantially identical in all material respects
to the Initial Notes (except that the transfer restrictions contained in the
Initial Notes shall be modified or eliminated, as appropriate), and which shall
be treated, together with any outstanding Initial Notes, and any PIK Notes
issued on the Initial Notes or the Exchange Notes as a single issue of
securities; (i) to change the name or title of the Notes or the Exchange Notes
and to make conforming changes related thereto or (j) to provide for the
issuance of PIK Notes and exchange notes for such PIK Notes.
14. Defaults, Remedies and Acceleration
If an Event of Default (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of Holdings) occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount at maturity of the outstanding Notes may declare the principal of and
accrued but unpaid interest on all the Notes to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of Holdings occurs, the principal of and interest on all the
Notes shall become and be immediately due and payable without any declaration
or other act on the part of the Trustee or any Holders. Under certain
circumstances, the Holders of a majority in principal amount at maturity of the
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
In case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any rights or powers under the Indenture at
the request or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Notes unless (i) such Holder has previously given to the
Trustee written notice stating that an Event of Default is continuing, (ii)
Holders of at least 25% in principal amount at maturity of the outstanding
Notes have requested the Trustee in writing to pursue the remedy, (iii) such
Holder or Holders have offered the Trustee reasonable security or indemnity
against any loss, liability or expense, (iv) the Trustee has not complied with
such request during 60 days after the receipt of the request and the offer of
security or indemnity and (v) the Holders of a majority in principal amount at
maturity of the outstanding Notes have not given the Trustee a direction
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the Holders of a majority in principal amount at maturity of the
outstanding Notes are given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or,
that the Trustee determines is unduly prejudicial to the rights of other
Holders or would involve the Trustee in personal liability. Prior to taking any
action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses
caused by taking or not taking such action.
B-9
<PAGE> 104
15. Trustee Dealings with Holdings
Subject to certain limitations imposed by the TIA, 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 and collect obligations owed to it
by Holdings or its Affiliates and may otherwise deal with Holdings or its
Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of Holdings
shall not have any liability for any obligations of Holdings under the Notes or
the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Note, each Holder waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
17. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
18. Abbreviations
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. Governing Law
THIS NOTE SHALL BE 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 LAWS
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
HOLDINGS WILL FURNISH TO ANY HOLDER OF NOTES UPON WRITTEN REQUEST AND
WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT
OF THIS NOTE.
B-10
<PAGE> 105
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Note on the books of Holdings. The agent may substitute another to act for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
____________________________________________________________
Sign exactly as your name appears on the other side of this Note.
Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the
Trustee.
B-11
<PAGE> 106
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS NOTE PURCHASED BY HOLDINGS PURSUANT
TO SECTION 4.06 (LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK) OR 4.08
(CHANGE OF CONTROL) OF THE INDENTURE, CHECK THE BOX:
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK (CHANGE OF CONTROL)
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS NOTE PURCHASED BY
HOLDINGS PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE PRINCIPAL
AMOUNT AT MATURITY ($1,000 OR AN INTEGRAL MULTIPLE THEREOF):
$
DATE: __________________ YOUR SIGNATURE: __________________
(SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE NOTE)
SIGNATURE GUARANTEE:________________________________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A RECOGNIZED SIGNATURE
GUARANTY MEDALLION PROGRAM OR OTHER SIGNATURE GUARANTOR ACCEPTABLE TO THE
TRUSTEE.
B-12
<PAGE> 1
Exhibit 4.6
MAXXIM MEDICAL, INC.
98,473 Units consisting of
$98,473,000 Aggregate Principal Amount at Maturity (Exclusive of PIK Notes)
of Senior Discount Notes due 2010
of Maxxim Medical, Inc.
and
144,132 Warrants to Purchase an aggregate of 144,132 shares of common stock
of Maxxim Medical, Inc.
PURCHASE AGREEMENT
November 12, 1999
GS Mezzanine Partners, L.P.
GS Mezzanine Partners Offshore, L.P.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Maxxim Medical, Inc., a Texas corporation ("Holdings") and the parent
of Maxxim Medical Group, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell 98,473 units (the "Units"), each Unit consisting of $1,000 in
principal amount at maturity of Holdings' Senior Discount Notes due 2010 (such
Notes, inclusive of any PIK Notes as defined in the Indenture referred to
below, the "Holdings Notes") and 1.46367 warrants (a "Warrant") to purchase,
per whole Warrant, one share of common stock of Holdings, par value $0.001 per
share ("Holdings Common Stock"), at an exercise price of $0.01 per share. The
Holdings Notes will be issued pursuant to an Indenture to be dated as of
November 12, 1999 (the "Indenture"), between Holdings and Wilmington Trust
Company, as trustee (the "Trustee"). The Warrants will be issued pursuant to a
Warrant Agreement, dated as of November 12, 1999 (the "Warrant Agreement"),
between Holdings and the Purchasers (as defined herein). Holdings hereby
confirms its agreement with GS Mezzanine Partners, L.P. and GS Mezzanine
Partners Offshore, L.P. (collectively, the "Purchasers") concerning the
purchase of the Units from Holdings by the Purchasers.
The Units will be offered and sold to the Purchasers without being
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in reliance upon an exemption
<PAGE> 2
therefrom. Holdings has prepared a private placement memorandum dated November
12, 1999 (the "Private Placement Memorandum") setting forth information
concerning the Company but which was not prepared for the purpose of offering
and selling the Units pursuant hereto. Copies of the Private Placement
Memorandum have been delivered to the Purchasers. Any references herein to the
Private Placement Memorandum shall be deemed to include all amendments and
supplements thereto, unless otherwise noted. Holdings hereby confirms that it
has authorized the Purchasers to rely upon the information contained in the
Private Placement Memorandum in connection with the sale of the Units to the
Purchasers in accordance with Section 2 (it being acknowledged that the Private
Placement Memorandum does not contain a full description of the Holdings Notes
and the Warrants, was not prepared for the purpose of offering and selling the
Units pursuant hereto and may not address specific risks associated with the
purchase and ownership thereof).
Holders of the Units (including the Purchasers and their direct and
indirect transferees) will be entitled to the benefits of an Exchange and
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit A (the "Registration Rights Agreement"), pursuant to which Holdings
will, at the request of the holders holding not less than 25% in aggregate
principal amount at maturity of the Holdings Notes at any time after the third
anniversary of the Closing Date, agree to file with the Securities and Exchange
Commission (the "Commission") (a) a registration statement under the Securities
Act (the "Exchange Offer Registration Statement") registering an issue of
senior discount notes (the "Exchange Notes") which are identical in all
material respects to the Holdings Notes (except that the Exchange Notes will
not contain terms with respect to transfer restrictions) and (b) under certain
circumstances, shelf registration statements pursuant to Rule 415 under the
Securities Act ("Shelf Registration Statements").
Pursuant to or in connection with the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of June 13, 1999, as amended, between Holdings
and Fox Paine Medic Acquisition Corporation ("Fox Paine Maxxim"), a Texas
corporation newly formed by Fox Paine Capital Fund, L.P. (the "Fox Paine
Fund"), as part of the proposed recapitalization (the "Recapitalization") of
Holdings, Fox Paine Maxxim will merge (the "Merger") with and into Holdings,
with Holdings as the surviving corporation in the Merger. Prior to or
simultaneously with the Merger, (a) the Fox Paine Fund and other affiliated
investment funds (collectively, the "Fox Paine Investors"), together with
certain other minority investors (together with the Fox Paine Investors, the
"Investors"), will purchase or will have purchased all the common stock of Fox
Paine Maxxim, with such common stock converting into Holdings' common stock in
the Merger (the "Investor Equity Contribution"), (b) Maxxim Medical, Inc., a
Delaware corporation and a wholly owned subsidiary of Holdings ("Maxxim
Delaware"), will sell to Circon Holdings Corporation (formerly Fox Paine Citron
Acquisition Corporation), a newly formed Delaware corporation ("Fox Paine
Circon") to be owned by the Investors and the Continuing Shareholders (as
defined herein), all the capital stock of Circon Corporation ("Circon"), its
wholly owned subsidiary (the "Circon Sale"), and (c) Holdings will contribute
all its assets and liabilities (other than those assets and liabilities related
to Holdings' existing credit facilities) to the Company (the "Asset Dropdown").
As part of the Recapitalization, (a) each outstanding share of common stock of
Holdings (other than certain shares held by a group of 10 current shareholders
of
- 2 -
<PAGE> 3
Holdings (the "Continuing Shareholders")) will be converted into the right to
receive $26.00 in cash (the "Merger Consideration"), and (b) certain options to
purchase the common stock of Holdings will be canceled in return for a cash
payment for each share subject to such options equal to the excess of $26.00
over the exercise price of such options (the "Option Consideration"). The
Recapitalization and related transactions will be funded from the following
sources: (a) an aggregate of up to $262.0 million of borrowings under new
senior secured credit facilities of the Company (the "New Credit Facilities");
(b) at least $110 million from the issuance and sale by the Company and
Holdings of units (the "Opco Units"), each Opco Unit consisting of $1,000 in
principal amount at maturity of the Company's Senior Subordinated Discount
Notes due 2009 (the "Opco Notes") and one warrant (an "Opco Note Warrant") to
purchase .8226 shares of Holdings Common Stock; (c) approximately $50.0 million
from the issuance by Holdings of the Units; (d) $228.0 million in cash proceeds
from the Circon Sale (including the repayment of any intercompany indebtedness
owed by Circon to Maxxim Delaware immediately prior to the Circon Sale); (e)
$131.8 million in cash from the Investor Equity Contribution; and (f) $4.4
million in cash from the sale of new shares of Holdings Common Stock to the
Continuing Shareholders financed from a portion of the Option Consideration
they receive. The Opco Notes will be issued pursuant to an Indenture to be
dated as of November 12, 1999 (the "Opco Indenture"), among the Company, the
Guarantors (as defined in the Opco Indenture and referred to herein as the
"Opco Guarantors") and The Bank of New York, as trustee (the "Opco Trustee").
The Opco Units will be issued by Holdings and the Company pursuant to a
Purchase Agreement, dated as of November 12, 1999 (the "Opco Purchase
Agreement"), among Holdings, the Company and the purchasers named therein (the
"Opco Purchasers"). The Opco Notes will be initially guaranteed on an unsecured
senior subordinated basis by Holdings and each U.S. subsidiary of the Company
listed on the signature pages of the Opco Purchase Agreement. The Opco Note
Warrants will be issued pursuant to a Warrant Agreement (the "Opco Note Warrant
Agreement"), dated as of November 12, 1999, among Holdings and the Opco
Purchasers. Holders of the Opco Units will be entitled to the benefits of an
Exchange and Registration Rights Agreement in the form attached as Annex A to
the Opco Purchase Agreement (the "Opco Registration Rights Agreement"). As part
of the Recapitalization, (a) Holdings and its subsidiaries will repay all their
existing debt, other than any Existing Notes (as defined) not purchased in the
Debt Tender Offer (as defined) and $8.7 million in capital leases, industrial
revenue bonds and other long-term obligations, by (i) repaying all amounts
outstanding under the Third Amended and Restated Credit Agreement, dated
January 4, 1999, among Holdings, Nationsbank, N.A., as agent, The Bank of Nova
Scotia and First Union Bank, as managing agents, and certain other banks named
therein and (ii) consummating a debt tender offer (the "Debt Tender Offer") to
acquire up to $100.0 million in principal amount of Holding's outstanding 10
1/2% Senior Subordinated Notes due 2006 (the "Existing Notes"), with any
Existing Notes not tendered and purchased in the Debt Tender Offer becoming
direct obligations of the Company, and (b) the Company, Holdings, Fox Paine
Circon and Circon will enter into a services agreement (the "Services
Agreement"), pursuant to which Holdings and the Company will provide Circon and
Fox Paine Circon certain services. All the above described transactions,
together with any related transactions, are collectively referred to herein as
the "Transactions."
- 3 -
<PAGE> 4
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Private Placement Memorandum. References to
subsidiaries of Holdings and/or the Company give effect to the Circon Sale.
1. Representations, Warranties and Agreements of Holdings. Holdings
represents and warrants to, and agrees with, the Purchasers on and as of the
date hereof that:
(a) The Private Placement Memorandum does not 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 therein, in the
light of the circumstances under which they were made, not misleading; provided
that (i) Holdings makes no representation or warranty as to information
contained in or omitted from the Private Placement Memorandum in reliance upon
and in conformity with written information relating to the Purchasers furnished
to the Company by on or behalf of any Purchaser specifically for use therein
(the "Purchasers' Information") and (ii) the Purchasers agree and acknowledge
that the Private Placement Memorandum does not fully describe the Holdings
Notes or the Warrants, was not prepared for the purpose of offering and selling
the Units pursuant hereto and may not address specific risks associated with
the purchase and ownership thereof.
(b) Assuming the accuracy of the representations and warranties of
the Purchasers contained in Section 2 and their compliance with the agreements
set forth therein, it is not necessary, in connection with the issuance and
sale of the Units to the Purchasers in the manner contemplated by this
Agreement, to register the Units, the Holdings Notes or the Warrants under the
Securities Act or to qualify the Indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act").
(c) Holdings and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing under
the laws of their respective jurisdictions of incorporation, are duly qualified
to do business and are in good standing as foreign corporations in each
jurisdiction in which their respective ownership or lease of property or the
conduct of their respective businesses requires such qualification, and have
all power and authority necessary to own or hold their respective properties
and to conduct the businesses in which they are engaged, except where the
failure to so qualify or have such power or authority could not, singularly or
in the aggregate, be reasonably expected to be materially adverse to the
condition (financial or otherwise), results of operations, business, assets or
liabilities of Holdings and its subsidiaries, taken as a whole (a "Material
Adverse Effect"). The Company is the only direct subsidiary of Holdings.
Schedule 2 hereto sets forth a list of all direct and indirect subsidiaries of
the Company.
(d) As of the Closing Date, immediately after giving effect to the
Transactions, (i) the authorized capital stock of Holdings consists of
40,000,000 shares of Holdings Common Stock and 10,000,000 shares of preferred
stock, par value $1.00 per share ("Preferred Stock") (ii) 5,770,704 shares of
Holdings Common Stock and no shares of Preferred Stock have been issued and are
outstanding, (iii) 144,132 Warrants have been issued and are outstanding and
144,132 shares of Holdings Common Stock has been reserved for issuance upon
- 4 -
<PAGE> 5
exercise of the Warrants, (iv) 144,552 Opco Note Warrants have been issued and
outstanding and 118,908 shares of Holdings Common Stock have been reserved for
issuance upon exercise of the Opco Note Warrants, (v) 1,172,875 shares of
Holdings Common Stock have been reserved for issuance upon exercise of options
issued to management of Holdings under Holdings' 1999 Stock Incentive Plan, and
(vi) no shares of Holdings' capital stock is held by Holdings or its
subsidiaries in its treasury. Schedule 3 hereto sets forth a complete and
accurate description in all material respects of the ownership of the
outstanding capital stock of Holdings on a primary and fully-diluted basis. All
the outstanding shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable and are owned
directly by Holdings, and the capital stock of the Company conforms in all
material respects to the description thereof contained in the Certificate of
Incorporation of the Company. All the outstanding shares of capital stock of
Holdings have been duly and validly authorized and issued, are fully paid and
non-assessable and the capital stock of Holdings conforms in all material
respects to the description thereof contained in the Articles of Incorporation
of Holdings. When the Units are delivered and paid for pursuant to this
Agreement on the Closing Date, the Warrants will be exercisable for shares of
Holdings Common Stock ("Underlying Shares") in accordance with their terms and
the Underlying Shares initially issuable upon exercise of such Warrants have
been duly and validly authorized and reserved for issuance upon such exercise
and, when issued and paid for in accordance with the terms of the Warrant
Agreement and the Warrants, will be validly issued, fully paid and
non-assessable. As of the Closing Date, all the outstanding capital stock of
the Company and each of its subsidiaries which are Opco Guarantors has been
duly and validly authorized and issued, is fully paid and non-assessable and is
owned directly or indirectly by Holdings and (other than the capital stock of
the Company) by the Company. As of the Closing Date, after giving effect to the
Asset Dropdown, Holdings engages in no business other than holding the
outstanding shares of capital stock of the Company. As of the Closing Date, all
the outstanding shares of capital stock of the Company and its subsidiaries
will be free and clear of any lien, charge, encumbrance, security interest or
restriction upon voting or transfer, except for the pledge of such capital
stock as security for the obligations under the credit agreement (the "Credit
Agreement"), to be dated as of the Closing Date, among Holdings, the Company,
The Chase Manhattan Bank, as Administrative Agent and Collateral Agent, Bankers
Trust Company and Merrill Lynch Capital Corporation, as Co-Syndication Agents,
Canadian Imperial Bank of Commerce and Credit Suisse First Boston Corporation,
as Co-Documentation Agents, and the lenders party thereto, relating to the New
Credit Facilities. Except as set forth in the Stockholders Agreement, dated as
of November 12, 1999 (the "Stockholders' Agreement"), among Holdings and the
investors listed on the signature pages thereof, (i) there are no outstanding
obligations of Holdings to repurchase, redeem or otherwise acquire any shares
of Holdings Common Stock, (ii) there are no voting trusts or other agreements
or understandings to which Holdings and the Company or any of its subsidiaries
is a party with respect to the holding, voting or disposing of Holdings Common
Stock (other than certain management loan arrangements), and (iii) Holdings has
no outstanding bonds, debentures, notes or other obligations or other
securities (other than the Holdings Common Stock, the Warrants, the Opco Note
Warrants and management stock options) that entitle the holders thereof to vote
with the stockholders of Holdings on any matter or which are convertible into
or exercisable for securities having such a right to vote.
- 5 -
<PAGE> 6
(e) Holdings has full right, power and authority to execute and
deliver the Merger Agreement and has full right, power and authority to perform
its obligations thereunder; and all corporate action required to be taken by
Holdings for the due and proper authorization, execution and delivery of the
Merger Agreement and the consummation of the transactions contemplated thereby
by Holdings were validly taken.
(f) Each of Holdings, the Company and the Opco Guarantors, as
applicable, has the full right, power and authority to execute and deliver this
Agreement, the Indenture, the Registration Rights Agreement, the Holdings
Notes, the Warrants, the Warrant Agreement, the Credit Agreement, and the
Security Documents and the Guarantee Agreements (each, as defined in the Credit
Agreement and, collectively with the Credit Agreement, the "New Credit
Facilities Documents"), the Services Agreement, the Stockholders' Agreement,
the Stock Subscription Agreement, dated November 12, 1999 (the "Stock
Subscription Agreement") among Fox Paine Medic Acquisition Corporation,
Holdings and the investors named therein, the Stock Subscription Agreement
dated November 12, 1999 (the "Management Stock Subscription Agreement"),
between Holdings and the individual investors named therein, the supplemental
indenture, dated as of October 18, 1999, relating to the Existing Notes (the
"Supplemental Indenture"), the Opco Indenture, the Opco Notes, the Opco
Purchase Agreement, the Opco Registration Rights Agreement, the Opco Note
Warrant Agreement, and the Stock Purchase Agreement, dated as of November 12,
1999 (the "Circon Purchase Agreement"), between Maxxim Delaware and Fox Paine
Circon (collectively, the "Transaction Documents") to which such entity is, or
will be as of the Closing Date, a party and to perform their respective
obligations hereunder and thereunder; and all corporate action required to be
taken for the due and proper authorization, execution and delivery of each of
the Transaction Documents by such entities and the consummation of the
transactions contemplated thereby by such entities has been duly and validly
taken.
(g) This Agreement has been duly authorized, executed and delivered
by Holdings and constitutes a valid and legally binding agreement of Holdings.
(h) The Indenture has been duly authorized by Holdings, and, when
duly executed and delivered in accordance with its terms by each of the parties
thereto, will constitute a valid and legally binding agreement of Holdings
enforceable against Holdings in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (whether considered in a
proceeding in equity or at law). On the Closing Date, the Indenture will
conform in all material respects to the requirements of the Trust Indenture Act
and the rules and regulations of the Commission applicable to an indenture
which is qualified thereunder.
(i) The Holdings Notes have been duly authorized by Holdings and,
when duly executed, authenticated, issued and delivered as provided in the
Indenture and paid for as provided herein, will be duly and validly issued and
outstanding and will constitute valid and legally binding obligations of
Holdings as issuer, entitled to the benefits of the Indenture and enforceable
against Holdings, as issuer, in accordance with their terms, except as may be
limited
- 6 -
<PAGE> 7
by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in equity or
at law).
(j) The Warrants have been duly authorized by Holdings and, when
duly executed, authenticated, issued and delivered as provided in the Warrant
Agreement and paid for as provided herein and therein, will be duly and validly
issued and outstanding and will constitute valid and legally binding
obligations of Holdings, entitled to the benefits of the Warrant Agreement and
enforceable against Holdings in accordance with their terms, except as may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (whether considered in a
proceeding in equity or at law) and except to the extent that the
indemnification or contribution provisions contained therein may be
unenforceable.
(k) The Registration Rights Agreement has been duly authorized by
Holdings and, when duly executed and delivered in accordance with its terms by
each of the parties thereto, will constitute a valid and legally binding
agreement of Holdings enforceable against Holdings in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law) and except to the
extent that the indemnification or contribution provisions contained therein
may be unenforceable.
(l) The Merger Agreement has been duly authorized, executed and
delivered by Holdings and constitutes a valid and legally binding agreement of
Holdings, enforceable against Holdings in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (whether considered in a
proceeding in equity or at law). No holder of Holdings Common Stock has, prior
to the Merger, perfected such Holder's appraisal rights in connection with the
Merger.
(m) Each New Credit Facilities Document to which Holdings, the
Company and each Opco Guarantor, is to be a party has been duly authorized by
Holdings, the Company and each Opco Guarantor, as applicable, and, when duly
executed and delivered in accordance with its terms by each of the parties
thereto, will constitute a valid and legally binding agreement of Holdings, the
Company and each Opco Guarantor, as applicable, enforceable against Holdings,
the Company and each Opco Guarantor, as applicable in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law).
(n) The Services Agreement has been duly authorized by Holdings and
the Company and, when duly executed and delivered in accordance with its terms
by each of the parties thereto, will constitute a valid and legally binding
agreement of Holdings and the Company enforceable against each of Holdings and
the Company in accordance with its terms,
- 7 -
<PAGE> 8
except as may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting
creditors' rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law).
(o) The Stockholders' Agreement has been duly authorized by
Holdings, and when duly executed and delivered in accordance with its terms by
each of the parties thereto, will constitute a valid and legally binding
agreement of Holdings enforceable against Holdings in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law).
(p) The Warrant Agreement has been duly authorized by Holdings, and
when duly executed and delivered in accordance with its terms by each of the
parties thereto, will constitute a valid and legally binding agreement of
Holdings enforceable against Holdings in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (whether considered in a
proceeding in equity or at law).
(q) Each other Transaction Document to which Holdings, the Company
or an Opco Guarantor is, or will be, as of the Closing Date, a party has been
duly authorized by Holdings, the Company or such Opco Guarantor, as applicable,
and, when duly executed and delivered in accordance with its terms by each of
the parties thereto, will constitute a valid and legally binding agreement of
Holdings, the Company or such Opco Guarantor, as applicable, enforceable
against Holdings, the Company or such Opco Guarantor, as applicable, in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law).
(r) Each Transaction Document conforms in all material respects to
the description thereof contained in the Private Placement Memorandum to the
extent described therein.
(s) The execution, delivery and performance by Holdings, the Company
and each Opco Guarantor of the Transaction Documents to which each is a party,
the issuance, authentication, sale and delivery of the Units (including the
Holdings Notes and the Warrants) and compliance by Holdings with the terms
thereof and the consummation of the transactions contemplated by the
Transaction Documents will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under, or, except
as created pursuant to the New Credit Facilities Documents or the Stockholders'
Agreement, result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of Holdings or any of its subsidiaries
pursuant to any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Holdings or any of its subsidiaries is a
- 8 -
<PAGE> 9
party or by which Holdings or any of its subsidiaries is bound or to which any
of the property or assets of Holdings or any of its subsidiaries is subject,
nor will such actions result in any violation of the provisions of the charter
or by-laws of Holdings or any of its subsidiaries or any statute or any
judgment, order, decree, or rule or regulation of any court or arbitrator or
governmental agency or body having jurisdiction over Holdings or any of its
subsidiaries or any of their properties or assets, except for any such
conflicts, breaches, violations, defaults, liens, charges and encumbrances
which, singularly or in the aggregate would not have a Material Adverse Effect;
and no consent, approval, authorization or order of, or filing or registration
with, any such court or arbitrator or governmental agency or body under any
such statute, judgment, order, decree, rule or regulation is required for the
execution, delivery and performance by Holdings and each of its subsidiaries of
each of the Transaction Documents to which each is a party, the issuance,
authentication, sale and delivery of the Units and compliance by Holdings and
its subsidiaries with the terms thereof and the consummation of the
transactions contemplated by the Transaction Documents, except for such
consents, approvals, authorizations, filings, orders, registrations or
qualifications (i) which shall have been obtained or made on or prior to the
Closing Date, (ii) as may be required to be obtained or made under the
Securities Act and applicable state securities laws as provided in the
Registration Rights Agreement or the Opco Registration Rights Agreement or the
Stockholders' Agreement, (iii) the failure of which to obtain would not,
singularly or in the aggregate, have Material Adverse Effect or materially
restrain, prevent or impose material burdensome conditions on any of the
transactions contemplated by the Transaction Documents.
(t) KPMG LLP are independent certified public accountants with
respect to Holdings and its subsidiaries within the meaning of Rule 101 of the
Code of Professional Conduct of the American Institute of Certified Public
Accountants (the "AICPA") and the interpretations and rulings thereunder. The
historical financial statements (including the related notes) contained in the
Private Placement Memorandum comply in all material respects with the
requirements applicable to a registration statement on Form S-1 under the
Securities Act (except that certain supporting schedules are omitted); such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods covered
thereby and fairly present in all material respects the financial position of
the entities purported to be covered thereby at the respective dates indicated
and the results of their operations and their cash flows for the respective
periods indicated; and the historical financial information contained in the
Private Placement Memorandum under the headings "Summary--Summary Historical
and Pro Forma Financial Information," "Capitalization," "Unaudited Pro Forma
Financial Information of the Company," "Selected Historical Consolidated
Financial Information of Holdings," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Management -- Compensation
of Executive Officers" are derived from the accounting records of Holdings, and
its subsidiaries and fairly present in all material respects the information
purported to be shown thereby. The pro forma financial information contained in
the Private Placement Memorandum has been prepared on a basis consistent with
the historical financial statements contained in the Private Placement
Memorandum (except for the pro forma adjustments specified therein), includes
all material adjustments to the historical financial information required by
Rule 11-02 of Regulation S-X promulgated by the Commission to reflect the
transactions described in the Private Placement Memorandum, gives effect to
- 9 -
<PAGE> 10
assumptions made on a reasonable basis and fairly presents in all material
respects the historical and proposed transactions contemplated by the Private
Placement Memorandum and the Transaction Documents; provided that no
representation is made with respect to the compliance of the calculation of
"EBITBA" with the requirements of Rule 11-02 of Regulation S-X under the
Exchange Act. The other historical financial and statistical information and
data included in the Private Placement Memorandum are, in all material
respects, fairly presented.
(u) Except as disclosed in the Private Placement Memorandum, there
are no legal or governmental proceedings pending to which Holdings or any of
its subsidiaries is a party or of which any property or assets of Holdings or
any of its subsidiaries is the subject which, (i) singularly or in the
aggregate, if determined adversely to Holdings or any of its subsidiaries,
could reasonably be expected to have a Material Adverse Effect or (ii) question
the validity or enforceability of any of the Transaction Documents or any
action taken or to be taken pursuant thereto; and to the best knowledge of
Holdings, the Company and the Opco Guarantors, no such proceedings are
threatened or contemplated by governmental authorities or by others.
(v) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency or body
which prevents the issuance of the Units or suspends the sale of the Units in
any jurisdiction; no injunction, restraining order or order of any nature by
any federal or state court of competent jurisdiction has been issued with
respect to Holdings or any of its subsidiaries which would prevent or suspend
the issuance or sale of the Units; except as disclosed in the Private Placement
Memorandum, no action, suit or proceeding is pending against or, to the best
knowledge of Holdings, the Company and the Opco Guarantors, threatened against
or affecting Holdings or any of its subsidiaries before any court or arbitrator
or any governmental agency, body or official, domestic or foreign, which could
reasonably be expected to interfere with or adversely affect the issuance of
the Units or in any manner draw into question the validity or enforceability of
any of the Transaction Documents or any action taken or to be taken pursuant
thereto.
(w) Neither Holdings nor any of its subsidiaries is (i) in violation
of its charter or by-laws, (ii) in default in any respect, and no event has
occurred which, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which it is a party or by which it is bound
or to which any of its property or assets is subject other than any such
default as would not, singularly or in the aggregate, have a Material Adverse
Effect or (iii) in violation in any respect of any law, ordinance, governmental
rule, regulation or court decree to which it or its property or assets are
subject, other than any such violation as could not, singularly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(x) Holdings and each of its subsidiaries possess all licenses,
certificates, authorizations and permits issued by, and have made all
declarations and filings with, the appropriate federal, state or foreign
regulatory agencies or bodies which are necessary or, in the reasonable
judgment of Holdings and the Company, desirable for the ownership of their
respective properties or the conduct of their respective businesses as
described in the Private
- 10 -
<PAGE> 11
Placement Memorandum, except where the failure to possess or make the same
would not, singularly or in the aggregate, have a Material Adverse Effect, and,
neither Holdings nor any of its subsidiaries has received notification of any
revocation or modification of any such license, certificate, authorization or
permit or has any reason to believe that any such license, certificate,
authorization or permit will not be renewed in the ordinary course of its
business which revocation, modification or nonrenewal would, singularly or in
the aggregate, have a Material Adverse Effect.
(y) Holdings and each of its subsidiaries have filed all federal,
state, local and foreign Tax returns required to be filed through the date
hereof and have paid all Taxes required to be paid (other than those Taxes
being contested in good faith for which adequate reserves have been provided in
accordance with generally accepted accounting principles, and other than any
such failure that could not reasonably be expected to have, singularly or in
the aggregate with any such other failures, a Material Adverse Effect). No
audits or examinations with respect to Holdings or any of its subsidiaries are
ongoing or, to the knowledge of Holdings, have been threatened or proposed by
the IRS or any state, local or foreign Tax authority which could reasonably be
expected to, singularly or in the aggregate, have a Material Adverse Effect. No
deficiencies for any Tax have been asserted or assessed or, to Holdings'
knowledge, threatened or proposed against Holdings or any of its subsidiaries
which have not been satisfied, and which, singularly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
"Tax" means all federal state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
communications services, severance, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise, production, value
added, occupancy and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts and any interest in respect to such penalties and
additions, and includes any liability for Taxes of another person by contract,
as transferee or successor, under Treasury Regulation Section 1.1502-6 or
analogous state, local or foreign law provision, or otherwise.
(z) Neither Holdings nor any of its subsidiaries is (i) an
"investment company" or a company "controlled by" an investment company within
the meaning of the Investment Company Act of 1940, as amended (the "Investment
Company Act"), and the rules and regulations of the Commission thereunder or
(ii) a "holding company" or a "subsidiary company" of a holding company or an
"affiliate" thereof within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
(aa) Except as would not, singularly or in the aggregate, have a
Material Adverse Effect, Holdings and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded
- 11 -
<PAGE> 12
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(bb) Except as would not, singularly or in the aggregate, have a
Material Adverse Effect, Holdings and each of its subsidiaries have insurance
covering their respective properties, operations, personnel and businesses,
which insurance is in amounts and insures against such losses and risks as are,
in the reasonable judgment of Holdings and the Company, adequate to protect
Holdings and its subsidiaries and their respective businesses. Neither Holdings
nor any of its subsidiaries has received notice from any insurer or agent of
such insurer that material capital improvements or other material expenditures
are required or necessary to be made in order to continue such insurance.
(cc) Holdings and each of its subsidiaries own or possess adequate
rights to use all material patents, patent applications, trademarks, service
marks, trade names, trademark registrations, service mark registrations,
copyrights, licenses and know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) necessary for the conduct of their respective businesses; and the
conduct of their respective businesses will not conflict in any respect with,
and Holdings and its subsidiaries have not received any notice of any claim of
conflict with, any such rights of others which conflict, singularly or in the
aggregate with any other such conflicts, if the subject of an unfavorable
decision, ruling or finding, could reasonably be expected to result in a
Material Adverse Effect.
(dd) Holdings and each of its subsidiaries have good and marketable
title in fee simple to, or have valid rights to lease or otherwise use, all
items of real and personal property which are material to the business of
Holdings and its subsidiaries, in each case free and clear of all liens,
encumbrances, claims and defects and imperfections of title except such as (i)
do not materially interfere with the use made and proposed to be made of such
property by Holdings and its subsidiaries, (ii) could not reasonably be
expected to have, singularly or in the aggregate with all other liens,
encumbrances, claims and defects and imperfections of title, a Material Adverse
Effect, (iii) arise under the New Credit Facilities Documents or (iv) are
permitted under the Indenture.
(ee) No labor disturbance by or dispute with the employees of
Holdings or any of its subsidiaries exists or, to the best knowledge of
Holdings, is contemplated or threatened, which disturbance or dispute would
singularly or in the aggregate have a Material Adverse Effect.
(ff) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section 4975
of the Internal Revenue Code of 1986, as amended from time to time (the
"Code")) or, except as set forth in Schedule 3.11(d) of the Merger Agreement
and the related schedule, "accumulated funding deficiency" (as defined in
Section 302 of ERISA) or any of the events set forth in Section 4043(b) of
ERISA (other than events with respect to which the 30-day notice requirement
under Section 4043 of ERISA has been waived) has occurred with respect to any
employee benefit plan of Holdings or any of its
- 12 -
<PAGE> 13
subsidiaries which could reasonably be expected to have a Material Adverse
Effect; each such employee benefit plan is in compliance in all material
respects with applicable law, including ERISA and the Code; Holdings and each
of its subsidiaries have not incurred and do not expect to incur liability
under Title IV of ERISA with respect to the termination of, or withdrawal from,
any pension plan for which Holdings or any of its subsidiaries would have any
liability; and each such pension plan that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which could reasonably be
expected to cause the loss of such qualification.
(gg) There has been no storage, generation, transportation,
handling, treatment, disposal, discharge, emission or other release of any kind
of toxic or other wastes or other hazardous substances by, due to or caused by
Holdings or any of its subsidiaries (or, to the best knowledge of Holdings, the
Company or any of the Opco Guarantors, any other entity (including any
predecessor) for whose acts or omissions Holdings or any of its subsidiaries is
or could reasonably be expected to be liable) upon any of the property now or
previously owned or leased by Holdings or any of its subsidiaries, or upon any
other property, in violation of any statute or any ordinance, rule, regulation,
order, judgment, decree or permit or which would, under any statute or any
ordinance, rule (including rule of common law), regulation, order, judgment,
decree or permit, give rise to any liability, except for any violation or
liability that could not reasonably be expected to have, singularly or in the
aggregate with all such violations and liabilities, a Material Adverse Effect;
and there has been no disposal, discharge, emission or other release of any
kind onto such property of any toxic or other wastes or other hazardous
substances with respect to which Holdings, the Company or any of the Opco
Guarantors, has knowledge, except for any such disposal, discharge, emission or
other release of any kind which could not reasonably be expected to have,
singularly or in the aggregate with all such discharges and other releases, a
Material Adverse Effect.
(hh) Neither Holdings nor any of its subsidiaries or, to the best
knowledge of Holdings, the Company or any of the Opco Guarantors, any director,
officer, agent, employee or other person associated with or acting on behalf of
Holdings or any of its subsidiaries has (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating
to political activity; (ii) made any unlawful payment to any foreign or
domestic government official or employee from corporate funds; (iii) violated
or is in violation of any provision of the Foreign Corrupt Practices Act of
1977; or (iv) made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
(ii) On and immediately after the Closing Date, Holdings (after
giving effect to the issuance of the Holdings Notes and the Warrants and to the
other Transactions) will be Solvent. As used in this paragraph, the term
"Solvent" means, with respect to a particular date, that on such date (i) the
fair value and present fair saleable value of the assets of Holdings, exceeds:
(x) the total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of Holdings, and (y) the amount required to pay such
liabilities as they become absolute and matured in the normal course of
business; (ii) Holdings has the ability to pay its debts and liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities) as
they become absolute and matured in the normal course of business; and (iii)
Holdings does
- 13 -
<PAGE> 14
not have an unreasonably small amount of capital with which to conduct its
business after giving due consideration to the prevailing practice in the
industry in which Holdings is engaged. In computing the amount of such
contingent liabilities at any time, it is intended that such liabilities will
be computed at the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
(jj) Except as described in the Private Placement Memorandum, or as
contemplated by this Agreement, there are no outstanding subscriptions, rights,
warrants, calls or options to acquire, or instruments convertible into or
exchangeable for, or agreements or understandings with respect to the sale or
issuance of, any shares of capital stock of or other equity or other ownership
interest in Holdings or any of its subsidiaries.
(kk) None of the proceeds of the sale of the Units will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Units to be considered a "purpose credit"
within the meanings of Regulation T, U or X of the Board of Governors of the
Federal Reserve Board.
(ll) Neither Holdings nor any of its subsidiaries is a party to any
contract, agreement or understanding, other than this Agreement, with any
person that would give rise to a valid claim against Holdings or its
subsidiaries or the Purchasers for a brokerage commission, finder's fee or like
payment in connection with the sale of the Units.
(mm) The Holdings Notes and the Warrants satisfy the eligibility
requirements of Rule 144A(d)(3) under the Securities Act.
(nn) None of Holdings, any of its subsidiaries or any of their
respective affiliates has, directly or through any agent, made any offer or
sale, solicited offers to buy or otherwise negotiated in respect of any of the
Holdings Notes or the Warrants or any securities of the same or similar class
as the Holdings Notes or the Warrants, the result of which would cause the sale
of the Holdings Notes or the Warrants to fail to be entitled to the exemption
from registration afforded by Section 4(2) of the Securities Act. As used
herein, the terms "offer" and "sale" have the meanings specified in Section
2(3) of the Securities Act.
(oo) None of Holdings, any of its subsidiaries or any of their
respective affiliates or any other person acting on its or their behalf has
engaged, in connection with the sale of the Units, in any form of general
solicitation or general advertising within the meaning of Rule 502(c) of
Regulation D under the Securities Act ("Regulation D").
(pp) Following the Transactions, there will be, other than pursuant
to the requirements of the Registration Rights Agreement, the Opco Registration
Rights Agreement and the Stockholders' Agreement, no securities of Holdings or
its subsidiaries registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or listed on a national
- 14 -
<PAGE> 15
securities exchange or quoted in a U.S. automated inter-dealer quotation system
following delisting and deregistration of the Holdings Common Stock outstanding
prior to the Merger.
(qq) No forward-looking statement (within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act) contained in the
Private Placement Memorandum has been made or reaffirmed without a reasonable
basis or has been disclosed other than in good faith.
(rr) Any reprogramming required to permit the proper functioning in
and following the year 2000 of (i) the computer systems of Holdings and each of
its subsidiaries and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which the systems of Holdings
or each of its subsidiaries interface) and the testing of all such systems and
equipment, as so reprogrammed, was materially complete by October 31, 1999. The
cost to Holdings and each of its subsidiaries of such reprogramming and testing
and of the reasonably foreseeable consequences of the occurrence of the year
2000 to Holdings and each of its subsidiaries (including reprogramming errors
and the failure of others' systems or equipment) will not result in a Material
Adverse Effect. Except for the reprogramming referred to in the preceding
sentence as may be necessary, the computer and management information systems
of Holdings and each of its subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement to be,
sufficient to permit Holdings and its subsidiaries to conduct their businesses
without Material Adverse Effect.
(ss) Since the date as of which information is given in the Private
Placement Memorandum, except as otherwise stated therein, (i) there has been no
material adverse change or any development involving a material adverse change
in the condition (financial or otherwise), earnings, business affairs,
management or business prospects of Holdings and its subsidiaries, taken as a
whole, whether or not arising in the ordinary course of business or (ii)
Holdings and its subsidiaries have not incurred any material liability or
obligation, direct or contingent, other than in the ordinary course of business
or in connection with the Transactions.
2. Purchase of the Units. (a) On the basis of the representations,
warranties and agreements contained herein, and subject to the terms and
conditions set forth herein, Holdings agrees to issue and sell to each of the
Purchasers, severally and not jointly, and each of the Purchasers, severally
and not jointly, agrees to purchase from Holdings the number of Units set forth
opposite the name of such Purchaser on Schedule 1 hereto at a purchase price
equal to $507.76 per Unit. Schedule 1 also sets forth for each Purchaser the
principal amount at maturity of the Holdings Notes and the number of Warrants
represented by the Units that such Purchaser has agreed to purchase.
(b) Each Purchaser represents to Holdings that (i) it is either (A)
an "accredited investor," within the meaning of Rule 501 promulgated by the
Commission under the Securities Act or (B) a Qualified Institutional Buyer
("QIB") as defined in Rule 144A under the Securities Act ("Rule 144A"), (ii) it
is acquiring the Units, the Holdings Notes and the Warrants to be purchased by
it hereunder for its own account, for investment, and not with a view to or for
sale in connection with any distribution thereof in violation of the
registration provisions of the
- 15 -
<PAGE> 16
Securities Act or the rules and regulations promulgated thereunder, (iii) it is
aware that it must bear the economic risk of such investment for an indefinite
period of time since the statutory basis for exemption from registration under
the Securities Act would not be present if such representation meant merely
that the present intention of such Purchaser is to hold these securities for a
deferred sale or for any fixed period in the future and (iv) it can afford to
bear such economic risk and can afford to suffer the complete loss of its
investment hereunder. Each Purchaser acknowledges that the Holdings Notes and
the Warrants are "restricted securities" under the federal securities laws,
have not been registered under the Securities Act or any state securities or
blue sky laws and may not be sold except pursuant to an effective registration
statement thereunder or any exemption from registration under the Securities
Act and applicable state securities laws. Each Purchaser further acknowledges
that each Holdings Note and Warrant shall include the restrictive legend set
forth below:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, SUCH REGISTRATION."
Each Purchaser further acknowledges that the Warrants and the Underlying Shares
will be subject to the provisions of the Stockholders' Agreement, which
agreement provides for certain restrictions on the transferability of the
Warrants and the Underlying Shares and will bear such other legends as may be
set forth in the Stockholders' Agreement.
(c) It is hereby agreed that, for purposes of Treasury Regulations
1.1273-2(h), (i) the aggregate "issue price" of a Unit consisting of the $1,000
in principal amount at maturity of the Holdings Notes and 1.46367 Warrants to
be purchased by the Purchasers is $492.53, (ii) the aggregate fair market value
and aggregate purchase price of each Note of $1,000 principal amount at
maturity is $454.49 and (iii) the aggregate fair market value and aggregate
purchase price of each Warrant is $25.99. Holdings and the Purchasers agree to
use the foregoing issue price, purchase prices and fair market values for U.S.
federal income tax purposes with respect to this transaction (unless otherwise
required by a final determination by the Internal Revenue Service or a court of
competent jurisdiction).
3. Delivery of and Payment for the Units. (a) Delivery of and payment
for the Units shall be made at the offices of Wachtell, Lipton, Rosen & Katz,
New York, New York, or at such other place as shall be agreed upon by the
Purchasers and the Company, at 3:30 p.m., New York City time, on November 12,
1999, or at such other time or date, not later than seven full business days
thereafter, as shall be agreed upon by the Purchasers and Holdings (such date
and time of payment and delivery being referred to herein as the "Closing
Date"). On the Closing Date, Holdings will deliver to the Purchasers
certificates evidencing an aggregate of 98,473 Units consisting of $98,473,000
aggregate principal amount at maturity of the Holdings Notes duly
- 16 -
<PAGE> 17
executed and authenticated by Holdings and 144,132 Warrants duly executed by
Holdings and registered in the names of the Purchasers and in the amounts set
forth on Schedule 1 (and in such denominations requested by each such Purchaser
not later than two business days prior to the Closing Date).
(b) On the Closing Date, payment of the purchase price for the Units
shall be made to Holdings by wire or book-entry transfer of same-day funds to
such account or accounts as Holdings shall specify prior to the Closing Date or
by such other means as the parties hereto shall agree prior to the Closing Date
against delivery to the Purchasers of the certificates evidencing the Units.
Time shall be of the essence, and delivery at the time and place specified
pursuant to this Agreement is a further condition of the obligations of the
Purchasers hereunder. On the Closing Date, Holdings shall deliver to each
Purchaser, against payment of the purchase price therefor, certificates in
definitive form representing the Holdings Notes, and Holdings shall deliver to
each Purchaser, against payment of the purchase price therefor, certificates in
definitive form representing the Warrants to be purchased by such Purchaser, in
each case registered in such names and in such denominations as such Purchaser
shall have requested not later than two business days prior to the Closing
Date.
(c) On the Closing Date, Holdings shall pay to each Purchaser or its
designee, by wire transfer in same-day funds, a takedown payment equal to 3.00%
of the aggregate purchase price of the Units purchased by such Purchaser on the
Closing Date (or $1,500,002.76 in the aggregate) and, the extent requested to
be paid on the Closing Date, all reasonable fees of and disbursements to Fried,
Frank, Harris, Shriver & Jacobson, counsel to the Purchasers incurred in
connection with the issuance and sale of the Holdings Notes and the Warrants.
4. Further Agreements of Holdings. Holdings agrees with each of the
Purchasers:
(a) at all times prior to the Closing Date, to advise the Purchasers
promptly and, if reasonably requested, confirm such advice in writing, of the
happening of any event which makes any statement of a material fact made in the
Private Placement Memorandum untrue or which requires the making of any
additions to or changes in the Private Placement Memorandum (as amended or
supplemented from time to time) in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(b) if at any time prior to the Closing Date, any event shall occur
or condition exist as a result of which it is necessary, in the opinion of
counsel for the Purchasers or counsel for Holdings, to amend or supplement the
Private Placement Memorandum in order that the Private Placement Memorandum
will not include any 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 existing at the time it is delivered to a Purchaser, not
misleading, including the fact that the Private Placement Memorandum was
prepared as an offering memorandum solely for the Opco Notes, and it being
acknowledged by Purchasers that the Private Placement Memorandum does not
describe the Notes and Warrants or specific risks that may be associated with
the purchase and ownership thereof, or if it is necessary to amend or
supplement the Private Placement Memorandum to comply with applicable law
relating to an offering of the Opco
- 17 -
<PAGE> 18
Notes, to promptly prepare such amendment or supplement as may be necessary to
correct such untrue statement or omission or so that the Private Placement
Memorandum, as so amended or supplemented, will comply with applicable law and
to deliver copies thereof to the Purchasers;
(c) for so long as the Holdings Notes or the Warrants are
outstanding and are "restricted securities" within the meaning of Rule
144(a)(3) under the Securities Act, to furnish to holders of the Holdings Notes
or the Warrants and prospective purchasers of the Holdings Notes or the
Warrants designated by such holders, upon request of such holders or such
prospective purchasers, the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act, unless Holdings is then subject to
and in compliance with Section 13 or 15(d) of the Exchange Act (the foregoing
agreement being for the benefit of the holders from time to time of the Units,
the Holdings Notes or the Warrants and prospective purchasers of the Units, the
Notes or the Warrants designated by such holders);
(d) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
not to, and to cause its affiliates not to, and not to authorize or knowingly
permit any person acting on their behalf to; solicit any offer to buy or offer
to sell the Notes by means of engaging in any form of general solicitation or
general advertising within the meaning of Rule 502 (c) of Regulation D under
the Securities Act; and not to offer, sell, contract to sell or otherwise
dispose of, or negotiate in respect of, directly or indirectly, any securities
of the same or similar class as the Holdings Notes or the Warrants under
circumstances where such offer, sale, contract, negotiation or disposition
could be integrated with the sale of the Notes and the Warrants in a manner
which would cause the exemption afforded by Section 4(2) of the Securities Act
to cease to be applicable to the sale of the Units as contemplated by this
Agreement;
(e) during the period from the Closing Date until two years after
the Closing Date, not to, and not permit any of its affiliates (as defined in
Rule 144 under the Securities Act) to, resell any of the Holdings Notes or the
Warrants that have been reacquired by them, except for Holdings Notes and
Warrants purchased by Holdings or any of its affiliates and resold in a
transaction registered under the Securities Act or unless the securities bear a
legend specifying the date of such resale;
(f) not to, for so long as the Holdings Notes or the Warrants are
outstanding, be or become, or be or become owned by, an open-end investment
company, unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company Act, and to
not be or become, or be or become owned by, a closed-end investment company
required to be registered under the Investment Company Act, but not registered
thereunder;
(g) to do and perform all things required to be done and performed
by it under this Agreement that are within its control prior to or after the
Closing Date, and to use its best efforts to satisfy all conditions precedent
on its part to the delivery of the Units;
- 18 -
<PAGE> 19
(h) not to take any action prior to the execution and delivery of
the Indenture which, if taken after such execution and delivery, would have
violated any of the covenants contained in the Indenture;
(i) not to take any action prior to the Closing Date which would
require the Private Placement Memorandum to be amended or supplemented pursuant
to Section 4(b);
(j) to apply the net proceeds from the sale of the Units as set
forth in the Private Placement Memorandum under the heading "Summary--Sources
and Uses" and "Use of Proceeds";
(k) to cause each of Wachtell, Lipton, Rosen & Katz, Shumaker, Loop
& Kendrick, LLP, Boyer, Ewing & Harris and Vinson & Elkins (allocated in
accordance with the forms of opinion previously provided to the counsel for the
Purchasers) to furnish to the Purchasers their written opinions, as counsel for
Holdings, addressed to the Purchasers and dated as of the Closing Date, in form
and substance reasonably satisfactory to the Purchasers, such opinions together
to be substantially in the form set forth in Annex B hereto;
(l) to furnish to the Purchasers a certificate, dated as of the
Closing Date, of the Chief Executive Officer and Chief Financial Officer of
Holdings stating that (i) such officers have carefully examined the Private
Placement Memorandum, (ii) in their opinion, the Private Placement Memorandum,
as of its date, did not include any untrue statement of a material fact and did
not omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, including the fact that the Private
Placement Memorandum was prepared as an offering memorandum solely for the Opco
Notes, and it being acknowledged by Purchasers that the Private Placement
Memorandum does not describe the Notes and Warrants or specific risks that may
be associated with the purchase and ownership thereof, and since the date of
the Private Placement Memorandum, no event has occurred which should have been
set forth in a supplement or amendment to the Private Placement Memorandum so
that the Private Placement Memorandum (as so amended or supplemented) would not
include any untrue statement of a material fact and would not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, (iii) as of the Closing Date, the representations and
warranties of Holdings in this Agreement are true and correct in all material
respects, and Holdings has complied in all material respects with all
agreements and satisfied all conditions on their part to be performed or
satisfied hereunder on or prior to the Closing Date and (iv) subsequent to the
date of the most recent financial statements contained in the Private Placement
Memorandum, there has been no material adverse change in the financial position
or results of operations of Holdings and its subsidiaries, taken as a whole, or
any material adverse change, or any material adverse development, in or
affecting the condition (financial or otherwise), results of operations or
business of Holdings and its subsidiaries, taken as a whole;
- 19 -
<PAGE> 20
(m) to furnish to the Purchasers, on or prior to the Closing Date, a
counterpart of the Registration Rights Agreement which shall have been duly
executed and delivered by Holdings;
(n) to furnish to the Purchasers, on or prior to the Closing Date,
(i) the Indenture which shall have been duly executed and delivered by Holdings
and the Trustee, and (ii) the Holdings Notes which shall have been duly
executed and delivered by Holdings and duly authenticated by the Trustee;
(o) to furnish to the Purchasers, on or prior to the Closing Date, a
counterpart of the Stockholders' Agreement which shall have been duly executed
and delivered by of Holdings and each other party thereto other than the
Purchasers;
(p) to furnish to the Purchasers, on or prior to the Closing Date, a
counterpart of the Warrant Agreement, which shall have been duly executed and
delivered by Holdings and the Purchasers, and (ii) the Warrants which shall
have been duly executed and delivered by Holdings and duly countersigned by the
Purchasers; and
(q) to furnish to the Purchasers, on or prior to the Closing Date,
true and complete copies of all the Transaction Documents (and all related
closing documents), which shall have been duly executed and delivered by all
the parties thereto, including, without limitation, the Services Agreement, the
Credit Agreement and other New Credit Facilities Documents and the Supplemental
Indenture.
5. Conditions to Purchasers' Obligations. The respective obligations of
the Purchasers hereunder are subject, on and as of the date hereof and the
Closing Date, to the satisfaction of the following terms and conditions:
(a) The representations and warranties of Holdings set forth in this
Agreement that are qualified as to materiality shall be true and correct in all
respects, as of the date hereof and as of the Closing Date as though made as of
such time, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties
shall be true and correct in all respects as of such earlier date) and the
representations and warranties of Holdings set forth in this Agreement that are
not qualified as to materiality shall be true and correct in all material
respects, as of the date hereof and as of the Closing Date as though made as of
such time, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties
shall be true and correct in all material respects as of such earlier date).
Holdings shall have performed or complied in all material respects with all
obligations and covenants required by this Agreement to be performed or
complied with by Holdings on or prior to the Closing Date. All the statements
made by Holdings and its officers made in any certificates delivered pursuant
hereto shall be accurate in all material respects.
(b) No stop order suspending the sale of the Units in any
jurisdiction shall have been issued and no proceeding for that purpose shall
have been commenced or shall be pending or threatened.
- 20 -
<PAGE> 21
(c) Holdings shall have furnished to the Purchasers such
certificates, opinions and other documents as are customary in connection with
the closing of transactions similar to the transactions contemplated by this
Agreement.
(d) The capitalization of Holdings and its subsidiaries shall be as
contemplated by the commitment letters each dated as of October 22, 1999
entered into by each of the Opco Purchasers with Fox Paine Maxxim, the
commitment letter dated as of August 13, 1999 (the "Prior Commitment Letter"),
among Fox Paine Maxxim, Fox Paine Circon and the GS Mezzanine Partners, L.P.,
as amended on October 29, 1999, and the commitment letter dated as of June 12,
1999 among Fox Paine Maxxim, The Chase Manhattan Bank and Chase Securities,
Inc., as amended on September 30, 1999, and November 1, 1999 (each a
"Commitment Letter" and collectively the "Commitment Letters"), except where
any change to such capitalization is on terms that are not materially adverse
to the Purchasers and the investment contemplated by such Commitment Letters.
(e) Subsequent to June 13, 1999, there shall not have been any
event, change, or development that constitutes a Company Material Adverse
Effect (as defined in the Merger Agreement), in each case other than actions
taken pursuant to or as disclosed in the Merger Agreement.
(f) The Merger Agreement shall be in full force and effect.
(g) (x) The issuance of the Units, the Holdings Notes and the
Warrants shall be in compliance with existing law and (y) no action shall have
been taken and no statute, rule, regulation or order shall have been enacted,
adopted or issued by any governmental agency or body which would, as of the
Closing Date, prevent the issuance or sale of the Units, the Holdings Notes or
the Warrants; and no injunction, restraining order or order of any other nature
by any federal or state court of competent jurisdiction shall have been issued
as of the Closing Date which would prevent the issuance or sale of the Units,
the Holdings Notes or the Warrants.
(h) The Investors shall have previously made, or shall substantially
concurrently with the sale of the Units hereunder make, payments in respect of
the entire amount of the Investor Equity Contribution.
(i) The Transactions, other than the sale of the Units, shall be
consummated substantially concurrently with the sale of the Units hereunder.
6. Termination. The obligations of the Purchasers hereunder may be
terminated by the Purchasers, in their absolute discretion, by notice given to
and received by Holdings prior to delivery of and payment for the Units (a) if,
prior to that time, any of the events described in Section 5(g)(y) shall have
occurred and be continuing or (b) at any time after December 31, 1999.
7. Several Obligations of the Purchasers. The obligations of the
Purchasers hereunder shall be several.
- 21 -
<PAGE> 22
8. Indemnification. (a) Holdings shall indemnify and hold harmless each
Purchaser, its affiliates, officers, directors, stockholders, trustees,
employees, and representatives, and each person, if any, who controls any such
person within the meaning of the Securities Act or the Exchange Act
(collectively referred to herein as the "Indemnitees"), from and against any
and all liabilities, obligations, losses, damages, claims, and the related
costs and expenses, including, without limitation, legal fees and other
expenses incurred in the investigation, defense, appeal and settlement of
claims, actions, suits and proceedings (collectively referred to herein as the
"Indemnified Liabilities"), incurred by the Indemnitees as a result of, or
arising out of or relating to the Transactions (it being understood and agreed
that such Indemnified Liabilities do not include losses by the Purchaser of all
or a portion of its investment in the Holding Notes and Warrants except as a
result of a breach by Holdings of its obligations under this Agreement, the
Warrant Agreement, the Registration Rights Agreement, the Indenture, the
Warrants or the Holdings Notes (collectively, the "Unit Documents") and
provided that this parenthetical shall in no way be deemed to limit or affect
the rights and obligations of Holdings under the Unit Documents, otherwise than
under this Section 8), including, without limitation:
(i) any action or failure to act by any of Holdings or
any of its subsidiaries;
(ii) any statements or omissions made in any disclosure
or other information or materials used in connection with the
Transactions;
(iii) the execution, delivery, performance or enforcement
of this Agreement, the other Transaction Documents or any other
instrument or document contemplated hereby or thereby or any act, event
or transaction related or attendant thereto or contemplated hereby or
thereby, or any action or inaction by any Indemnitee under or in
connection herewith or therewith; or
(iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether
based on contract, tort or other theory and regardless of whether any
Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that (x) such Indemnified Liabilities are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or wilful misconduct of such Indemnitee or (y) such
Indemnified Liabilities of a Purchaser result from disputes among such
Purchaser or one or more Purchasers. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, Holdings agrees to make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
(b) The obligations of Holdings under this Section 8 shall be in
addition to any liability that Holdings may otherwise have and shall survive
the payment or prepayment in full or transfer of any Unit and the enforcement
of any provision hereof or thereof.
- 22 -
<PAGE> 23
9. Additional Covenants of Holdings Regarding Information and Access,
Management Rights and Syndication Assistance.
(a) Information Rights. So long as the Purchasers and their
affiliates hold Holdings Notes representing in the aggregate at least
$50,000,000 principal amount due at maturity, Holdings will deliver to the
Purchasers and each other holder of the Holdings Notes that is an institutional
investor (i) the financial and other information required to be delivered by
the Company to the Administrative Agent and the Lenders (as defined in the
Credit Agreement) pursuant to clauses (a) through (g) of Section 5.01 of the
Credit Agreement as in effect on the date hereof no later than the times such
information is furnished or required to be furnished under said provisions,
(ii) notice of the matters referred to in Section 5.02 of the Credit Agreement
as in effect on the date hereof no later than the times such notices are given
to the Administrative Agent under said Section and (iii) promptly following any
request therefor, such other information regarding the operations, business
affairs, and financial condition of Holdings and its subsidiaries including
reports and materials of the committees of the board of directors as the
Purchasers may reasonably request in relation to their investment in the Units.
In addition, Holdings will, and will cause its subsidiaries to, permit
representatives of the Purchaser, upon reasonable prior notice, to visit and
inspect the properties of, to examine and make extracts from its books and
records, and to discuss its affairs, finances and conditions with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.
(b) Management Rights. So long as the Purchasers and their
affiliates own Holdings Notes and Opco Notes representing in the aggregate at
least $50,000,000 in principal amount at maturity:
(i) Holdings shall cause, at the request of GS Mezzanine
Partners, L.P. ("GSMP"), the establishment of one person, who shall be
a managing director, officer or employee of The Goldman Sachs Group,
Inc. or any of its affiliates, as a non-voting observer (a "Non-Voting
Observer") to the Board of Holdings (the "Board"); it being understood
that GSMP may from time to time change the designation of such
Non-Voting Observer. In the event of a vacancy caused by the
resignation or other cessation of service of any Non-Voting Observer,
upon nomination by GSMP, Holdings shall cause the appointment of a new
Non-Voting Observer nominated by Purchasers at least seven (7) days
prior to the date of the next regular or special meeting of the Board.
The Non-Voting Observer shall be permitted to attend meetings of the
Board or each such other board or committee in person or
telephonically.
(ii) The Non-Voting Observer shall be entitled to be present at
all meetings of the Board and such observer shall be notified of any
meeting of any such board of directors or a committee thereof,
including such meeting's time and place, in the same manner and to the
same extent, if any, as directors of Holdings (and with respect to
committees, who are not members of such committee) and shall have the
same access to information (including any copies of all materials
distributed to members of the Board) concerning the business and
operations of Holdings or its subsidiaries and at the same time and to
the same extent, if any, as directors of Holdings (and with respect to
- 23 -
<PAGE> 24
committees, who are not members of such committee) and shall be
entitled to participate in discussions of the Board and consult with,
and make proposals and furnish advice to, the board of directors or
members of the committee without voting; provided, however, that
Holdings shall not be under any obligation to take any action with
respect to any proposals made or advice furnished by the Non-Voting
Observer. The Non-Voting Observer shall have a duty of confidentiality
and a duty of good faith to Holdings comparable to the analogous duties
of a director of Holdings.
(iii) At all times after an initial public offering ("IPO"),
Holdings shall cause to be maintained, provided the same is available
at reasonable cost, directors' and officers' liability insurance
covering all directors and officers of Holdings and covering the
Non-Voting Observer (regardless of whether such insurance shall be
obtained prior to an IPO or after an IPO) to the same extent as that
maintained for all other directors, including coverage in an amount of
at least $10 million.
(iv) Holdings shall indemnify and hold harmless, to the fullest
extent permitted under the applicable law, the Non-Voting Observer to
the same extent as all other directors and on terms no less favorable
than under Holdings' articles of incorporation and by-laws on the date
hereof.
(v) concurrently with the Closing Date, pursuant to a letter of
even date herewith in the form of Annex C hereto, the Company has
provided GSMP contractual information, inspection rights and management
rights with respect to the Company's Board of Directors substantially
comparable to the rights granted by Holdings to GSMP hereunder.
(c) Syndication Assistance. Following the first anniversary of the
date of this Agreement, so long as the Purchasers and their affiliates hold
Holdings Notes representing in the aggregate at least $50,000,000 in principal
amount due at maturity:
(i) The Company will, if reasonably requested by the
Purchasers, assist the Purchasers in completing any private resale (a
"Private Offering") of at least $15,000,000 of Accreted Value (as
defined in the Indenture) of Holdings Notes, but in no event more than
two Private Offerings and in no event more than once in any six-month
period, by the Purchasers of the Holdings Notes in accordance with the
Purchasers' intended method of distribution, provided that the
Purchasers shall comply with all restrictions applicable to the
transfer of the Holdings Notes under the Indenture and under applicable
federal and state securities laws. Such assistance may, in any such
case, include the following:
(A) using commercially reasonable efforts to ensure that
the distribution efforts benefit materially from the Company's
existing lending relationships;
- 24 -
<PAGE> 25
(B) using commercially reasonable efforts to provide
contact between the Company's senior management and advisors and
prospective purchasers to enable them to conduct their due
diligence investigation;
(C) responding to reasonable inquiries of, and providing
answers to, each prospective purchaser who so inquires about the
Company and its Subsidiaries (to the extent such information is
available or can be acquired and made available to prospective
purchasers without commercially unreasonable effort or expense
and to the extent the provision thereof is not prohibited by
applicable law or applicable confidentiality restrictions) and
the terms and conditions of the applicable distribution;
(D) if requested by the Purchasers in connection with any
Private Offering, using commercially reasonable efforts to
prepare an offering memorandum (the "Offering Memorandum") to
the extent required by paragraphs (iii) or (iv) of this Section
9(c) and other materials to be used in connection with the
distribution (including assistance in completion of the
Purchasers', any sales or placement agent's, if any, or in the
case of an underwritten offering, the lead managers' and
co-managers' reasonable due diligence review of Holdings and its
subsidiaries as an aid to such preparation);
(E) using commercially reasonable efforts to host one or
more meetings of prospective purchasers;
(F) using commercially reasonable efforts to promptly
prepare and provide to the Purchasers (or any sales or placement
agent therefor and any underwriter thereof) all information with
respect to Holdings, including projections, as the Purchasers
(or any sales or placement agent therefor and any underwriter
thereof) may reasonably request. Any such projections made
available to the Purchasers (or each placement or sales agent,
if any, therefor and each underwriter, if any, thereof) by
Holdings or any of its representatives will be prepared in good
faith based upon reasonable assumptions; provided, however, that
in no event shall Holdings be required to give any
representations or warranties with respect to such projections;
and
(G) if requested by the Purchasers, take commercially
reasonable actions necessary to enable Standard & Poor's Rating
Services, Inc. and Moody's Investors Service, Inc. to provide
their respective credit ratings of the Holdings Notes;
provided, that nothing contained in this Paragraph 9(c)(i) or paragraph
9(c)(ii) shall require Holdings or any of its subsidiaries to take any
actions that would (i) unreasonably interfere with or disrupt their
businesses or operations, provided that this limitation shall not limit
Holdings from taking such action for more than 90 days; (ii) interfere
with or disrupt any securities offering by Holdings or the Company;
(iii) require Holdings and its subsidiaries to incur any significant
expense; or (iv) require Holdings or any of its
- 25 -
<PAGE> 26
subsidiaries to provide any non-public information to any third party
unless such third party shall have entered into a confidentiality
agreement on terms reasonably acceptable to Holdings; or (v) result in
any Private Offering being deemed a public offering under the
Securities Act.
(ii) Holdings will allow the Purchasers (or any sales or
placement agent therefor or, in the case of an underwritten offering,
the lead manager and co-managers thereof, in each case, as may be
selected by the Purchasers and is reasonably acceptable to Holdings),
in consultation with Holdings, to manage all aspects of the
distribution of the Holdings Notes, including decisions as to the
selection of institutions to be approached and when they will be
approached, when their commitment will be accepted, which institutions
will participate, the allocations of the commitments among the
prospective purchasers and the amount and distribution of fees among
the prospective purchasers and sellers.
(iii) At the request of the Purchasers, and subject to paragraph
9(c)(i), in order to facilitate the consummation of a Private Offering,
Holdings will prepare and deliver to each Purchaser copies of an
Offering Memorandum describing the terms of the Holdings Notes proposed
to be sold and of the Private Offering contemplated by such resales and
containing such other information customarily included in offering
memoranda for similar transactions. The Offering Memorandum for any
Private Offering will not, as of its date and as of the closing of such
Private Offering, include 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; provided, however, that the foregoing shall not apply
to statements in or omissions from the Offering Memorandum made in
reliance upon and in conformity with information furnished to Holdings
in writing by any Purchaser expressly for use in the Offering
Memorandum. Without limiting the foregoing, the Offering Memorandum for
any Offering will contain all the information specified in, and meeting
the requirements of, subsection (d)(4) of Rule 144A and all other
applicable regulations. Prior to distributing, amending or
supplementing the Offering Memorandum in connection with any Private
Offering, Holdings shall furnish to the Purchasers a copy of each such
proposed Offering Memorandum, or amendment or supplement thereto, and,
allowing for a reasonable period of review by the Purchasers, the
Company shall not distribute, use or file the Offering Memorandum or
any such proposed amendment or supplement to which any Purchaser
selling Holdings Notes pursuant to such Offering Memorandum may
reasonably object.
(iv) If, prior to the completion of the sale of the Holdings
Notes by the Purchasers in any Private Offering, any event shall occur
or condition exist as a result of which it is necessary to amend or
supplement the related Offering Memorandum in order to make the
statements therein not contain a misstatement of a material fact or an
omission of a material fact required to make the statements therein, in
the light of the circumstances when the Offering Memorandum is
delivered to a prospective purchaser and at the closing of the sale of
the Holdings Notes covered thereby, not misleading or if,
- 26 -
<PAGE> 27
in the opinion of the Purchasers or counsel for the Purchasers, it is
otherwise necessary to amend or supplement the Offering Memorandum to
comply with applicable law, then Holdings agrees to promptly prepare,
and furnish at its own expense to the Purchasers, amendments or
supplements to the Offering Memorandum so that the statements in the
Offering Memorandum as so amended or supplemented will not contain a
misstatement of a material fact or an omission of a material fact
required to make the statements therein, in the light of the
circumstances when the Offering Memorandum is delivered to a
prospective purchaser and at the closing of the sale of such Holdings
Notes, not misleading or so that the Offering Memorandum, as amended or
supplemented, will comply with applicable law.
10. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the several Purchasers, Holdings
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except as provided in
Section 8 with respect to affiliates, officers, directors, stockholders,
trustees, employees, representatives, agents and controlling persons of the
Purchasers. Nothing in this Agreement is intended or shall be construed to give
any person, other than the persons referred to in this Section 9, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.
11. Expenses. Holdings agrees, whether or not the sale of the Units
hereunder or any other transactions contemplated hereby shall be consummated,
to pay and hold the Purchasers harmless against any and all liability for the
payment of all reasonable out-of-pocket fees and expenses arising in connection
with the preparation, negotiation, execution, delivery and performance of this
Agreement, the Units, the Private Placement Memorandum and any other
Transaction Documents, any other agreements, instruments or documents executed
pursuant thereto or in connection therewith, and the Transactions, including,
without limitation, (a) the fees and expenses of the Trustee or any paying
agent (including reasonable fees and expenses of counselor to such parties),
and (b) the reasonable fees and disbursements of Fried, Frank, Harris, Shriver
& Jacobson, counsel to the Purchasers. Holdings agrees to pay all expenses
incurred by the Purchasers (including reasonable counsel fees and
disbursements) in connection with any amendment, waiver or consent requested by
Holdings under or with respect to this Agreement, the Indenture or the Units,
whether or not the same shall become effective. The obligations of Holdings
under this Section 11 shall survive the payment for or transfer of any Unit,
the enforcement of any provision hereof or thereof, any such amendments and
waivers or consents. The Purchasers shall not be responsible for any fees or
disbursements of the accountants or any other costs and expenses incident to
the performance of the obligations of Holdings under this Agreement which are
not otherwise specifically provided for in this Section 11.
12. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of Holdings and the Purchasers
contained in this Agreement or made by or on behalf of Holdings or the
Purchasers pursuant to this Agreement or any certificate delivered pursuant
hereto shall survive the delivery of and payment for the Units and shall remain
in full force and effect, regardless of any termination or cancellation of this
Agreement or
- 27 -
<PAGE> 28
any investigation made by or on behalf of any of them or any of their
respective affiliates, officers, directors, employees, representatives, agents
or controlling persons.
13. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing and delivered in person or overnight courier
service, mailed by first-class mail addressed as follows or delivered via
telecopy transmission:
(a) if to the Purchasers:
Goldman, Sachs & Co.
85 Broad Street, 10th Floor
New York, New York 10004
(telecopier no.: (212) 357-5505)
Attention: Ben Adler, Esq.
(b) if to Holdings:
10300 49th Street North
Clearwater, Florida 33762
Attention: Corporate Secretary
(telecopier no.: 727-561-2180)
Holdings or the Purchasers, by notice to the other party, may designate
additional or different addresses for subsequent notices or communications.
14. Definition of Terms. For purposes of this Agreement, (a) the term
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act and (c) except where otherwise expressly provided, the
term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
15. GOVERNING LAW. THIS AGREEMENT SHALL BE 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 LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
16. Submission to Jurisdiction; Waiver of Service and Venue. (a) Each
of the parties hereto hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the U.S. District
Court of the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement, the Units or any other document, instrument or agreement executed or
delivered in connection herewith or therewith, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted
- 28 -
<PAGE> 29
by law, in such federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement, the Units or any other document,
instrument or agreement executed or delivered in connection herewith or
therewith shall affect any right that the any of the parties hereto may
otherwise have to bring any action or proceeding relating to this Agreement,
the Units or any other document, instrument or agreement executed or delivered
in connection herewith or therewith against Holdings or their properties in the
courts of any jurisdiction.
(b) Each of the parties hereto hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement,
the Units or any other document, instrument or agreement executed or delivered
in connection herewith or therewith in any court referred to in Section 16(a).
Each of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 13. Nothing in this
Agreement, the Units or any other document, instrument or agreement executed or
delivered in connection herewith or therewith will affect the right of any
party to this Agreement to serve process in any other manner permitted by law.
17. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE UNITS
OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THEREWITH WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT, TORT OR OTHER THEORY. EACH PARTY HERETO (a)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (b) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
18. Counterparts. This Agreement may be executed in one or more
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
19. Entire Agreement and Amendments. (a) This Agreement represents the
entire agreement of the parties hereto and supersedes all prior agreements and
understandings, oral or
- 29 -
<PAGE> 30
written, if any, relating to the transactions contemplated in this Agreement
(including the Prior Commitment Letter); and (b) no amendment or waiver of any
provision of this Agreement, nor any consent or approval to any departure
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the parties hereto.
20. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between Holdings and the several
Purchasers in accordance with its terms.
- 30 -
<PAGE> 31
[Signature Page to Senior Discount Notes Purchase Agreement]
Very truly yours,
MAXXIM MEDICAL, INC.,
By: /s/ Kenneth W. Davidson
-------------------------------------------
Name: Kenneth W. Davidson
Title: Chairman of the Board, President and
Chief Executive Officer
Accepted:
GS MEZZANINE PARTNERS, L.P.
By: GS Mezzanine Advisors, L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Melina Higgins
---------------------------------------
Name: Melina Higgins
Title: Attorney-at-law
GS MEZZANINE PARTNERS OFFSHORE, L.P.
By: GS Mezzanine Advisors (Cayman), L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Melina Higgins
---------------------------------------
Name: Melina Higgins
Title: Attorney-at-law
<PAGE> 1
Exhibit 4.7
WARRANT AGREEMENT
AMONG
MAXXIM MEDICAL, INC.
and
the parties named herein
Dated as of November 12, 1999
<PAGE> 2
TABLE OF CONTENTS1
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1. Warrant Certificates..............................................................1
SECTION 2. Execution of Warrant Certificates.................................................1
SECTION 3. Registration......................................................................2
SECTION 4. Registration of Transfers and Exchanges...........................................2
SECTION 5. Warrants; Exercise of Warrants....................................................5
SECTION 6. Payment of Taxes..................................................................6
SECTION 7. Mutilated or Missing Warrant Certificates.........................................7
SECTION 8. Reservation of Warrant Shares.....................................................7
SECTION 9. Obtaining Stock Exchange Listings.................................................8
SECTION 10. Adjustment of Number of Warrant Shares Issuable..................................8
SECTION 11. Fractional Interests............................................................16
SECTION 12. Notices to Warrant Holders......................................................16
SECTION 13. Mandatory Exercise in the Event of an Initial Public Offering...................18
SECTION 14. Notices to Company and Warrant Holder...........................................18
SECTION 15. Supplements and Amendments......................................................19
SECTION 16. Successors......................................................................19
SECTION 17. Termination.....................................................................19
SECTION 18. Governing Law...................................................................19
SECTION 19. Benefits of This Agreement......................................................19
SECTION 20. Headings........................................................................20
SECTION 21. Submission to Jurisdiction......................................................20
SECTION 22. Waiver of Jury Trial............................................................20
SECTION 23. Service of Process..............................................................20
SECTION 24. Counterparts....................................................................20
</TABLE>
- ---------------------
1 This Table of Contents does not constitute a part of this Agreement or have
any bearing upon the interpretation of any of its terms or provisions.
- i -
<PAGE> 3
WARRANT AGREEMENT (the "Warrant Agreement" or this "Agreement")
dated as of November 12, 1999 (the "Issue Date") between Maxxim Medical, Inc.,
a Texas corporation (the "Company"), and the parties named herein (together
with their successors and assigns, the "Holders").
Terms defined in the Purchase Agreement (the "Purchase
Agreement"), dated as of November 12, 1999 among the Company and the purchasers
named therein (the "Purchasers") unless defined herein are used as therein
defined.
WHEREAS, the Company proposes to issue Warrants, as hereinafter
described (the "Warrants"), to purchase up to 144,132 shares of Common Stock
(the "Common Stock") of the Company (the Common Stock issuable on exercise of
the Warrants being referred to herein as the "Warrant Shares"), in connection
with a private placement of an aggregate of $98,473,000
principal amount at maturity of the Company's Senior Discount Notes due 2010
and each Warrant entitling the Holder thereof to purchase one Warrant Share.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Warrant Certificates. The certificates evidencing the
Warrants (the "Warrant Certificates") to be delivered pursuant to this
Agreement shall be in registered form only and shall be substantially in the
form set forth in Exhibit A attached hereto.
SECTION 2. Execution of Warrant Certificates. Warrant
Certificates shall be signed on behalf of the Company by its Chairman of the
Board or its President or a Vice President and by its Secretary or an Assistant
Secretary under its corporate seal. Each such signature upon the Warrant
Certificates may be in the form of a facsimile signature of the present or any
future Chairman of the Board, President, Vice President, Secretary or Assistant
Secretary and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, President,
Vice President, Secretary or Assistant Secretary, notwithstanding the fact that
at the time the Warrant Certificates shall be delivered or disposed of he shall
have ceased to hold such office. The seal of the Company may be in the form of
a facsimile thereof and may be impressed, affixed, imprinted or otherwise
reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any of
the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be delivered or disposed of as though such person
had not ceased to be such officer of the Company; and any Warrant Certificate
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Warrant Certificate, shall be a proper officer of the
Company to sign such Warrant Certificate, although at the date of the execution
of this Warrant Agreement any such person was not such an officer.
- 1 -
<PAGE> 4
SECTION 3. Registration. The Company shall number and register
the Warrant Certificates in a register as they are issued. The Company may deem
and treat the registered Holder(s) of the Warrant Certificates as the absolute
owner(s) thereof (notwithstanding any notation of ownership or other writing
thereon made by anyone), for all purposes, and shall not be affected by any
notice to the contrary. The Company shall act as the registrar for the
Warrants.
SECTION 4. Registration of Transfers and Exchanges. (a) The
Company shall from time to time register the transfer of any outstanding
Warrant Certificates in a Warrant register to be maintained by the Company upon
surrender thereof accompanied by a written instrument or instruments of
transfer in the form set forth on the reverse side of the form of Warrant
Certificate attached hereto as Exhibit A, duly executed by the registered
Holder or Holders thereof or by the duly appointed legal representative thereof
or by a duly authorized attorney, together with (if such transfer is pursuant
to clause (1)(w) or (1)(y) of the next paragraph) the opinion of counsel
specified therein. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled and disposed of by the Company.
The Holders of Warrant Shares, by their acceptance of Warrant
Certificates or certificates evidencing Warrant Shares, agree that any proposed
resale, pledge or other transfer (including any transfer by issuance of Warrant
Shares upon exercise of a Warrant evidenced by a Warrant Certificate in a name
other than the name in which such Warrant Certificate is registered) of any
Warrant or Warrant Shares may be effected only (1)(w) inside the United States
(I) to a person who the seller reasonably believes is a qualified institutional
buyer within the meaning of Rule 144A under the Securities Act in a transaction
meeting the requirements of Rule 144A, (II) in accordance with Rule 144 under
the Securities Act or (III) pursuant to another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
reasonably satisfactory to the Company to such effect), (x) to the Company, (y)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act (and based upon an opinion of
counsel reasonably satisfactory to the Company to such effect) or (z), in the
case of Warrant Shares only, pursuant to an effective registration statement
under the Securities Act and (2) in each case, in accordance with the
applicable securities laws of any state of the United States or any other
applicable jurisdiction. Each Holder by acceptance of Warrant Certificates or
certificates evidencing Warrant Shares, agrees to, and each subsequent Holder
is required to, notify any purchaser thereof of the resale restrictions set
forth above. Prior to any proposed resale, pledge or other transfer (including
any transfer by issuance of Warrant Shares upon exercise of a Warrant evidenced
by a Warrant Certificate in a name other than the name in which such Warrant
Certificate is registered) of any Warrant or Warrant Shares, the Holder thereof
shall give written notice to the Company of such Holder's intention to effect
such transfer and the names and circumstances thereof and, if the proposed
transfer is pursuant to clause (1)(w) or (1)(y) of the second preceding
sentence, will, if requested by the Company, deliver to the Company:
- 2 -
<PAGE> 5
(1) an investment covenant, signed by the proposed transferee,
setting forth acceptance of the provisions referenced in this Section 4
and reasonably satisfactory to the Company;
(2) an agreement by such transferee to the impression of the
restrictive investment legend set forth below on the Warrant or the
Warrant Shares;
(3) an agreement by such transferee that the Company may place a
notation in the stock books of the Company or a "stop transfer order"
with any transfer agent or registrar with respect to the Warrant Shares
or such other legend as the Company reasonably believes is required by
law; and
(4) an agreement by such transferee to be bound by the
provisions of this Section 4 relating to the transfer of such Warrant
or Warrant Shares.
The Warrant Holders agree that each Warrant Certificate and any
certificate representing the Warrant Shares will bear the following legend:
THE SECURITY REPRESENTED BY THIS CERTIFICATE (AND ANY PREDECESSOR) WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER OF THE
WARRANTS EVIDENCED HEREBY AGREES FOR THE BENEFIT OF MAXXIM MEDICAL,
INC., A TEXAS CORPORATION (THE "COMPANY"), THAT (A) SUCH SECURITY (AND,
IF SUCH SECURITY EVIDENCES A WARRANT, THE WARRANT SHARES ISSUABLE
PURSUANT THERETO) MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) (W) INSIDE THE UNITED STATES (I) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, OR (II) IN ACCORDANCE WITH RULE 144
UNDER THE SECURITIES ACT, OR (III) PURSUANT TO ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL, IF THE COMPANY SO REQUESTS), (X) TO THE COMPANY,
(Y) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL, IF THE COMPANY SO REQUESTS) OR (Z),
IN THE CASE OF WARRANT SHARES ONLY, PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (2) IN EACH CASE,
IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
- 3 -
<PAGE> 6
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH
IN (A) ABOVE. THE SECURITY REPRESENTED BY THIS CERTIFICATE IS ALSO
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFERABILITY, AND HAS THE BENEFIT
OF CERTAIN REGISTRATION RIGHTS, CONTAINED IN THE STOCKHOLDERS'
AGREEMENT, DATED AS OF NOVEMBER 12, 1999, AS AMENDED FROM TIME TO TIME,
A COPY OF WHICH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICES.
Subject to the foregoing provisions, Warrant Certificates may be
exchanged at the option of the Holder(s) thereof, when surrendered to the
Company at its office for another Warrant Certificate or other Warrant
Certificates of like tenor and representing in the aggregate a like number of
Warrants. Warrant Certificates surrendered for exchange shall be canceled and
disposed of by the Company.
On delivery of the Warrants by the Company to the Purchasers
pursuant to the Purchase Agreement, each Holder will have registration rights
with respect to the Warrant Shares set forth in the Stockholders' Agreement,
dated as of November 12, 1999, among the Company and the other parties set
forth on the signature pages thereto, as the same may be amended from time to
time (the "Stockholders' Agreement").
Every Holder of a Warrant Certificate, by accepting the same,
consents and agrees with the Company and with every subsequent Holder of such
Warrant Certificate that, prior to due presentment of such Warrant Certificate
for registration of transfer, the Company may treat the person in whose name
the Warrant Certificate is registered as the owner thereof for all purposes and
as the person entitled to exercise the registration rights granted under the
Warrants, and neither the Company nor any agent thereof shall be affected by
any notice to the contrary.
(b) Termination of Restrictions. The restriction referred to in
the legend referenced in Section 4(a) of this Agreement shall cease and
terminate as to any particular Warrants or Warrant Certificates or certificates
representing Warrant Shares when, in the reasonable opinion of counsel for the
Company, such restriction is no longer required in order to assure compliance
with the Securities Act. The Company or the Company's counsel, at their
election, may request from any Holder a certificate or an opinion of such
Holder's counsel with respect to any relevant matters in connection with the
removal of the legend set forth in Section 4(a) from such Holder's
Certificate(s), any such certificate or opinion of counsel to be reasonably
satisfactory to the Company and its counsel. The restrictions referred to in
Section 4(a) shall cease and terminate as to any particular Warrants, Warrant
Certificates and certificates representing Warrant Shares when, in the
reasonable opinion of counsel for the Company, the provisions of this Agreement
are no longer applicable to such Warrants, Warrant Certificates or certificates
representing Warrant Shares or this Agreement shall have terminated in
accordance with its terms. Any other restrictions referred to in any other
legends required pursuant to Section 4 shall cease and terminate when, in the
reasonable opinion of counsel for the Company, such restrictions are no longer
applicable. Whenever such restrictions shall cease and
- 4 -
<PAGE> 7
terminate as to any Warrants, Warrant Certificates and certificates
representing Warrant Shares the Holder holding such shares shall be entitled to
receive from the Company, without expense (other than applicable transfer
taxes, if any, if such unlegended shares are being delivered and transferred to
any person other than the registered Holder thereof), new certificates for a
like number of Warrants, Warrant Certificates and certificates representing
Warrant Shares not bearing the relevant legend(s) set forth or referred to in
Section 4.
SECTION 5. Warrants; Exercise of Warrants. Subject to the terms
of this Agreement, each Holder shall have the right, which may be exercised
commencing at the opening of business on the Issue Date and until 5:00 p.m.,
New York City time on November 12, 2004, to receive from the Company the number
of fully paid and nonassessable Warrant Shares which the Holder may at the time
be entitled to receive on exercise of such Warrants and payment of the Exercise
Price then in effect for such Warrant Shares. Each Warrant not exercised prior
to 5:00 p.m., New York City time, November 12, 2004 shall become void and all
rights thereunder and all rights in respect thereof under this Agreement shall
cease as of such time.
A Warrant may be exercised upon surrender to the Company at its
office designated for such purpose (the address of which is set forth in
Section 14 hereof) of the Warrant Certificate or Certificates evidencing the
Warrants to be exercised with the form of election to purchase on the reverse
thereof duly filled in and signed, which signature shall be guaranteed by a
bank or trust company having an office or correspondent in the United States or
a broker or dealer which is a member of a registered securities exchange or the
National Association of Securities Dealers, Inc., together with (if such
exercise involves a transfer pursuant to clause (1)(w) or (1)(y) of the second
paragraph of Section 4) the opinion of counsel specified therein, and upon
payment to the Company of the exercise price (the "Exercise Price") which is
set forth in the form of Warrant Certificate attached hereto as Exhibit A, as
adjusted as provided in this Agreement, for the number of Warrant Shares in
respect of which such Warrants are then exercised. Payment of the aggregate
Exercise Price shall be made in cash or by certified or official bank check to
the order of the Company. In lieu of exercising this Warrant by paying in full
the Exercise Price plus transfer taxes (if applicable pursuant to Section 6),
if any, the Warrant Holder may, from time to time, convert this Warrant, in
whole or in part, into a number of shares of Common Stock determined by
dividing (a) the aggregate current market price of the number of shares of
Common Stock represented by the Warrants converted, minus the aggregate
Exercise Price for such shares of Common Stock, minus transfer taxes, if any,
by (b) the current market price of one share of Common Stock. The current
market price shall be determined pursuant to Section 10(f).
Subject to the provisions of Section 6 hereof, upon such
surrender of Warrant Certificates and payment of the Exercise Price the Company
shall issue and cause to be delivered with all reasonable dispatch (and in any
event within 10 Business Days after such receipt) to or upon the written order
of the Holder and, subject to Section 4, in such name or names as the Warrant
Holder may designate, a certificate or certificates for the number of full
Warrant Shares issuable upon the exercise of such Warrants together with cash
as provided in Section 11; provided, however, that if any consolidation, merger
or lease or sale of assets is
- 5 -
<PAGE> 8
proposed to be effected by the Company as described in subsection (1) of
Section 10 hereof, or a tender offer or an exchange offer for shares of Common
Stock of the Company shall be made, upon such surrender of Warrant Certificates
and payment of the Exercise Price as aforesaid, the Company shall, as soon as
possible, but in any event not later than five business days thereafter, issue
and cause to be delivered the full number of Warrant Shares issuable upon the
exercise of such Warrants in the manner described in this sentence together
with cash as provided in Section 11. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a Holder of record of such Warrant Shares as of
the date of the surrender of such Warrant Certificates and payment of the
Exercise Price.
Prior to the exercise of the Warrants, except as may be
specifically provided for herein, (i) no Holder of a Warrant Certificate, as
such, shall be entitled to any of the rights of a holder of Common Stock of the
Company, including, without limitation, the right to vote at or to receive any
notice of any meetings of stockholders; (ii) the consent of any such Holder
shall not be required with respect to any action or proceeding of the Company;
(iii) except as provided in Section 10(i), no such Holder, by reason of the
ownership or possession of a Warrant or the Warrant Certificate representing
the same, shall have any right to receive any cash dividends, stock dividends,
allotments or rights or other distributions paid, allotted or distributed or
distributable to the stockholders of the Company prior to, or for which the
relevant record date preceded, the date of the exercise of such Warrant; and
(iv) no such Holder shall have any right not expressly conferred by the Warrant
or Warrant Certificate held by such Holder.
The Warrants shall be exercisable, at the election of the
Holders thereof, either in full or from time to time in part and, in the event
that a Warrant Certificate is exercised in respect of fewer than all of the
Warrant Shares issuable on such exercise at any time prior to the date of
expiration of the Warrants, a new Warrant Certificate evidencing the remaining
Warrant or Warrants will be issued and delivered pursuant to the provisions of
this Section and of Section 2 hereof.
All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled and disposed of by the Company. The Company shall keep copies
of this Agreement and any notices given or received hereunder available for
inspection by the Holders during normal business hours at its office.
SECTION 6. Payment of Taxes. The Company will pay all
documentary stamp taxes attributable to the initial issuance of Warrant Shares
upon the exercise of Warrants; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issue of any Warrant Certificates or any certificates
for Warrant Shares in a name other than that of the registered Holder of a
Warrant Certificate surrendered for registration of transfer or upon the
exercise of a Warrant, and the Company shall not be required to issue or
deliver such Warrant Certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the reasonable satisfaction of the
Company that such tax has been paid.
- 6 -
<PAGE> 9
SECTION 7. Mutilated or Missing Warrant Certificates. In case
any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed,
the Company may in its discretion issue, in exchange and substitution for and
upon cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant Certificate and
indemnity, if requested, also reasonably satisfactory to it. Applicants for
such substitute Warrant Certificates shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company may
prescribe.
SECTION 8. Reservation of Warrant Shares. The Company will at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company or, if appointed, the transfer agent for the Common
Stock (the "Transfer Agent") and every subsequent transfer agent for any shares
of the Company's capital stock issuable upon the exercise of any of the rights
of purchase aforesaid will be irrevocably authorized and directed at all times
to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Company will furnish such Transfer Agent a
copy of all notices of adjustments and certificates related thereto,
transmitted to each Holder.
Before taking any action which would cause an adjustment
pursuant to Section 10 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take any corporate
action which may, in the opinion of its counsel (which may be counsel employed
by the Company), be necessary in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
The Company covenants that all Warrant Shares which may be
issued upon exercise of the Warrants will, upon issue, be duly authorized,
fully paid, nonassessable, free of preemptive rights and, subject to Section 6,
free from all taxes, liens, charges and security interests, other than the
restrictions contained in the Stockholders' Agreement. The Company further
covenants, represents and warrants that, (a) as of the Issue Date, no form of
general solicitation or general advertising was used by the Company or, to the
best of its knowledge, any other Person acting on behalf of the Company, in
respect of the Warrants or the Warrant Shares or in connection with the
issuance of the Warrants; (b) as of the Issue Date, neither the Company nor any
Person acting on behalf of the Company has, either directly or indirectly, sold
or offered for sale to any Person any of the Warrants, the Warrant Shares or
any other similar security of the Company except (i) as contemplated by this
Agreement, (ii) the offer and sale of Warrants issued by the Company in
connection with the offer and sale by Maxxim Medical Group, Inc., a
- 7 -
<PAGE> 10
Delaware corporation and direct subsidiary of the Company, of up to
$144,552,000 principal amount at maturity of senior subordinated discount notes
due 2009 and (iii) the offer and sale of shares of common stock and the grant
of options to purchase shares of common stock of the Company in connection with
the Transactions contemplated by the Agreement and Plan of Merger, dated as of
June 13, 1999, as amended, between the Company and Fox Paine Medic Acquisition
Corporation; and (c) neither the Company nor any Person acting on its behalf
will sell or offer for sale any such security to or solicit any offers to buy
any such security from, or otherwise approach or negotiate in respect thereof
with, any Person or Persons so as thereby to bring the issuance or sale of any
of the Warrants within the provisions of Section 5 of the Securities Act.
SECTION 9. Obtaining Stock Exchange Listings. The Company will
from time to time take all action which may be necessary so that the Warrant
Shares, immediately upon their issuance upon the exercise of the Warrants, will
be listed on the principal securities exchanges and markets within the United
States of America, if any, on which other shares of Common Stock are then
listed.
SECTION 10. Adjustment of Number of Warrant Shares Issuable. The
number of Warrant Shares issuable upon the exercise of each Warrant is subject
to adjustment from time to time upon the occurrence of the events enumerated in
this Section 10. For purposes of this Section 10, "Common Stock" means shares
now or hereafter authorized of any class of common stock of the Company and any
other stock of the Company, however designated, that has the right (subject to
any prior rights of any class or series of preferred stock) to participate in
any distribution of the assets or earnings of the Company without limit as to
per share amount.
(a) Adjustment for Change in Capital Stock.
If the Company:
(1) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares of
its capital stock;
then the number and kind of shares of its capital stock issuable upon exercise
of any Warrant in effect immediately prior to such action shall be
proportionately adjusted so that the Holder of any
- 8 -
<PAGE> 11
Warrant thereafter exercised may receive the aggregate number and kind of
shares of capital stock of the Company which such Holder would have owned
immediately following such action if such Warrant had been exercised
immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a Holder of a Warrant upon exercise of
it may receive shares of two or more classes of capital stock of the Company,
the exercise price of each class of capital stock shall thereafter be subject
to adjustment on terms comparable to those applicable to Common Stock in this
Section.
Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to
all holders of its Common Stock entitling them to purchase shares of Common
Stock or securities directly or indirectly convertible into or exchangeable for
Common Stock (or options or rights with respect to such securities) at a price
per share less than the current market price per share on the applicable record
date, the number of Warrant Shares issuable upon exercise of one Warrant shall
be adjusted in accordance with the formula:
N(1) = N x (O + A)
-------
(O + (A x P))
-
M
where:
N(1) = the adjusted number of Warrant Shares issuable upon exercise
of one Warrant.
N = the current number of Warrant Shares issuable upon exercise of
one Warrant.
O = the number of shares of Common Stock outstanding on the record
date.
A = the number of additional shares of Common Stock offered
pursuant to such rights, options or warrants issuance.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock, on the
record date.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of
- 9 -
<PAGE> 12
the period during which such rights, options or warrants are exercisable, not
all rights, options or warrants shall have been exercised, the number of
Warrant Shares issuable upon exercise of the Warrants shall be immediately
readjusted to what it would have been if "A" in the above formula had been the
number of shares actually issued.
(c) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Stock
any of its assets (including but not limited to cash), debt securities, or any
rights or warrants to purchase debt securities, preferred stock, assets or
other securities of the Company, the number of Warrant Shares issuable upon
exercise of one Warrant shall be adjusted in accordance with the formula:
N(1) = N x M
---
M-F
where:
N(1) = the adjusted number of Warrant Shares issuable upon exercise
of one Warrant.
N = the current number of Warrant Shares issuable upon exercise of
one Warrant.
M = the current market price per share of Common Stock on the
record date mentioned below.
F = the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of Common
Stock. The Board of Directors shall determine the fair market
value in good faith.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the
distribution.
This subsection does not apply to distributions of capital stock
referred to in subsection (a) of this Section 10 and to distributions of
rights, options or warrants referred to in subsection (b) of this Section 10.
(d) Adjustment for Common Stock Issue.
If the Company issues shares of Common Stock to Fox Paine &
Company, LLC, or its Affiliates, in their capacity as such (as defined in the
Stockholders' Agreement) for a consideration per share less than the current
market price per share on the date the Company fixes the offering price of such
additional shares, the number of Warrant Shares issuable upon exercise of one
Warrant shall be adjusted in accordance with the formula:
N1 = N x A
---
O + P
-
M
- 10 -
<PAGE> 13
where:
N(1) = the adjusted number of Warrant Shares issuable upon exercise
of one Warrant.
N = the current number of Warrant Shares issuable upon exercise of
one Warrant.
O = the number of shares outstanding immediately prior to the
issuance of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
M = the current market price per share on the date of sale of such
additional shares.
A = the number of shares outstanding immediately after the
issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections (b) and (c)
of this Section 10,
(2) the exercise of Warrants, or the conversion or exchange of
other securities convertible or exchangeable for Common Stock,
(3) Common Stock issued upon the exercise of warrants and stock
options outstanding on the Issue Date, or
(4) Common Stock issued in a bona fide underwritten public
offering.
(e) Adjustment for Convertible Securities Issue.
If the Company issues any securities convertible into or
exchangeable for Common Stock (other than securities issued in transactions
described in subsections (b), (c) and (d) of this Section 10) to Fox Paine &
Company, LLC or its Affiliates, in their capacity as such for a consideration
per share of Common Stock initially deliverable upon conversion or exchange of
such securities less than the current market price per share on the date of
issuance of such securities, the number of Warrant Shares issuable upon
exercise of one Warrant shall be adjusted in accordance with this formula:
N(1) = N x O + D
-----
O + P
-
M
where:
- 11 -
<PAGE> 14
N(1) = the adjusted number of Warrant Shares issuable upon exercise
of one Warrant.
N = the then current number of Warrant Shares issuable upon
exercise of one Warrant.
O = the number of shares outstanding immediately prior to the
issuance of such securities.
P = the aggregate consideration received for the issuance of such
securities.
M = the current market price per share on the date of sale of such
securities.
D = the maximum number of shares deliverable upon conversion or in
exchange for such securities at the initial conversion or
exchange rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or
exchange of such securities have not been issued when such securities are no
longer outstanding, then the number of Warrant Shares issuable upon exercise of
one Warrant shall promptly be readjusted to the number of Warrant Shares
issuable upon exercise of one Warrant which would then be in effect had the
adjustment upon the issuance of such securities been made on the basis of the
actual number of shares of Common Stock issued upon conversion or exchange of
such securities.
This subsection (e) does not apply to convertible securities
issued in a bona fide underwritten public offering.
(f) Current Market Price.
In Sections 5 and 11 and in subsections (b), (c), (d) and (e) of
this Section 10, the current market price per share of Common Stock on any date
is the average of the Quoted Prices of the Common Stock for 10 consecutive
trading days commencing 15 trading days before the date in question. The
"Quoted Price" of the Common Stock is the last reported sales price of the
Common Stock as reported by NASDAQ, National Market System, or if the Common
Stock is listed on a securities exchange, the last reported sales price of the
Common Stock on such exchange which shall be for consolidated trading if
applicable to such exchange, or if neither so reported or listed, the last
reported bid price of the Common Stock. In the absence of one or more such
quotations, the Board of Directors of the Company shall determine the current
market price (i) based on the most recently completed arm's length transaction
between the Company and a person other than an Affiliate of the Company and the
closing of which occurs on such date or shall have occurred within the three
months preceding such date, (ii) if no such transaction shall have occurred on
such date or within such three month period, the value of the security most
recently determined as of a date within the six months preceding such date by a
nationally recognized financial advisory or appraisal firm selected by the
Company's Board of Directors which is not an Affiliate of the Company (an
"Independent Financial Advisor") or (iii) if neither clause (i) nor (ii) is
applicable or at the election of either the Company or the holders of at least
- 12 -
<PAGE> 15
50% of the total Warrants issued under this Agreement (subject to adjustment
pursuant to this Section 10), then the value of the security shall be
determined as of such date by an Independent Financial Advisor.
(g) Consideration Received.
For purposes of any computation respecting consideration
received pursuant to subsections (d) and (e) of this Section 10, the following
shall apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that
in no case shall any deduction be made for any commissions, discounts or
other expenses incurred by the Company for any underwriting of the issue
or otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors (irrespective of the
accounting treatment thereof), whose determination shall be conclusive,
and described in a Board resolution;
(3) in the case of the issuance of securities convertible into
or exchangeable for shares, the aggregate consideration received
therefor shall be deemed to be the consideration received by the Company
for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the conversion
or exchange thereof (the consideration in each case to be determined in
the same manner as provided in clauses (1) and (2) of this subsection).
(h) When De Minimis Adjustment May Be Deferred.
No adjustment in the number of Warrant Shares issuable upon
exercise of one Warrant need be made unless the adjustment would require an
increase or decrease of at least 1% in the number of Warrant Shares issuable
upon exercise of one Warrant. Any adjustments that are not made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Section shall be made to the nearest
1/100th of a share.
(i) When No Adjustment Required.
No adjustment need be made for a transaction referred to in
Section 10 (a), (b), (c), (d) or (e) hereof if a Warrant holder actually
participates in an issuance or distribution pursuant to Section 10 (a), (b),
(c), (d) or (e) hereof
No adjustment need be made for rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no
par value of the Common Stock.
- 13 -
<PAGE> 16
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(j) Notice of Adjustment.
Whenever the number of Warrant Shares issuable upon exercise of
one Warrant is adjusted, the Company shall provide the notices required by
Section 12 hereof.
(k) Notice of Certain Transactions.
If:
(1) The Company takes any action that would require an
adjustment in the number of Warrant Shares issuable upon exercise of one
Warrant pursuant to subsection (a), (b), (c), (d) or (e) of this Section
10 and if the Company does not arrange for Holders to participate
pursuant to subsection (i) of this Section 10;
(2) The Company takes any action that would require a
supplemental Warrant Agreement pursuant to subsection (l) of this
Section 10; or
(3) there is a liquidation or dissolution of the Company,
the Company shall mail to Warrant Holders a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. The Company shall mail the notice at least
15 days before such date. Failure to mail the notice or any defect in it shall
not affect the validity of the transaction.
(l) Reorganization of Company.
If the Company consolidates or merges with or into any person,
upon consummation of such transaction the Warrants shall automatically become
exercisable for the kind and amount of securities, cash or other assets which
the Holder of a Warrant would have owned immediately after the consolidation or
merger if the Holder had exercised the Warrant immediately before the effective
date of the transaction. Concurrently with the consummation of such
transaction, the corporation formed by or surviving any such consolidation or
merger if other than the Company, or the person to which such sale or
conveyance shall have been made, shall enter into a supplemental Warrant
Agreement so providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided for in this
Section. The successor company shall mail to Warrant Holders a notice
describing the supplemental Warrant Agreement.
If the issuer of securities deliverable upon exercise of
Warrants under the supplemental Warrant Agreement is an affiliate of the formed
or surviving corporation, that issuer shall join in the supplemental Warrant
Agreement.
- 14 -
<PAGE> 17
If this subsection (l) applies, subsections (a), (b), (c), (d)
and (e) of this Section 10 do not apply.
(m) Company Determination Final.
Any determination that the Company or the Board of Directors
must make pursuant to subsection (a), (c), (d), (e), (f), (g) or (i) of this
Section 10 which is made in good faith shall be conclusive.
(n) When Issuance or Payment May Be Deferred.
In any case in which this Section 10 shall require that an
adjustment in the number of Warrant Shares issuable upon exercise of one
Warrant be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event (i) issuing to
the Holder of any Warrant exercised after such record date the Warrant Shares
and other capital stock of the Company, if any, issuable upon such exercise
over and above the Warrant Shares and other capital stock of the Company, if
any, issuable upon such exercise on the basis of the current number of Warrant
Shares issuable upon exercise of one Warrant and (ii) paying to such Holder any
amount in cash in lieu of a fractional share pursuant to Section 11; provided,
however, that the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such
additional Warrant Shares, other capital stock and cash upon the occurrence of
the event requiring such adjustment.
(o) Adjustment in Exercise Price.
Upon each adjustment of the number of Warrant Shares pursuant to
this Section 10, the Exercise Price for each Warrant outstanding prior to the
making of the adjustment in the number of Warrant Shares shall thereafter be
adjusted to the Exercise Price (calculated to the nearest hundredth) obtained
from the following formula:
E(1) = E x N
----
N(1)
Where
E(1) = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
N(1) = the adjusted number of Warrant Shares issuable upon exercise
of a Warrant.
N = the number or Warrant shares previously issuable upon exercise
of a Warrant prior to adjustment.
Notwithstanding anything to the contrary, in no event shall the
Exercise Price for a Warrant be reduced below the par value of the Warrant
Share underlying such Warrant.
- 15 -
<PAGE> 18
(p) Form of Warrants.
Irrespective of any adjustments in the number or kind of shares
purchasable upon the exercise of the Warrants, Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
(q) No Dilution or Impairment.
The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Warrants, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate (including through a reduction in the par value of Warrant Shares
as necessary) in order to protect the rights of the Holder of the Warrants
against dilution or other impairment.
SECTION 11. Fractional Interests. Any one Warrant may be
exercised only in full and not in part. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise at the same time by the same Holder,
the number of full Warrant Shares which shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of the Warrants so requested to be exercised. If
any fraction of a Warrant Share would, except for the provisions of this
Section 11, be issuable on the exercise of any Warrants (or specified portion
thereof) , the Company shall pay an amount in cash equal to the product of (i)
such fraction of a Warrant Share and (ii) the difference between the current
market price of a share of Common Stock and the Exercise Price.
SECTION 12. Notices to Holders. Upon any adjustment of the
number of Warrant Shares issuable upon exercise of one Warrant pursuant to
Section 10, the Company shall promptly thereafter (i) no later than the
delivery of the audit opinion of a firm of independent public accountants of
recognized standing selected by the Board of Directors of the Company (who may
be the regular auditors of the Company) with respect to the then current fiscal
year of the Company, cause to be filed with the Company a certificate which
includes the report of such firm setting forth the number of Warrant Shares
issuable upon exercise of one Warrant after such adjustment and setting forth
in reasonable detail the method of calculation and the facts upon which such
calculations are based, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein, and (ii) cause to be given to
each of the registered Holders of the Warrant Certificates at such Holder's
address appearing on the Warrant register written notice of such adjustments by
first class mail, postage prepaid. Where appropriate, such notice may be given
in advance and included as a part of the notice required to be mailed under the
other provisions of this Section 12.
In case:
- 16 -
<PAGE> 19
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants; or
(b) the Company shall authorize the distribution to all holders
of shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares
of Common Stock or distributions referred to in subsection (a) of
Section 10 hereof); or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is
required or of any reclassification or change of Common Stock issuable
upon exercise of the Warrants (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock by the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any action (other than actions
of the character described in Section 10(a)) which would require an
adjustment of the number of Warrant Shares issuable upon exercise of one
Warrant pursuant to Section 10;
then the Company shall cause to be given to each of the registered Holders of
the Warrant Certificates at such Holder's address appearing on the Warrant
register, at least 20 days (or 10 days in any case specified in clauses (a) or
(b) above) prior to the applicable record date hereinafter specified, or
promptly in the case of events for which there is no record date, by first
class mail, postage prepaid, a written notice stating (i) the date as of which
the holders of record of shares of Common Stock to be entitled to receive any
such rights, options, warrants or distribution are to be determined, or (ii)
the initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock by the Company, or (iii) the date on which any such
consolidation, merger, conveyance, dissolution, liquidation or winding up is
expected to become effective or consummated, and the date as of which it is
expected that holders of record of shares of Common Stock shall be entitled to
exchange such shares for securities or other property, if any, deliverable upon
such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 12 or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the Holders thereof the
right to vote or to consent or to receive notice as shareholders in respect of
the meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company.
- 17 -
<PAGE> 20
SECTION 13. Mandatory Exercise in the Event of an Initial Public
Offering. At the request of the Company, in the event of an underwritten
initial public offering or public offerings (on a cumulative basis) of shares
of Common Stock of the Company pursuant to a registration statement or
registration statements under the Securities Act with aggregate proceeds to the
Company of at least $50.0 million, the Holders shall exercise their Warrants to
purchase Common Stock of the Company upon consummation of such initial public
offering or at such other mutually agreed upon date on or before the date of
consummation of such initial public offering.
SECTION 14. Notices to Company and Warrant Holder. Any notice or
demand authorized by this Agreement to be given or made by the registered
Holder of any Warrant Certificate to or on the Company shall be sufficiently
given or made when and if deposited in the mail, first class or registered,
postage prepaid, addressed to the office of the Company expressly designated by
the Company at its office for purposes of this Agreement (until the Holders are
otherwise notified in accordance with this Section by the Company), as follows:
Maxxim Medical, Inc.
10300 49th Street North
Clearwater, Florida 33762
Telecopy: (727) 561-2180
Attention: Corporate Secretary
with a copy to:
Fox Paine & Company, LLC
950 Tower Lane, Suite 1950
Foster City, California 94404
Telecopy: (650) 525-1396
Attention: Mr. Saul A. Fox
as well as a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy: (212) 403-2000
Attention: Mitchell S. Presser, Esq.
Goldman, Sachs & Co.
85 Broad Street
10th Floor
New York, New York 10004
Telecopy: (212) 357-5505
Attention: Ben Adler, Esq.
with a copy to:
- 18 -
<PAGE> 21
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopy: (212) 859-4000
Attention: F. William Reindel, Esq.
Any notice pursuant to this Agreement to be given by the Company
to the registered Holder(s) of any Warrant Certificate shall be sufficiently
given when and if deposited in the mail, first class or registered, postage
prepaid, addressed (until the Company is otherwise notified in accordance with
this Section by such Holder) to such Holder at the address appearing on the
Warrant register of the Company.
SECTION 15. Supplements and Amendments. The Company may from
time to time supplement or amend this Agreement without the approval of any
Holders of Warrant Certificates in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company may deem
necessary or desirable and which shall not in any way adversely affect the
interests of the Holders of Warrant Certificates. Any amendment or supplement
to this Agreement that has an adverse effect on the interests of Holders shall
require the written consent of registered Holders of two thirds of the then
outstanding Warrant Shares issued or issuable upon exercise of the Warrants
(excluding Warrant Shares held by the Company or any of its Affiliates). The
consent of each Holder of a Warrant affected shall be required for any
amendment pursuant to which the number of Warrant Shares purchasable upon
exercise of Warrants would be decreased (other than in accordance with Section
10 or 11 hereof).
SECTION 16. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its respective successors and assigns hereunder.
SECTION 17. Termination. This Agreement (except for the
restrictions on transfer of Warrant Shares specified in Section 4) shall
terminate at 5:00 p.m., New York City time on November 12, 2004.
SECTION 18. Governing Law. THIS AGREEMENT AND EACH WARRANT
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE.
SECTION 19. Benefits of This Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than
the Company and the registered Holders of the Warrant Certificates or Warrant
Shares any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company and
the registered Holders of the Warrant Certificates and the Warrant Shares.
Nothing herein shall prohibit or limit the Company from entering into an
agreement providing holders of securities which may hereafter be issued by the
Company with such registration rights
- 19 -
<PAGE> 22
exercisable at such time or times and in such manner as the Board of Directors
shall deem in the best interests of the Company so long as the performance by
the Company of its obligations under such other agreement will not cause the
Company to breach its obligations hereunder to the Holders.
SECTION 20. Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for convenience only, do
not constitute a part of this Agreement and shall not affect in any way the
meanings or interpretation of this Agreement.
SECTION 21. Submission to Jurisdiction. If any action,
proceeding or litigation shall be brought by the Purchasers or any Holder of
Warrants in order to enforce any right or remedy under this Agreement, the
Company hereby consents and will submit, and will cause each of its
subsidiaries to submit, to the jurisdiction of any state or federal court of
competent jurisdiction sitting within the area comprising the Southern District
of New York on the date of this Agreement. The Company hereby irrevocably
waives any objection, including, but not limited to, any objection to the
laying of venue or based on the grounds of forum non conveniens, which it may
now or hereafter have to the bringing of any such action, proceeding or
litigation in such jurisdiction.
SECTION 22. Waiver of Jury Trial. THE ISSUER HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OF THE WARRANTS.
SECTION 23. Service of Process. Nothing herein shall affect the
right of any holder of a security to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
the Company in any other jurisdiction.
SECTION 24. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
[Signature Page Follows]
- 20 -
<PAGE> 23
[Signature Page of Warrant Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
MAXXIM MEDICAL, INC.,
By: /s/ Kenneth W. Davidson
-------------------------------------------
Name: Kenneth W. Davidson
Title: Chairman of the Board, President and
Chief Executive Officer
Accepted:
GS MEZZANINE PARTNERS, L.P.
By: GS Mezzanine Advisors, L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Melina Higgins
---------------------------------------
Name: Melina Higgins
Title: Attorney-at-law
GS MEZZANINE PARTNERS OFFSHORE, L.P.
By: GS Mezzanine Advisors (Cayman), L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Melina Higgins
---------------------------------------
Name: Melina Higgins
Title: Attorney-at-law
- 1 -
<PAGE> 24
EXHIBIT A
[Form of Warrant Certificate]
[Face]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE (AND ANY
PREDECESSOR) WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE WARRANTS EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. THE HOLDER OF THE WARRANTS EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF MAXXIM MEDICAL, INC., A TEXAS CORPORATION (THE "COMPANY") THAT (A)
SUCH WARRANTS (AND SHARES ISSUABLE PURSUANT THERETO) MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (W) INSIDE THE UNITED STATES (I) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR (II) IN ACCORDANCE WITH RULE 144 UNDER THE
SECURITIES ACT, OR (III) PURSUANT TO ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL, IF
THE COMPANY SO REQUESTS), (X) TO THE COMPANY, (Y) OUTSIDE THE UNITED STATES TO
A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT OR (AND BASED UPON AN OPINION OF COUNSEL, IF THE COMPANY SO
REQUESTS) (Z), PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (2) IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE. THE WARRANTS REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFERABILITY, AND
HAVE THE BENEFIT OF CERTAIN REGISTRATION RIGHTS, CONTAINED IN THE STOCKHOLDERS'
AGREEMENT DATED AS OF NOVEMBER 12, 1999, AS AMENDED FROM TIME TO TIME, A COPY
OF WHICH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES.
- 1 -
<PAGE> 25
EXERCISABLE ON OR BEFORE 5:00 P.M. NEW YORK CITY TIME ON NOVEMBER 12, 2004
No. ___ ______ Warrants
Warrant Certificate
Maxxim Medical, Inc.
This Warrant Certificate certifies that , or registered assigns,
is the registered holder of Warrants expiring November 12, 2004 (the
"Warrants") to purchase Common Stock, $.001 par value (the "Common Stock"), of
Maxxim Medical, Inc., a Texas corporation (the "Company"). Each Warrant
entitles the holder upon exercise to receive from the Company on or before 5:00
p.m. New York City Time on November 12, 2004, one fully paid and nonassessable
share of Common Stock (a "Warrant Share") at the exercise price (the "Exercise
Price") of $.01 payable in lawful money of the United States of America upon
surrender of this Warrant Certificate and payment of the Exercise Price at the
office of the Company designated for such purpose, but only subject to the
conditions set forth herein and in the Warrant Agreement referred to on the
reverse hereof. In lieu of exercising this Warrant by paying in full the
Exercise Price minus transfer taxes (if applicable pursuant to Section 6 of the
Warrant Agreement), if any, the Warrant holder may, from time to time, convert
this Warrant, in whole or in part, into a number of shares of Common Stock
determined by dividing (a) the aggregate current market price of the number of
shares of Common Stock represented by the Warrants converted, minus the
aggregate Exercise Price for such shares of Common Stock, minus transfer taxes,
if any, by (b) the current market price of one share of Common Stock. The
current market price shall be determined pursuant to Section 10(f) of the
Warrant Agreement.
The number of Warrant Shares issuable upon exercise of the
Warrants is subject to adjustment upon the occurrence of certain events set
forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City Time
on November 12, 2004, and to the extent not exercised by such time such
Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
- 2 -
<PAGE> 26
IN WITNESS WHEREOF, Maxxim Medical, Inc. has caused this Warrant
Certificate to be signed by its Executive Vice President and Controller and by
its Secretary, each by a facsimile of his signature, and has caused a facsimile
of its corporate seal to be affixed hereunto or imprinted hereon.
Dated: November 12, 1999
By:
----------------------------
Executive Vice President and
Controller
By:
----------------------------
Secretary
- 3 -
<PAGE> 27
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring November 12, 2004, entitling the
holder on exercise to receive shares of Common Stock, $.001 par value, of the
Company (the "Common Stock"), and are issued or to be issued pursuant to a
Warrant Agreement, dated as of November 12, 1999 (the "Warrant Agreement"),
duly executed and delivered by the Company, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company.
Warrants may be exercised at any time on or before November 12,
2004. The holder of Warrants evidenced by this Warrant Certificate may exercise
them by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon properly completed and executed, together with
payment of the Exercise Price in cash at the office of the Company designated
for such purpose. In lieu of exercising this Warrant by paying in full the
Exercise Price and transfer taxes (if applicable pursuant to Section 6 of the
Warrant Agreement), if any, the Warrant holder may, from time to time, convert
this Warrant, in whole or in part, into a number of shares of Common Stock
determined by dividing (a) the aggregate current market price of the number of
shares of Common Stock represented by the Warrants converted, minus the
aggregate Exercise Price for such shares of Common Stock and transfer taxes, if
any, by (b) the current market price of one share of Common Stock. The current
market price shall be determined pursuant to Section 10(f) of the Warrant
Agreement. In the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued to the holder hereof or his assignee a
new Warrant Certificate evidencing the number of Warrants not exercised. No
adjustment shall be made for any dividends on any Common Stock issuable upon
exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the number of Warrant Shares issuable upon exercise of one
Warrant set forth on the face hereof may, subject to certain conditions, be
adjusted. No fractions of a share of Common Stock will be issued upon the
exercise of any Warrant, but the Company will pay the cash value thereof
determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the
Company by the registered holder thereof in person or by legal representative
or attorney duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, but without
payment of any service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
- 4 -
<PAGE> 28
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Company a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company may deem and treat the registered holder(s) thereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary. Neither the Warrants nor this Warrant Certificate entitles any holder
hereof to any rights of a stockholder of the Company.
- 5 -
<PAGE> 29
ASSIGNMENT FORM
If you the Holder want to assign this Warrant, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Warrant 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 Warrant on the books of the Company. The agent may substitute another to
act for him.
Date: _____________________________ Signed: ___________________________________
(Signed exactly as your name appears on the
other side of this Warrant)
Signature Guarantee: _____________________________________
In connection with any transfer of this Warrant occurring prior
to the date which is the earlier of (i) the date of the declaration by the SEC
of the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act") covering resales of this Warrant (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) [ , 2001], the undersigned confirms that it has not utilized
any general solicitation or general advertising in connection with the transfer
and that this Warrant is being transferred:
[Check One]
(1) [ ] to the Company or a subsidiary thereof; or
(2) [ ] pursuant to and in compliance with Rule 144A under the Securities Act;
or
(3) [ ] to an institutional "accredited investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) that has furnished to the
Company a signed letter containing certain representations and
agreements (the form of which appears below); or
- 6 -
<PAGE> 30
(4) [ ] outside the United States to a "foreign person" in compliance
with Rule 904 of Regulation S under the Securities Act; or
(5) [ ] pursuant to the exemption from registration provided by Rule 144
under the Securities Act; or
(6) [ ] pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Company will refuse to register any of
the Warrants evidenced by this certificate in the name of any person other than
the registered Holder thereof; provided that if box (3) , (4), (5) or (6) is
checked, the Company may require, prior to registering any such transfer of the
Warrant Certificate, in its sole discretion, such legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Company has reasonably requested to confirm that
such transfers being made pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Company shall not be obligated
to register this Warrant Certificate in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein shall have been satisfied.
Date: ______________________________ Signed:_________________________________
(Sign exactly as your name
appears on the other side of this
Warrant Certificate)
Signature Guarantee:____________________________________________________________
- 7 -
<PAGE> 31
[TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED]
The undersigned represents and warrants that it is purchasing
this Warrant for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Date: _______________________ ________________________________________________
NOTICE: To be executed by an executive officer
- 8 -
<PAGE> 32
[FORM OF LETTER TO BE COMPLETED
BY PURCHASER IF (3) ABOVE IS CHECKED]
Ladies and Gentlemen:
1. The undersigned understands that any subsequent transfer of
the Warrants is subject to certain restrictions and conditions set forth in the
Warrants and in the Warrant Agreement and the undersigned agrees to be bound
by, and not to resell, pledge or otherwise transfer the Warrants except in
compliance with, such restrictions and conditions and the Securities Act.
2. The undersigned understands that the offer and sale of the
Warrants have not been registered under the Securities Act, and that the
Warrants may not be offered or sold except as permitted in the following
sentence. The undersigned agrees, on its own behalf and on behalf of any
accounts for which it is acting as hereinafter stated, that if it should sell,
pledge or otherwise transfer any Warrants it will do so only (1) (w) inside the
United States to a person who the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
a transaction meeting the requirements of Rule 144A, or in accordance with Rule
144 under the Securities Act, or pursuant to another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel, if the Company so requests), (x) to the Company, (y) outside the
United States to a foreign person in a transaction meeting the requirements of
Rule 904 under the Securities Act (and based upon an opinion of counsel, if the
Company so requests) or (z) pursuant to an effective registration statement
under the Securities Act and (2) in each case, in accordance with the
applicable securities laws of any state of the United States or any other
applicable jurisdiction, and the undersigned further agrees to provide to any
person purchasing any of the Warrants from us a notice advising such purchaser
that resales of the Warrants are restricted as stated herein.
3. The undersigned understands that, on any proposed resale of
any Warrants, it may be required to furnish the Company such certification and
other information as the Company may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. The undersigned further
understands that the Warrants purchased by it will bear a legend to the
foregoing effect.
4. The undersigned is an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) and (7) 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 Warrants,
and the undersigned and any accounts for which it is acting are each able to
bear the economic risk of our or its investment, as the case may be.
5. The undersigned is acquiring the Warrants 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 the undersigned exercises sole
investment discretion.
Date: ___________________________ ____________________________________________
NOTICE: To be signed by an executive officer
- 9 -
<PAGE> 33
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the
Warrant, represented by this Warrant Certificate, to receive _____________
shares of Common Stock and herewith (check item)
(i) tenders payment for such shares to the order of Maxxim
Medical, Inc. in the amount of $ in accordance with the terms hereof; or
(ii) converts this Warrant, in whole or in part, into a number
of shares of Common Stock determined by dividing (a) the aggregate
current market price of the number of shares of Common Stock
represented by this Warrant, minus the aggregate Exercise Price for
such shares of Common Stock and transfer taxes, if any, by (b) the
current market price of one Share.
The undersigned requests that a certificate for such shares be
registered in the name of ________________, whose address is
____________________, and that such shares be delivered to
________________________,whose address is _________________________.
If said number of shares is less than all of the shares of
Common Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of _________________________, whose address is _____________________,
and that such Warrant Certificate be delivered to _____________________, whose
address is __________________________.
Signature: ____________________________
Date: _________________________________
Signature Guaranteed:__________________
- 10 -
<PAGE> 1
Exhibit 4.8
MAXXIM MEDICAL, INC.
$98,473,000 Principal Amount At Maturity (Exclusive of PIK Notes)
Of Senior Discount Notes due 2010
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
November 12, 1999
GS Mezzanine Partners, L.P.
c/o Goldman, Sachs & Co.
85 Broad Street, 10th Floor
New York, NY 10004
GS Mezzanine Partners Offshore, L.P.
c/o Goldman, Sachs & Co.
85 Broad Street, 10th Floor
New York, NY 10004
Ladies and Gentlemen:
Maxxim Medical, Inc., a Texas corporation (the "Company"),
proposes to issue and sell to GS Mezzanine Partners, L.P. and GS Mezzanine
Partners Offshore, L.P. (collectively, the "Purchasers"), upon the terms and
subject to the conditions set forth in a Purchase Agreement, dated November 12,
1999 (the "Purchase Agreement"), $98,473,000 principal amount at maturity of
its Senior Discount Notes due 2010 (such Notes, together with any additional
Senior Discount Notes ("PIK Notes") that may be issued under the Indenture in
lieu of cash interest otherwise due and payable on any outstanding Senior
Discount Notes, collectively, the "Securities"). Capitalized terms used but not
defined herein shall have the meanings given to such terms in the Purchase
Agreement.
As an inducement to the Purchasers to enter into the Purchase
Agreement, the Company agrees with the Purchasers, for the benefit of the
holders (including the Purchasers) of the Securities and the Exchange
Securities (as defined in Section 1) (collectively, the "Holders"), as follows:
<PAGE> 2
1. Registered Exchange Offer. Upon the written request of any
holders of Securities, aggregating not less than 25% in aggregate principal
amount at maturity of the Securities at the time then outstanding, which
request may be made at any time on or after November 12, 2002 (the "Trigger
Date"), the Company shall (i) prepare and file with the Commission a
registration statement (the "Exchange Offer Registration Statement") on an
appropriate form under the Securities Act with respect to a proposed offer to
the Holders of the Securities (the "Registered Exchange Offer") to issue and
deliver to such Holders, in exchange for any and all of the Securities
(including any and all PIK Notes issued after consummation of the Registered
Exchange Offer under the Exchange Securities Indenture (as defined below)), a
like aggregate principal amount at maturity of debt securities of the Company
(the "Exchange Securities") that are identical in all material respects to the
Securities, except that they will have been registered pursuant to an effective
registration statement under the Securities Act and will not contain provisions
restricting transfer, (ii) use its reasonable best efforts to cause the
Exchange Offer Registration Statement to become effective under the Securities
Act no later than 150 days after the Trigger Date and the Registered Exchange
Offer to be consummated no later than 180 days after the Trigger Date and (iii)
keep the Exchange Offer Registration Statement effective for not less than 30
days (or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders (such period being
called the "Exchange Offer Registration Period"). The Exchange Securities as
well as any PIK Notes will be issued under the Indenture or an indenture (the
"Exchange Securities Indenture") between the Company and the Trustee or such
other bank or trust company that is reasonably satisfactory to the Purchasers,
as trustee (the "Exchange Securities Trustee"), such indenture to be identical
in all material respects to the Indenture, except for the transfer restrictions
relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer,
it being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for Exchange Securities (assuming that such
Holder (a) is not (i) an affiliate of the Company or (ii) an Exchanging Dealer
(as defined below) not complying with the requirements of the next sentence,
(b) acquires the Exchange Securities in the ordinary course of such Holder's
business and (c) has no arrangements or understandings with any person to
participate in the distribution of the Exchange Securities) and to trade such
Exchange Securities from and after their receipt without any limitations or
restrictions under the Securities Act and without material restrictions under
the blue sky or securities laws of the several states of the United States. The
Company, the Purchasers and each Exchanging Dealer acknowledge that, pursuant
to current interpretations by the Commission's staff of Section 5 of the
Securities Act, each Holder that is a broker-dealer electing to exchange
Securities, acquired for its own account as a result of market-making
- 2 -
<PAGE> 3
activities or other trading activities, for Exchange Securities (an "Exchanging
Dealer"), is required to deliver a prospectus containing substantially the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section and in Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Securities received
by such Exchanging Dealer pursuant to the Registered Exchange Offer.
In connection with the Registered Exchange Offer, the Company
shall:
(a) mail to each Holder a copy of the prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30
days (or longer, if required by applicable law) after the date on which
notice of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York;
(d) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York City time, on the last business
day on which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all material respects with all laws that
are applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer;
(b) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the
case may be, promptly to authenticate and deliver to each Holder
Exchange Securities equal in principal amount at maturity to the
Securities of such Holder so accepted for exchange and thereafter to
issue PIK Notes under the Exchange Securities Indenture if and to the
extent such PIK Notes are required to be delivered under the Exchange
Securities Indenture.
- 3 -
<PAGE> 4
The Company shall use its reasonable 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 used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided that (i) in the case where
such prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the period beginning on the date on
which the Exchange Offer Registration Statement is declared effective and
ending on the earlier to occur of (x) the date that is 180 days after the date
on which the Exchange Offer Registration Statement is declared effective and
(y) the date on which all Exchanging Dealers have sold all Exchange Securities
held by them and (ii) the Company shall make such prospectus and any amendment
or supplement thereto available to any broker-dealer for use in connection with
any resale of any Exchange Securities for a period of not less than 90 days
after the consummation of the Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the case
may be, shall provide that the Securities and the Exchange Securities shall
vote and consent together on all matters as one class and that neither the
Securities nor the Exchange Securities will have the right to vote or consent
as a separate class on any matter.
Interest on each Exchange Security issued pursuant to the
Registered Exchange Offer will accrue from the last interest payment date on
which interest was paid on the Securities surrendered in exchange therefor.
Each Holder participating in the Registered Exchange Offer shall
be required to represent to the Company that at the time of the consummation of
the Registered Exchange Offer (i) any Exchange Securities received by such
Holder will be acquired in the ordinary course of business, (ii) such Holder
will have no arrangements or understanding with any person to participate in
the distribution of the Securities or the Exchange Securities within the
meaning of the Securities Act and (iii) such Holder is not an affiliate of the
Company or, if it is such an affiliate, such Holder will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Exchange Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and any supplement thereto
complies in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Exchange Offer Registration
Statement and any amendment thereto does not, when it becomes effective,
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
- 4 -
<PAGE> 5
therein not misleading and (iii) any prospectus forming part of any Exchange
Offer Registration Statement, and any supplement to such prospectus, does not,
as of the consummation of the Registered Exchange Offer, include 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.
2. Shelf Registration. If (i) because of any change in law or
the applicable interpretations thereof by the Commission's staff the Company is
not permitted to effect the Registered Exchange Offer as contemplated by
Section 1 hereof, or (ii) any Securities validly tendered pursuant to the
Registered Exchange Offer are not exchanged for Exchange Securities on or prior
to 180 days after the Trigger Date, or (iii) any Purchaser so requests on or
prior to the 20th business day following the date on which the Registered
Exchange Offer is consummated with respect to Securities not eligible to be
exchanged for Exchange Securities in the Registered Exchange Offer and held by
it following the consummation of the Registered Exchange Offer, or (iv) any law
or the applicable interpretations thereof by the Commission's staff do not
permit any Holder to participate in the Registered Exchange Offer, or (v) any
Holder that participates in the Registered Exchange Offer and does not receive
freely transferable Exchange Securities in exchange for tendered Securities
(including without limitation PIK Notes issued after the consummation of the
Registered Exchange Offer which are not so freely tradeable) so requests with
respect to such Securities on or prior to the 20th business day following the
date on which the Registered Exchange Offer is consummated, or (vi) the Company
so elects, then the following provisions shall apply:
(a) The Company shall use its reasonable best efforts to file as
promptly as practicable (but in no event more than 45 days after so
required or requested pursuant to this Section 2) with the Commission,
and thereafter shall use its reasonable best efforts to cause to be
declared effective, a shelf registration statement on an appropriate
form under the Securities Act relating to the offer and sale of the
Transfer Restricted Securities (as defined in Section 3(a)) by the
Holders thereof from time to time in accordance with the methods of
distribution set forth in such registration statement (hereafter, a
"Shelf Registration Statement" and, together with any Exchange Offer
Registration Statement, a "Registration Statement"); provided that no
Holder (other than each Purchaser) shall be entitled to have any
Securities held by such Holder covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound by the
provisions of this Agreement applicable to such Holder.
(b) The Company shall use its reasonable best efforts to keep
the Shelf Registration Statement continuously effective in order to
permit the prospectus forming part thereof to be used by Holders of
Transfer Restricted Securities for a period ending on the earlier of (i)
two years from the Trigger Date (or, in the case
- 5 -
<PAGE> 6
of any proposed registration of PIK Notes issued after the Trigger Date
covering at least $15,000,000 principal amount of PIK Notes, six months
from the date of effectiveness of any such Shelf Registration Statement
(provided no more than two such Shelf Registration Statements shall be
required with respect to the PIK Notes) or such shorter period that will
terminate when all the Transfer Restricted Securities covered by the
Shelf Registration Statement have been sold pursuant thereto and (ii)
the date on which the Securities become eligible for resale without
volume restrictions pursuant to Rule 144 under the Securities Act (in
any such case, such period being called the "Shelf Registration
Period"). The Company shall be deemed not to have used its reasonable
best efforts to keep the Shelf Registration Statement effective during
the requisite period if any of them voluntarily take any action that
results in Holders of Transfer Restricted Securities covered thereby not
being able to offer and sell such Transfer Restricted Securities during
that period, unless (i) such action is required by law or the applicable
interpretations thereof by the Commission's staff or (ii) such action is
taken by the Company in good faith and for valid business reasons (not
including avoidance of their obligations hereunder), provided that the
Company and the Guarantors on or prior to 60 days thereafter comply with
the requirements of Section 4(j) hereof. Any such period during which
the Company fails to keep the Shelf Registration Statement effective and
usable for offers and sales of Securities and Exchange Securities is
referred to as a "Suspension Period". A Suspension Period shall commence
on and include the date the Company gives notice that the Shelf
Registration Statement is no longer effective or the prospectus included
therein is no longer usable for offers and sales of Securities and
Exchange Securities and shall end on the date when each Holder of
Securities and Exchange Securities covered by such Shelf Registration
Statement either receives copies of the supplemented or amended
prospectus or other document contemplated by Section 4(j) hereof or is
advised in writing by the Company that use of the prospectus may be
resumed. If more than one Suspension Period occurs during any period of
360 consecutive days, then the Company will be obligated to pay
Additional Amounts (as defined in Section 3(a)), in accordance with the
provisions of Section 3, to each Holder of Transfer Restricted
Securities during each such Suspension Period in an amount equal to
$0.192 per week per $1,000 of Accreted Value (as defined in the
Indenture) (as of the most recent interest payment date, or if no
interest has been paid, the Issue Date) of the Transfer Restricted
Securities held by such Holder. If one or more Suspension Periods occur,
the two-year time period referenced in the first sentence of this
Section 2(b) shall be extended by the number of days included in each
such Suspension Period.
(c) Notwithstanding any other provisions hereof, the Company
will ensure that (i) any Shelf Registration Statement and any amendment
thereto and any prospectus forming part thereof and
- 6 -
<PAGE> 7
any supplement thereto complies in all material respects with the
Securities Act and the rules and regulations of the Commission
thereunder, (ii) any Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information included
therein in reliance upon or in conformity with written information
furnished to the Company by or on behalf of any Holder specifically for
use therein (the "Holders' Information")) does 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 not
misleading and (iii) any prospectus forming part of any Shelf
Registration Statement, and any supplement to such prospectus (in either
case, other than with respect to Holders' Information), does not include
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.
3. Liquidated Damages. (a) The parties hereto agree that the
Holders of Transfer Restricted Securities will suffer damages if the Company
fails to fulfill its obligations under Section 1 or Section 2, as applicable,
and that it would not be feasible to ascertain the extent of such damages.
Accordingly, if (i) the applicable Registration Statement is not filed with the
Commission on or prior to 75 days after the Trigger Date, (ii) the Exchange
Offer Registration Statement or the Shelf Registration Statement, as the case
may be, is not declared effective on or prior to 150 days after the Trigger
Date (or in the case of a Shelf Registration Statement required to be filed in
response to a change in law or the applicable interpretations of Commission's
staff, if later, on or prior to 60 days after publication of the change in law
or interpretation), (iii) the Registered Exchange Offer is not consummated on
or prior to 180 days after the Trigger Date, or (iv) the Shelf Registration
Statement is filed and declared effective on or prior to 150 days after the
Trigger Date (or in the case of a Shelf Registration Statement required to be
filed in response to a change in law or the applicable interpretations of
Commission's staff, if later, on or prior to 60 days after publication of the
change in law or interpretation) but shall thereafter cease to be effective (at
any time that the Company is obligated to maintain the effectiveness thereof)
without being succeeded within 45 days by an additional Registration Statement
filed and declared effective (each such event referred to in clauses (i)
through (iv), a "Registration Default"), the Company will be obligated to pay
liquidated damages (collectively referred to herein as "Additional Amounts") to
each Holder of Transfer Restricted Securities, during the period of one or more
such Registration Defaults, in an amount equal to $0.192 per week per $1,000 of
Accreted Value (as of the most recent interest payment date, or if no interest
has been paid, the Issue Date) of the Transfer Restricted Securities held by
such Holder until (i) the applicable Registration Statement is filed, (ii) the
Exchange Offer Registration Statement is declared effective and the Registered
Exchange Offer is consummated, (iii) the Shelf
- 7 -
<PAGE> 8
Registration Statement is declared effective or (iv) the Shelf Registration
Statement again becomes effective, as the case may be. Following the cure of
all Registration Defaults, the accrual of Additional Amounts will cease. As
used herein, the term "Transfer Restricted Securities" means (i) each Security
until the date on which such Security has been exchanged for a freely
transferable Exchange Security in the Registered Exchange Offer, (ii) each
Security until the date on which it has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iii) each Security until the date on which it is distributed to
the public pursuant to Rule 144 under the Securities Act or is saleable
pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to
the contrary in this Section 3(a), the Company shall not be required to pay
Additional Amounts to a Holder of Transfer Restricted Securities if such Holder
failed to comply with its obligations to make the representations set forth in
the second to last paragraph of Section 1 or failed to provide the information
required to be provided by it, if any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent
(as defined in the Indenture) under the Indenture immediately upon the
happening of each and every Registration Default. The Company shall pay the
Additional Amounts due on the Transfer Restricted Securities by depositing with
the Paying Agent (which may not be the Company for these purposes), in trust,
for the benefit of the Holders thereof, prior to 10:00 a.m., New York City
time, on the next interest payment date specified by the Indenture and the
Securities, sums sufficient to pay the Additional Amounts then due. The
Additional Amounts due shall be payable on each interest payment date specified
by the Indenture and the Securities to the record holder entitled to receive
the interest payment to be made on such date. Each obligation to pay Additional
Amounts shall be deemed to accrue from and including the date of the applicable
Registration Default.
(c) The parties hereto agree that the Additional Amounts
provided for in this Section 3 constitute a reasonable estimate of and are
intended to constitute the sole damages that will be suffered by Holders of
Transfer Restricted Securities by reason of the failure of (i) the Shelf
Registration Statement or the Exchange Offer Registration Statement to be
filed, (ii) the Shelf Registration Statement to remain effective or (iii) the
Exchange Offer Registration Statement to be declared effective and the
Registered Exchange Offer to be consummated, in each case to the extent
required by this Agreement.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein
- 8 -
<PAGE> 9
and shall use its reasonable best efforts to reflect in each such
document, when so filed with the Commission, such comments as any
Purchaser may reasonably propose; (ii) include the information set forth
in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and
in Annex C hereto in the "Plan of Distribution" section of the
prospectus forming a part of the Exchange Offer Registration Statement,
and include the information set forth in Annex D hereto in the Letter of
Transmittal (as defined in the Exchange Offer Registration Statement)
delivered pursuant to the Registered Exchange Offer; and (iii) if
requested by any Purchaser, include the information required by Items
507 or 508 of Regulation S-K, as applicable, in the prospectus forming a
part of the Exchange Offer Registration Statement.
(b) The Company shall advise each Purchaser, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such
person, confirm such advice in writing (which advice pursuant to
clauses (ii)-(v) hereof shall be accompanied by an instruction to
suspend the use of the prospectus until the requisite changes have been
made):
(i) when any Registration Statement and any amendment
thereto has been filed with the Commission and when such
Registration Statement or any post-effective amendment thereto
has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus
included therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or
the initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the
Securities or the Exchange Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding
for such purpose; and
(v) of the happening of any event that requires the
making of any changes in any Registration Statement so that (A)
the Registration Statement and any amendment thereto does not,
when it becomes effective, 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 not
misleading or (B) any prospectus forming part of any
Registration
- 9 -
<PAGE> 10
Statement, and any supplement to such prospectus, does not
include 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.
(c) The Company will use its reasonable best efforts to obtain
the withdrawal at the earliest possible time of any order suspending
the effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer
Restricted Securities included within the coverage of any Shelf
Registration Statement, without charge, at least one conformed copy of
such Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules and, if any such
Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(e) The Company will, during the Shelf Registration Period,
promptly deliver to each Holder of Transfer Restricted Securities
included within the coverage of any Shelf Registration Statement,
without charge, as many copies of the prospectus (including each
preliminary prospectus) included in such Shelf Registration Statement
and any amendment or supplement thereto as such Holder may reasonably
request; and the Company consents to the use of such prospectus or any
amendment or supplement thereto by each of the selling Holders of
Transfer Restricted Securities in connection with the offer and sale of
the Transfer Restricted Securities covered by such prospectus or any
amendment or supplement thereto.
(f) The Company will furnish to each Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without
charge, at least one conformed copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules and, if any Purchaser or Exchanging Dealer or
any such Holder so requests in writing, all exhibits thereto (including
those, if any, incorporated by reference).
(g) The Company will, during the Exchange Offer Registration
Period or the Shelf Registration Period, as applicable, promptly
deliver to each Purchaser, each Exchanging Dealer and such other
persons that are required to deliver a prospectus following the
Registered Exchange Offer, without charge, as many copies of the final
prospectus included in the Exchange Offer Registration Statement or the
Shelf Registration Statement and any amendment or supplement thereto as
such Purchaser, Exchanging Dealer or other persons may reasonably
request; and the Company consents to the use of such prospectus or any
- 10 -
<PAGE> 11
amendment or supplement thereto by any such Purchaser, Exchanging
Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement,
the Company will use its reasonable best efforts to register or
qualify, or cooperate with the Holders of Securities or Exchange
Securities included therein and their respective counsel in connection
with the registration or qualification of, such Securities or Exchange
Securities for offer and sale under the securities or blue sky laws of
such jurisdictions as any such Holder reasonably requests in writing
and do any and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the Securities or
Exchange Securities covered by such Registration Statement; provided
that the Company will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to
take any action which would subject it to general service of process or
to taxation in any such jurisdiction where it is not then so subject.
(i) The Company will cooperate with the Holders of Securities or
Exchange Securities to facilitate the timely preparation and delivery
of certificates representing Securities or Exchange Securities to be
sold pursuant to any Registration Statement free of any restrictive
legends and in such denominations and registered in such names as the
Holders thereof may request in writing prior to sales of Securities or
Exchange Securities pursuant to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v)
occurs during the period for which the Company is required to maintain
an effective Registration Statement, the Company will promptly prepare
and file with the Commission a post-effective amendment to the
Registration Statement or a supplement to the related prospectus or
file any other required document so that, as thereafter delivered to
purchasers of the Securities or Exchange Securities from a Holder, the
prospectus will not include 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.
(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for the
Securities and the Exchange Securities, as the case may be, and provide
the applicable trustee with printed certificates for the Securities or
the Exchange Securities, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Company will comply in all material respects with all
applicable rules and regulations of the Commission and the Company will
make generally available to its security holders as soon as practicable
after the effective date of the
- 11 -
<PAGE> 12
applicable Registration Statement an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act; provided that in no
event shall such earnings statement be delivered later than 45 days
after the end of a 12-month period (or 90 days, if such period is a
fiscal year) beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the applicable
Registration Statement, which statement shall cover such 12-month
period.
(m) The Company will cause the Indenture or the Exchange
Securities Indenture, as the case may be, to be qualified under the
Trust Indenture Act as required by applicable law in a timely manner
and in the event that such qualification would require the appointment
of a new trustee under such indenture, the Company shall, to the extent
it is permitted, appoint a new trustee thereunder pursuant to the
applicable provisions of such indenture.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration
Statement to furnish to the Company such information concerning the
Holder and the distribution of such Transfer Restricted Securities as
the Company may from time to time reasonably require for inclusion in
such Shelf Registration Statement, and the Company may exclude from
such registration the Transfer Restricted Securities of any Holder that
fails to furnish such information within a reasonable time after
receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder
of Transfer Restricted Securities to be registered pursuant thereto
agrees by acquisition of such Transfer Restricted Securities that, upon
receipt of any notice from the Company pursuant to Section 4(b)(ii)
through (v), such Holder will discontinue disposition of such Transfer
Restricted Securities until such Holder's receipt of copies of the
supplemental or amended prospectus or other document contemplated by
Section 4(j) or until advised in writing (the "Advice") by the Company
that the use of the applicable prospectus may be resumed. If the
Company shall give any notice under Section 4(b)(ii) through (v) during
the period that the Company is required to maintain an effective
Registration Statement (the "Effectiveness Period"), such Effectiveness
Period shall be extended by the number of days during such period from
and including the date of the giving of such notice to and including
the date when each seller of Transfer Restricted Securities covered by
such Registration Statement shall have received (x) the copies of the
supplemental or amended prospectus or other document contemplated by
Section 4(j) (if an amended or supplemental prospectus or other
document is required) or (y) the Advice (if no amended or supplemental
prospectus or other document is required).
- 12 -
<PAGE> 13
(p) In the case of a Shelf Registration Statement, the Company
shall enter into such customary agreements (including, if requested, an
underwriting agreement in customary form) and take all such other
action, if any, as Holders of a majority in principal amount at
maturity of the Securities and Exchange Securities being sold or the
managing underwriters (if any) shall reasonably request in order to
facilitate any disposition of Securities or Exchange Securities
pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company
shall (i) make reasonably available for inspection by a representative
of, and Special Counsel (as defined in Section 5) acting for, Holders
of a majority in principal amount at maturity of the Securities and
Exchange Securities being sold and any underwriter participating in any
disposition of Securities or Exchange Securities pursuant to such Shelf
Registration Statement, all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries and (ii) use its reasonable best efforts to have its
officers, directors, employees, accountants and counsel supply all
relevant information reasonably requested by such representative,
Special Counsel or any such underwriter (an "Inspector") in connection
with such Shelf Registration Statement, in either case to the extent
reasonably requested by such representative, Special Counsel or
underwriter for the purpose of conducting customary due diligence with
respect to the Company.
(r) In the case of a Shelf Registration Statement, the Company
shall, if requested by Holders of a majority in principal amount at
maturity of the Securities and Exchange Securities being sold, their
Special Counsel or the managing underwriters (if any) in connection
with such Shelf Registration Statement, use its reasonable best efforts
to cause (i) its counsel to deliver an opinion relating to the Shelf
Registration Statement and the Securities or Exchange Securities, as
applicable, in customary form, (ii) its officers to execute and deliver
all customary documents and certificates requested by Holders of a
majority in principal amount at maturity of the Securities and Exchange
Securities being sold, their Special Counsel or the managing
underwriters (if any) and (iii) its independent public accountants to
provide a comfort letter or letters in customary form, subject to
receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
5. Registration Expenses. The Company will bear all expenses
incurred in connection with the performance of its obligations under Sections
1, 2, 3 and 4 and the Company will reimburse the Purchasers and the Holders for
the reasonable fees and disbursements of one firm of attorneys (in addition to
any local counsel utilized for state securities or blue sky purposes under
Section 4(b)) chosen by the Holders of a
- 13 -
<PAGE> 14
majority in principal amount at maturity of the Securities and the Exchange
Securities to be sold pursuant to each Registration Statement (the "Special
Counsel") acting for the Purchasers or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by a Purchaser or Exchanging Dealer, as
applicable, the Company shall indemnify and hold harmless each Holder
(including, without limitation, any such Purchaser or Exchanging Dealer), its
affiliates, their respective officers, partners, directors, employees,
representatives and agents, and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 6 and Section 7 as a Holder), from and
against any loss, claim, damage or liability, joint or several, or any action
in respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of Securities or Exchange
Securities), to which that Holder may become subject, whether commenced or
threatened, under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained
in any such Registration Statement or any prospectus forming part thereof or in
any amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and shall reimburse each Holder promptly
upon demand for any legal or other expenses reasonably incurred by that Holder
in connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with any
Holders' Information; and provided, further, that with respect to any such
untrue statement in or omission from any related preliminary prospectus, the
indemnity agreement contained in this Section 6(a) shall not inure to the
benefit of any Holder from whom the person asserting any such loss, claim,
damage, liability or action received Securities or Exchange Securities to the
extent that such loss, claim, damage, liability or action of or with respect to
such Holder results from the fact that both (A) a copy of the final prospectus
was not sent or given to such person at or prior to the written confirmation of
the sale of such Securities or Exchange Securities to such person and (B) the
untrue statement in or omission from the related preliminary prospectus was
corrected in the final prospectus unless, in either case, such
- 14 -
<PAGE> 15
failure to deliver the final prospectus was a result of non-compliance by the
Company with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder
shall indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6(b) and
Section 7 as the "Company"), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement
or alleged untrue statement of a material fact contained in any such
Registration Statement or any prospectus forming part thereof or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with any Holders'
Information furnished to the Company by such Holder, and shall reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that no such Holder shall be liable for any indemnity claims hereunder in
excess of the amount of net proceeds received by such Holder from the sale of
Securities or Exchange Securities pursuant to such Shelf Registration
Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party pursuant to Section 6(a) or 6(b), notify the
indemnifying party in writing of the claim or the commencement of that action;
provided, however, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have under this Section 6 or
otherwise except to the extent that it has been materially prejudiced by such
failure. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 6 for
- 15 -
<PAGE> 16
any legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than the reasonable costs of
investigation; provided, however, that an indemnified party shall have the
right to employ its own counsel in any such action, but the fees, expenses and
other charges of such counsel for the indemnified party will be at the expense
of such indemnified party unless (1) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party, (2)
the indemnified party has reasonably concluded (based upon advice of counsel to
the indemnified party) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict
exists (based upon advice of counsel to the indemnified party) between the
indemnified party and the indemnifying party (in which case the indemnifying
party will not have the right to direct the defense of such action on behalf of
the indemnified party) or (4) the indemnifying party has not in fact employed
counsel reasonably satisfactory to the indemnified party to assume the defense
of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm of attorneys (in addition to any
local counsel) at any one time for all such indemnified party or parties. Each
indemnified party, as a condition of the indemnity agreements contained in
Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnifying
party shall be liable for any settlement of any such action effected without
its written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party (which consent shall not be
unreasonably withheld), effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding and does not include a statement as to, or an admission of, fault,
culpability or failure to act, by or on behalf of any indemnified party.
7. Contribution. If the indemnification provided for in Section
6 is unavailable or insufficient to hold harmless an indemnified party under
Section 6(a) or 6(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such
- 16 -
<PAGE> 17
loss, claim, damage or liability, or action in respect thereof, (i) in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company from the initial offering and sale of the Securities, on the one
hand, and by a Holder from receiving Securities or Exchange Securities, as
applicable, registered under the Securities Act, on the other, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, on
the one hand, and such Holder, on the other, with respect to the statements or
omissions that resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative fault 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 the Company or information
supplied by the Company, or to any Holders' Information supplied by such
Holder, on the other, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 7 were to be determined by
pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to herein. The amount paid
or payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 7
shall be deemed to include, for purposes of this Section 7, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending or preparing to defend any such action or claim.
Notwithstanding the provisions of this Section 7, an indemnifying party that is
a Holder of Securities or Exchange Securities shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Securities or Exchange Securities sold by such indemnifying party to any
purchaser exceeds the amount of any damages which such indemnifying party has
otherwise paid or become liable to pay by reason of any 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.
8. Rules 144 and 144A. The Company shall use its reasonable best
efforts to 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 Commission
thereunder in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the written request of any Holder of
Transfer Restricted Securities, make publicly available other information so
long as necessary to permit sales of such Holder's securities pursuant to Rules
144 and 144A or any successor rule or regulation hereafter adopted by the
Commission. The Company covenants that it will take such further action
- 17 -
<PAGE> 18
as any Holder of Transfer Restricted Securities may reasonably request, all to
the extent required from time to time to enable such Holder to sell Transfer
Restricted Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). Upon the written request of
any Holder of Transfer Restricted Securities, the Company shall deliver to such
Holder a written statement as to whether it has complied with such
requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be
deemed to require the Company to register any of its securities pursuant to the
Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders
of a majority in principal amount at maturity of such Transfer Restricted
Securities included in such offering, subject to the consent of the Company
(which shall not be unreasonably withheld or delayed), and such Holders shall
be responsible for all underwriting commissions and discounts in connection
therewith.
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
10. Miscellaneous. (a) 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, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount at maturity of the Securities and the Exchange Securities,
taken as a single class, at the time outstanding. 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 whose
Securities or Exchange Securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of a majority in aggregate principal amount at
maturity of the Securities and the Exchange Securities being sold by such
Holders pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telecopier or air courier guaranteeing next-day delivery:
- 18 -
<PAGE> 19
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section 10(b),
which address initially is, with respect to each Holder, the address of such
Holder maintained by the Registrar under the Indenture;
(2) if to a Purchaser, initially at its address set forth in the
Purchase Agreement; and
(3) if to the Company, initially at the address of the Company
set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors and Assigns. This Agreement shall be binding upon
the Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number
of counterparts (which may be delivered in original form or by telecopier) 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.
(e) Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
(f) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) Remedies. In the event of a breach by the Company or by any
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages (other than the recovery
of damages for a breach by the Company of its obligations under Sections 1 or 2
hereof for which Additional Amounts
- 19 -
<PAGE> 20
have been paid pursuant to Section 3 hereof), will be entitled to specific
performance of its rights under this Agreement. The Company and each Holder
agree that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by each such person of any of the provisions of
this Agreement and hereby further agree that, in the event of any action for
specific performance in respect of such breach, each such person shall waive
the defense that a remedy at law would be adequate.
(i) No Inconsistent Agreements. The Company represents, warrants
and agrees that (i) it has not entered into, and shall not on or after the date
of this Agreement, enter into any agreement that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof, (ii) it has not previously entered into any agreement which
remains in effect granting any registration rights with respect to any of its
debt securities to any person and (iii) without limiting the generality of the
foregoing, without the written consent of the Holders of a majority in
aggregate principal amount at maturity of the then outstanding Transfer
Restricted Securities, it will not grant to any person the right to request the
Company to register any debt securities of the Company under the Securities Act
unless the rights so granted are not in conflict or inconsistent with the
provisions of this Agreement.
(j) No Piggyback on Registrations. Neither the Company nor any
of its security holders (other than the Holders of Transfer Restricted
Securities in such capacity) shall have the right to include any securities of
the Company in any Shelf Registration or Registered Exchange Offer other than
Transfer Restricted Securities.
(k) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. 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 reasonable 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.
Please confirm that the foregoing correctly sets forth the
agreement among the Company and the Purchasers.
[Signature Page of Exchange and Registration Rights Agreement to Follow]
- 20 -
<PAGE> 21
[Signature Page to Exchange and Registration Rights Agreement]
Very truly yours,
MAXXIM MEDICAL, INC.,
By: /s/ Kenneth W. Davidson
---------------------------------------------
Name: Kenneth W. Davidson
Title: Chairman of the Board, President
and Chief Executive Officer
Accepted:
GS MEZZANINE PARTNERS, L.P.
By: GS Mezzanine Advisors, L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Melina Higgins
---------------------------------------
Name: Melina Higgins
Title: Attorney-at-law
GS MEZZANINE PARTNERS OFFSHORE, L.P.
By: GS Mezzanine Advisors (Cayman), L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Melina Higgins
---------------------------------------
Name: Melina Higgins
Title: Attorney-at-law
<PAGE> 22
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a 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
broker-dealer in connection with resales of Exchange Securities received in
exchange for Securities where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
consummation of the Registered Exchange Offer, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution".
1-A
<PAGE> 23
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution".
1-B
<PAGE> 24
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 90 days after the consummation of the Registered
Exchange Offer, it will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until _____, all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of
Exchange Securities by broker-dealers. Exchange Securities received by
broker-dealers for their own account pursuant to the Registered Exchange Offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Securities 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 at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Securities. Any
broker-dealer that resells Exchange Securities that were received by it for its
own account pursuant to the Registered Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Securities may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Securities and any commission 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
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of 90 days after the consummation of the Registered
Exchange Offer the Company will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed to pay all expenses incident to the Registered Exchange
Offer (including the expenses of one counsel for the Holders of the Securities)
other than commissions or concessions of any broker-dealers
1-C
<PAGE> 25
and will indemnify the Holders of the Securities (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
2-C
<PAGE> 26
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it
is not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE> 1
EXHIBIT 10.1
===============================================================================
CREDIT AGREEMENT
dated as of
November 12, 1999,
among
MAXXIM MEDICAL, INC.,
MAXXIM MEDICAL GROUP, INC.,
The Lenders Party Hereto,
THE CHASE MANHATTAN BANK,
as Administrative Agent
and Collateral Agent,
BANKERS TRUST COMPANY,
as Co-Syndication Agent,
MERRILL LYNCH CAPITAL CORPORATION,
as Co-Syndication Agent,
CANADIAN IMPERIAL BANK OF COMMERCE,
as Co-Documentation Agent,
and
CREDIT SUISSE FIRST BOSTON,
as Co-Documentation Agent
---------------------------
CHASE SECURITIES INC.,
as Lead Arranger and Book Manager
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Classification of Loans and Borrowings . . . . . . . . . . . . 36
SECTION 1.03. Terms Generally. . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 1.04. Accounting Terms; GAAP . . . . . . . . . . . . . . . . . . . . 36
ARTICLE II
The Credits
SECTION 2.01. Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.02. Loans and Borrowings . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.03. Requests for Borrowings. . . . . . . . . . . . . . . . . . . . 38
SECTION 2.04. Swingline Loans. . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.05. Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 2.06. Funding of Borrowings. . . . . . . . . . . . . . . . . . . . . 47
SECTION 2.07. Interest Elections . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 2.08. Termination and Reduction of Commitments . . . . . . . . . . . 49
SECTION 2.09. Repayment of Loans; Evidence of Debt . . . . . . . . . . . . . 51
SECTION 2.10. Amortization of Term Loans . . . . . . . . . . . . . . . . . . 52
SECTION 2.11. Prepayment of Loans. . . . . . . . . . . . . . . . . . . . . . 54
SECTION 2.12. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 2.13. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 2.14. Alternate Rate of Interest . . . . . . . . . . . . . . . . . . 59
SECTION 2.15. Increased Costs. . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 2.16. Break Funding Payments . . . . . . . . . . . . . . . . . . . . 61
SECTION 2.17. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Setoffs . . 63
SECTION 2.19. Mitigation Obligations; Replacement of Lenders . . . . . . . . 65
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers . . . . . . . . . . . . . . . . . . . . . 67
SECTION 3.02. Authorization; Enforceability. . . . . . . . . . . . . . . . . 67
SECTION 3.03. Governmental Approvals; No Conflicts . . . . . . . . . . . . . 67
SECTION 3.04. Financial Condition; No Material Adverse Effect. . . . . . . . 68
</TABLE>
1
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3.05. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 3.06. Litigation and Environmental Matters . . . . . . . . . . . . . 69
SECTION 3.07. Compliance with Laws and Agreements. . . . . . . . . . . . . . 70
SECTION 3.08. Investment and Holding Company Status. . . . . . . . . . . . . 70
SECTION 3.09. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 3.10. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 3.11. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 3.12. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 3.13. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 3.14. Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 3.15. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 3.16. Senior Indebtedness. . . . . . . . . . . . . . . . . . . . . . 73
SECTION 3.17. Year 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 3.18. Security Interests . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE IV
Conditions of Lending
SECTION 4.01. Each Credit Event. . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 4.02. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE V
Affirmative Covenants
SECTION 5.01. Financial Statements and Other Information . . . . . . . . . . 82
SECTION 5.02. Notices of Material Events . . . . . . . . . . . . . . . . . . 84
SECTION 5.03. Information Regarding Collateral . . . . . . . . . . . . . . . 84
SECTION 5.04. Existence; Conduct of Business . . . . . . . . . . . . . . . . 85
SECTION 5.05. Payment of Obligations . . . . . . . . . . . . . . . . . . . . 86
SECTION 5.06. Maintenance of Properties. . . . . . . . . . . . . . . . . . . 86
SECTION 5.07. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 5.08. Casualty and Condemnation. . . . . . . . . . . . . . . . . . . 86
SECTION 5.09. Books and Records; Inspection and Audit Rights . . . . . . . . 87
SECTION 5.10. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 87
SECTION 5.11. Use of Proceeds and Letters of Credit. . . . . . . . . . . . . 87
SECTION 5.12. Additional Subsidiaries. . . . . . . . . . . . . . . . . . . . 88
SECTION 5.13. Further Assurances . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 5.14. Interest Rate Protection . . . . . . . . . . . . . . . . . . . 89
SECTION 5.15. Corporate Formalities. . . . . . . . . . . . . . . . . . . . . 89
</TABLE>
2
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness; Certain Equity Securities . . . . . . . . . . . 89
SECTION 6.02. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 6.03. Fundamental Changes . . . . . . . . . . . . . . . . . . . . . 93
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions . . 94
SECTION 6.05. Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 6.06. Sale and Leaseback Transactions . . . . . . . . . . . . . . . 98
SECTION 6.07. Hedging Agreements. . . . . . . . . . . . . . . . . . . . . . 99
SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness . . . . 99
SECTION 6.09. Transactions with Affiliates. . . . . . . . . . . . . . . . . 101
SECTION 6.10. Restrictive Agreements. . . . . . . . . . . . . . . . . . . . 102
SECTION 6.11. Amendment of Material Documents . . . . . . . . . . . . . . . 103
SECTION 6.12. Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . 103
SECTION 6.13. Total Adjusted Leverage Ratio . . . . . . . . . . . . . . . . 104
SECTION 6.14. Senior Adjusted Leverage Ratio. . . . . . . . . . . . . . . . 105
SECTION 6.15. Capital Expenditures. . . . . . . . . . . . . . . . . . . . . 105
SECTION 6.16. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . 106
ARTICLE VII
Events of Default . . . . . . . . . . . . . . 107
ARTICLE VIII
The Administrative Agent . . . . . . . . . . . . . 110
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 9.02. Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . 114
SECTION 9.03. Expenses; Indemnity; Damage Waiver. . . . . . . . . . . . . . 116
SECTION 9.04. Successors and Assigns. . . . . . . . . . . . . . . . . . . . 118
SECTION 9.05. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 122
SECTION 9.06. Counterparts; Integration; Effectiveness. . . . . . . . . . . 123
SECTION 9.07. Severability. . . . . . . . . . . . . . . . . . . . . . . . . 123
SECTION 9.08. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . 123
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. . 124
SECTION 9.10. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . 125
</TABLE>
3
<PAGE> 5
<TABLE>
<S> <C>
SECTION 9.11. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 125
SECTION 9.12. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 125
SECTION 9.13. Interest Rate Limitation. . . . . . . . . . . . . . . . . . . 126
SCHEDULES:
Schedule 1.01(a) -- Investor
Schedule 1.01(b) -- Mortgaged Property
Schedule 1.01(c) -- Existing Capital Lease Obligations
Schedule 2.01 -- Commitments
Schedule 3.05(c) -- Owned and Leased Real Property
Schedule 3.06 -- Disclosed Matters
Schedule 3.12 -- Subsidiaries
Schedule 3.13 -- Insurance
Schedule 3.18(d) -- Mortgage Filing Offices
Schedule 5.15 -- Corporate Formalities and Procedures
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.04(d) -- Investments
Schedule 6.04(e) -- Existing Investments in Subsidiaries
Schedule 6.04(k) -- Existing Loans and Advances
Schedule 6.09(h) -- Existing Stockholders Agreements
Schedule 6.10 -- Existing Restrictions
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance
Exhibit B-1 -- Form of Opinion of Wachtell, Lipton, Rosen & Katz
Exhibit B-2 -- Form of Opinion of Shumaker, Loop & Kendrick, LLP
Exhibit B-3 -- Form of Opinion of Local Counsel
Exhibit C -- Form of Perfection Certificate
Exhibit D -- Form of Parent Guarantee Agreement
Exhibit E -- Form of Subsidiary Guarantee Agreement
Exhibit F -- Form of Indemnity, Subrogation and Contribution Agreement
Exhibit G -- Form of Pledge Agreement
Exhibit H -- Form of Security Agreement
Exhibit I -- Form of Services Agreement
</TABLE>
4
<PAGE> 6
CREDIT AGREEMENT dated as of
November 12, 1999, among MAXXIM MEDICAL,
INC., MAXXIM MEDICAL GROUP, INC., the
LENDERS party hereto, THE CHASE MANHATTAN
BANK, as Administrative Agent and
Collateral Agent, BANKERS TRUST COMPANY, as
Co-Syndication Agent, MERRILL LYNCH CAPITAL
CORPORATION, as Co-Syndication Agent,
CANADIAN IMPERIAL BANK OF COMMERCE, as
Co-Documentation Agent, and CREDIT SUISSE
FIRST BOSTON CORPORATION, as
Co-Documentation Agent.
Pursuant to or in connection with the Merger Agreement (such term and
each other capitalized term used but not defined in this introductory statement
having the meaning assigned to such term in Article I), (a) prior to or
simultaneously with the borrowing of the Term Loans on the Closing Date, (i)
the Investor will make the Investor Equity Contribution, (ii) the Continuing
Shareholders will make the Management Equity Contribution and (iii) Holdings
will issue the Holdings Notes to the Sponsor and/or certain other investors
reasonably satisfactory to the Administrative Agent for gross proceeds of at
least $50,000,000 in cash, (b) immediately prior to or concurrent with the
Merger, Holdings and the Borrower will effect the Asset Dropdown, (c)
immediately after the Asset Dropdown but prior to or concurrent with the
Merger, pursuant to the Substitution, the Borrower will succeed to, and be
substituted for, Holdings as primary obligor under the indenture relating to
the Existing Notes, (d) prior to or concurrent with the Merger, (i) Circon will
declare the Dividend and immediately pay the Dividend by issuing the Dividend
Note to Circon Parent and (ii) Circon Holdings and Circon Parent will effect
the Circon Acquisition, (e) simultaneously with or immediately after the
consummation of the Circon Acquisition, (i) Circon Holdings will pay the Circon
Acquisition Consideration to Circon Parent, (ii) Circon will repay the Dividend
Note in full and (iii) immediately after the consummation of the Circon
Acquisition, the Borrower and Circon will enter into the Services Agreement,
(f) as promptly as practicable after or concurrent with the Asset Dropdown, the
Substitution and the Circon Acquisition, (i) Holdings and the Purchaser will
consummate the Merger and (ii) subject to stockholders' appraisal rights, each
of the Shares (other than (A) Shares acquired by the Investor and the
Continuing Shareholders pursuant to the Equity Contributions and (B) the
Retained Equity) will be converted into the right to receive the Cash Merger
Consideration and (g) the Investor's common equity holdings in Holdings
following the Equity Contributions shall be such that,
<PAGE> 7
pursuant to the terms of the Merger Agreement, after giving effect to the
Merger, (i) the Investor will hold post-Merger common stock of Holdings
representing not less than 87.8% of the aggregate post-Merger common stock of
Holdings (and 74.0% of such common stock on a fully diluted basis) and (ii) the
Continuing Shareholders and, possibly, certain other existing stockholders of
Holdings will retain the Retained Equity. The Merger is anticipated to be
structured as a recapitalization for accounting purposes.
In connection with the Recapitalization, (a) prior to or
simultaneously with the borrowing of the Term Loans on the Closing Date, (i)
Holdings and each of its subsidiaries (including Circon and its subsidiaries)
will repay or repurchase in full all the Existing Indebtedness and (ii) the
Existing Credit Agreement and any related guarantee and collateral documents
shall be terminated, (b) Holdings will (i) make the Debt Tender Offer and (ii)
pay the Debt Tender Premium, (c) Holdings or its applicable subsidiaries
(excluding Circon and its subsidiaries) will retain the Existing Capital Lease
Obligations, (d) the Borrower will assume, under the Substitution, the
obligations of Holdings in relation to any Existing Notes not repurchased
pursuant to the Debt Tender Offer, (e) on the Closing Date, the Borrower will
obtain the senior secured credit facilities provided for in this Agreement in
an aggregate principal amount not to exceed $310,000,000, (f) prior to or
simultaneously with the borrowing of the Term Loans on the Closing Date, the
Borrower will issue the Senior Subordinated Notes in a public offering or in a
Rule 144A offering or other private placement for gross proceeds of at least
$110,000,000 in cash and (g) the Transaction Costs (including the Debt Tender
Premium) will be paid.
The parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
2
<PAGE> 8
"Acquired EBITDA" shall mean, with respect to any Acquired Entity or
Business or any Sold Entity or Business for any period, the Consolidated EBITDA
of such Acquired Entity or Business or Sold Entity or Business for such period.
"Acquired Entity or Business" has the meaning assigned to such term in
the definition of the term Adjusted Consolidated EBITDA.
"Adjusted Consolidated EBITDA" shall mean, for any Person for any
period, Consolidated EBITDA of such Person for such period, calculated by (a)
including in the determination thereof the Acquired EBITDA of any Person,
property, business or asset acquired during such period pursuant to a
transaction permitted under Section 6.04 and not subsequently sold, transferred
or otherwise disposed of during such period to the extent acquired by the
Borrower or any Subsidiary during such period (each such Person, property,
business or asset acquired and not subsequently so disposed of, an "Acquired
Entity or Business"), based on the actual Acquired EBITDA of such Acquired
Entity or Business for such period (including the portion thereof occurring
prior to such acquisition) and (b) excluding in the determination thereof the
Acquired EBITDA of any Person, property, business or asset sold, transferred or
otherwise disposed of by the Borrower or any Subsidiary during such period
(each such Person, property, business or asset so sold or disposed of, a "Sold
Entity or Business") based on the actual Acquired EBITDA of such Sold Entity or
Business for such period (including the portion thereof occurring prior to such
sale, transfer or disposition).
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means The Chase Manhattan Bank, in its capacity
as administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire
in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
3
<PAGE> 9
"Agents" means the Administrative Agent and the Co-Syndication Agents.
"Alternate Base Rate" means, for any day, a rate per annum equal to
the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate
in effect on such day plus 1% and (c) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to
a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective
Rate shall be effective from and including the effective date of such change in
the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate,
respectively.
"Applicable Laws" means the Food, Drug and Cosmetic Act and the rules
and regulations of the Food and Drug Administration.
"Applicable Percentage" means, with respect to any Revolving Lender,
the percentage of the total Revolving Commitments represented by such Lender's
Revolving Commitment. If the Revolving Commitments have terminated or expired,
the Applicable Percentages shall be determined based upon the Revolving
Commitments most recently in effect, giving effect to any assignments.
"Applicable Rate" means, for any day (a) with respect to any Tranche B
Term Loan, the applicable Tranche B Rate, (b) with respect to any Tranche C
Term Loan, the applicable Tranche C Rate and (c) with respect to any ABR Loan
or Eurodollar Loan that is a Revolving Loan or a Tranche A Term Loan, or with
respect to the commitment fees payable hereunder, as the case may be, the
applicable rate per annum set forth below under the caption "ABR Spread",
"Eurodollar Spread" or "Commitment Fee Rate", as the case may be, based upon
the Leverage Ratio as of the most recent determination date, provided that
until 180 days after the
4
<PAGE> 10
Closing Date, the "Applicable Rate" for purposes of clause (c) shall be the
applicable rate per annum set forth below in Category 1:
<TABLE>
<CAPTION>
ABR Eurodolla Commitment Fee
Leverage Ratio: Spread Spread Rate
--------------- ------ ------ ----
<S> <C> <C> <C>
Category 1
----------
Greater than or equal to 4.50 to 1.75% 2.75% 0.500%
1.00 ----- ----- ------
Category 2
----------
Less than 4.50 to 1.00 but greater 1.50% 2.50% 0.500%
than or equal to 4.00 to 1.00 ----- ----- ------
Category 3
----------
Less than 4.00 to 1.00 but greater 1.25% 2.25% 0.500%
than or equal to 3.50 to 1.00 ----- ----- ------
Category 4
----------
Less than 3.50 to 1.00 1.00% 2.00% 0.375%
----- ----- ------
</TABLE>
For purposes of the foregoing, (i) the Leverage Ratio shall be
determined as of the end of each fiscal quarter of the Borrower's fiscal year
based upon Holdings's consolidated financial statements delivered pursuant to
Section 5.01(a) or (b) and (ii) each change in the Applicable Rate resulting
from a change in the Leverage Ratio shall be effective during the period
commencing on and including the date of delivery to the Administrative Agent of
such consolidated financial statements indicating such change and ending on the
date immediately preceding the effective date of the next such change, provided
that the Leverage Ratio shall be deemed to be in Category 1 (A) at any time
that an Event of Default has occurred and is continuing or (B) at the option of
the Administrative Agent or at the request of the Required Lenders if the
Borrower fails to deliver the consolidated financial statements required to be
delivered by it pursuant to Section 5.01(a) or (b), during the period from the
expiration of the time for delivery thereof until such consolidated financial
statements are delivered.
"Assessment Rate" means, for any day, the annual assessment rate in
effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States, provided that if, as a result of
any change in any law, rule or regulation, it is no longer possible to
determine the Assessment Rate as
5
<PAGE> 11
aforesaid, then the Assessment Rate shall be such annual rate as shall be
determined by the Administrative Agent to be representative of the cost of such
insurance to the Lenders.
"Asset Dropdown" means the contribution by Holdings of all its assets
to the Borrower.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an assignee (with the consent of any party whose consent
is required by Section 9.04), and accepted by the Administrative Agent, in the
form of Exhibit A or any other form approved by the Administrative Agent.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Board" means the Board of Governors of the Federal Reserve System of
the United States of America.
"Borrower" means Maxxim Medical Group, Inc., a Delaware corporation.
"Borrowing" means (a) Loans of the same Class and Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans,
as to which a single Interest Period is in effect, or (b) a Swingline Loan.
"Borrowing Request" means a request by the Borrower for a Borrowing in
accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City or Texas are authorized or
required by law to remain closed, provided that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"Capital Expenditures" means, for any period, (a) the additions to
property, plant and equipment and other capital expenditures of the Borrower
and its consolidated Subsidiaries (other than pursuant to a Permitted
Acquisition) that are (or would be) set forth in a consolidated statement of
cash flows of the Borrower for such period prepared in accordance with GAAP and
(b) Capital Lease Obligations incurred by the Borrower and its consolidated
Subsidiaries during such period.
6
<PAGE> 12
"Capital Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Cash Merger Consideration" means $26.00 per Share.
"Change in Control" means (a) the acquisition of ownership, directly
or indirectly, beneficially or of record, by any Person other than Holdings of
any Equity Interest in the Borrower; (b) prior to an IPO, the failure by the
Sponsor to own, directly or indirectly, beneficially and of record, Equity
Interests in Holdings representing at least a majority of each of the aggregate
ordinary voting power and aggregate equity value represented by the issued and
outstanding Equity Interests in Holdings; (c) after an IPO, the failure by the
Sponsor to own, directly or indirectly, beneficially and of record, Equity
Interests in Holdings representing at least 35% of each of the aggregate
ordinary voting power and the aggregate equity value represented by the issued
and outstanding Equity Interests in Holdings; (d) after an IPO, the acquisition
of ownership, directly or indirectly, beneficially or of record, by any Person
or group (within the meaning of the Securities Exchange Act of 1934 and the
rules of the Securities and Exchange Commission thereunder as in effect on the
date hereof) other than the Sponsor, of Equity Interests representing more than
35% of either the aggregate ordinary voting power or the aggregate equity value
represented by the issued and outstanding Equity Interests in Holdings; (e)
occupation of a majority of the seats (other than vacant seats) on the board of
directors of Holdings by Persons who were neither (i) nominated by the board of
directors of Holdings, (ii) appointed by directors so nominated nor (iii)
designated or nominated by the Sponsor; (f) the acquisition of direct or
indirect Control of Holdings by any Person or group other than the Sponsor; or
(g) the occurrence of a "Change of Control" (or similar event, however
denominated), as defined in any Subordinated Debt Documents or indenture or
other instrument or agreement under which any Permitted Refinancing
Indebtedness is issued or incurred or the Holdings Notes Indenture.
"Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any
7
<PAGE> 13
change in any law, rule or regulation or in the interpretation or application
thereof by any Governmental Authority after the date of this Agreement or (c)
compliance by any Lender or the Issuing Bank (or, for purposes of Section
2.15(b), by any lending office of such Lender or by such Lender's or the
Issuing Bank's holding company, if any) with any request, guideline or
directive (whether or not having the force of law) of any Governmental
Authority made or issued after the date of this Agreement.
"Circon" means Circon Corporation, a Delaware corporation.
"Circon Acquisition" means the acquisition by Circon Holdings from
Circon Parent of all the outstanding capital stock of Circon for the Circon
Acquisition Consideration.
"Circon Acquisition Consideration" means the payment in cash of an
amount equal to the difference between (a) $228,000,000 and (b) the amount
repaid by Circon to Circon Parent in respect of the Dividend Note on the
Closing Date.
"Circon Businesses" mean the businesses of Circon and its subsidiaries
to the extent that such businesses are being sold in the Circon Acquisition.
"Circon Holdings" means Circon Holdings Corporation (formerly known as
Fox Paine Citron Acquisition Corporation), a Delaware corporation.
"Circon Parent" means Maxxim Medical, Inc., a Delaware corporation.
"Class", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans,
Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans or Swingline
Loans and, when used in reference to any Commitment, refers to whether such
Commitment is a Revolving Commitment, Tranche A Commitment, Tranche B
Commitment or Tranche C Commitment.
"Closing Date" means the date on which (a) the conditions specified in
Section 4.02 are satisfied (or waived in accordance with Section 9.02) and (b)
the drawing of the Term Facilities and the substantially simultaneous
consummation of the Recapitalization occur.
8
<PAGE> 14
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Co-Documentation Agents" means Canadian Imperial Bank of Commerce and
Credit Suisse First Boston, in their capacity as co-documentation agents for
the Lenders hereunder.
"Co-Syndication Agents" means Bankers Trust Company and Merrill Lynch
Capital Corporation, in their capacity as co-syndication agents for the Lenders
hereunder.
"Collateral" means any and all "Collateral", as defined in any
applicable Security Document.
"Collateral Agent" shall have the meaning given to such term in the
Security Agreement.
"Commitment" means a Revolving Commitment, Tranche A Commitment,
Tranche B Commitment or Tranche C Commitment, or any combination thereof (as
the context requires).
"Consolidated Cash Interest Expense" means, for any period,
Consolidated Interest Expense less the sum for such period of (a) non-cash
expenses for interest payable in kind, including the amortization of the debt
discount on the Senior Subordinated Notes, the Holdings Notes or any other
Indebtedness permitted by Section 6.01(a), (b) to the extent included in
Consolidated Interest Expense, the amortization of fees paid by Holdings, the
Borrower or their subsidiaries in connection with the Transactions and (c) the
amortization of fees in respect of Hedging Agreements, provided that there
shall be included or excluded, as applicable, in determining Consolidated Cash
Interest Expense for any period the cash interest expense (calculated in the
same manner as Consolidated Cash Interest Expense is calculated) for such
period (including the portion thereof accruing prior to the applicable
acquisition or sale) of any Acquired Entity or Business or Sold Entity or
Business acquired or sold, as applicable, during such period assuming any
Indebtedness incurred or repaid in connection with the acquisition or sale had
been incurred or repaid on the first day of such period.
"Consolidated EBIT" means, for any Person for any period, Consolidated
Net Income of such Person, before total interest expense (whether cash or
non-cash), Transaction Costs (whether cash or non cash) and provisions for
taxes based on income, and determined without giving effect to any
extraordinary gains or extraordinary non-cash losses
9
<PAGE> 15
included in determining Consolidated Net Income for such Person for such
period.
"Consolidated EBITDA" means, for any Person for any period,
Consolidated EBIT of such Person, adjusted by adding thereto, without
duplication, the amount of (a) all depreciation expense, amortization expense
and other non-cash charges that were deducted in determining Consolidated EBIT
for such Person for such period and (b) if such Person is the Borrower, in
respect of any period ending on or before the date that is two years after the
Closing Date all out-of-pocket expenses incurred in that period in connection
with cost reduction initiatives or rationalizations at the Borrower's and the
Subsidiaries' facilities, provided that, in relation to such cost reduction
initiatives or rationalizations, (A) the Lender's (x) have been advised of the
Borrower's cost reduction and rationalization plans in advance of their
implementation and (y) are subsequently provided with a detailed breakdown of
the expenses incurred in connection therewith and (B) the amount added to such
Consolidated EBIT of the Borrower in respect of such cost reduction initiatives
or rationalizations for all periods combined shall not exceed $9,000,000.
"Consolidated Interest Expense" means, for any period, total interest
expense (including that attributable to Capital Lease Obligations in accordance
with GAAP), whether cash or non-cash, of Holdings, the Borrower and the
Subsidiaries determined on a consolidated basis with respect to all outstanding
Indebtedness of Holdings, the Borrower and the Subsidiaries, including, without
limitation, (a) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, (b)
amortization of the net costs or benefits under Hedging Agreements and (c)
amortization of the interest-equivalent costs that are associated with any
payments made to obtain any Hedging Agreement, deferred financing costs and any
interest expense on deferred compensation arrangements and any other non-cash
interest to the extent included in total interest expense.
"Consolidated Net Income" means, for any Person for any period, the
net income (or loss) after provision for taxes and before any pay-in-kind or
non-cash accumulating dividend on preferred stock of such Person and its
subsidiaries on a consolidated basis for such period taken as a single
accounting period, provided that there shall be excluded from such net income
(or loss) the income of any Person in which any other Person or Persons (other
than the Borrower or any Subsidiary or any director holding qualifying shares
in compliance with applicable law) owns or
10
<PAGE> 16
own aggregate Equity Interests representing more than 50% of the outstanding
Equity Interests in such Person except to the extent of the amount of dividends
or other distributions actually paid to the Borrower or any of the Subsidiaries
by such Person during such period.
"Continuing Shareholders" means Kenneth W. Davidson, Peter M. Graham,
David L. Lamont, Henry T. DeHart, Jack F. Cahill, Alan S. Blazei, Joseph D.
Dailey, Suzanne R. Garon, Ernest J. Henley and Davis C. Henley.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Default" means any event or condition that constitutes an Event of
Default or that upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Debt Tender Offer" means (a) the tender offer to be made by Holdings
to acquire all the Existing Notes and (b) the related consent solicitation
pursuant to which the covenants in the indenture relating to the Existing Notes
remaining outstanding after the consummation of the Debt Tender Offer shall be
waived or eliminated as required by Section 4.02(t), in each case to be
consummated concurrently with the Merger.
"Debt Tender Premium" means the debt tender premium and consent fees
to be paid in connection with the Debt Tender Offer in an aggregate amount not
in excess of $14,400,000.
"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
"Disqualified Stock" means, with respect to any Person, any Equity
Interest that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event: (a) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise; (b) is convertible or exchangeable for
Indebtedness or Disqualified Stock; or (c) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the
11
<PAGE> 17
Tranche C Maturity Date; provided, however, that any Equity Interests that
would not constitute Disqualified Stock but for the provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Equity Interests upon the occurrence of an "asset sale" or "Change of Control"
occurring prior to the first anniversary of the Tranche C Maturity Date shall
not constitute Disqualified Stock if (i) the "asset sale" or "Change of
Control" provisions applicable to such Equity Interests are not more favorable
to the holders of such Equity Interests than the "asset sale" provisions and
the "Change of Control" provisions, respectively, contained in the Subordinated
Debt Documents, and (ii) any payment obligations in relation to the "Change of
Control" provisions applicable to such Equity Interests are subordinated to the
Obligations on terms satisfactory to the Administrative Agent.
"Dividend" means a dividend to be paid by Circon to Circon Parent in
the form of the Dividend Note.
"Dividend Note" means the intercompany note (a) payable by Circon to
Circon Parent and (b) pursuant to which Circon agrees to pay Circon Parent an
amount equal to the amount of the Dividend, with such amount paid
simultaneously with or immediately after the consummation of the Circon
Acquisition.
"dollars" or "$" refers to lawful money of the United States of
America.
"Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, preservation or reclamation
of natural resources, the management, Release or threatened Release of any
Hazardous Material or to public health and safety matters.
"Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental investigation and
remediation, natural resource damages, fines, penalties or indemnities), of
Holdings, the Borrower or any Subsidiary directly or indirectly resulting from
or based upon (a) any actual or alleged violation of any Environmental Law, (b)
the generation, use, handling, transportation, storage, treatment or disposal
of any Hazardous Materials, (c) any actual or alleged exposure to any Hazardous
Materials, (d) the Release or threatened Release of any Hazardous Materials or
(e) any contract, agreement or other consensual
12
<PAGE> 18
arrangement pursuant to which liability is assumed or imposed with respect to
any of the foregoing.
"Equity Contributions" means the Investor Equity Contribution and the
Management Equity Contribution.
"Equity Interests" means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person and any
options warrants or other rights to acquire such Equity Interests, but
excluding any debt securities convertible into such Equity Interests.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan
(other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Borrower or any of its ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate
of any notice, or the receipt by any Multiemployer Plan from the Borrower or
any ERISA Affiliate of any notice, concerning the imposition of Withdrawal
Liability or a determination that a Multiemployer Plan is insolvent or in
reorganization, within the meaning of Title IV of ERISA.
13
<PAGE> 19
"Eurodollar", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Article
VII.
"Excess Cash Flow" means, for any fiscal year, the sum (without
duplication) of:
(a) the consolidated net income (or loss) of Holdings, the Borrower
and its consolidated subsidiaries for such fiscal year, after provision
for taxes, adjusted to exclude any gains or losses attributable to
Prepayment Events; plus
(b) depreciation, amortization and other non-cash charges or losses
deducted in determining such consolidated net income (or loss) for such
fiscal year; plus
(c) the sum of (i) the amount, if any, by which Net Working Capital
decreased during such period plus (ii) the net amount, if any, by which
the consolidated deferred revenues of Holdings, the Borrower and its
consolidated subsidiaries increased during such period plus (iii) the
aggregate principal amount of Capital Lease Obligations and other
Indebtedness incurred during such period to finance Capital Expenditures,
to the extent that mandatory principal payments in respect of such
Indebtedness would, pursuant to clause (f) below, be deducted in
determining Excess Cash Flow when made; minus
(d) the sum of (i) any non-cash gains included in determining such
consolidated net income (or loss) for such fiscal year plus (ii) the
amount, if any, by which Net Working Capital increased during such fiscal
year plus (iii) the amount, if any, by which the consolidated deferred
revenues of Holdings, the Borrower and its consolidated subsidiaries
decreased during such fiscal year; minus
(e) Capital Expenditures for such period, except to the extent such
Capital Expenditures are financed with the proceeds of asset dispositions
(including casualty and condemnation events) or with the proceeds of the
sale of equity by, or the contribution of equity to, Holdings, the
Borrower or any Subsidiary (other than to or by Holdings, the Borrower or
any Subsidiary); minus
14
<PAGE> 20
(f) the aggregate principal amount of Capital Lease Obligations and
other Indebtedness repaid or prepaid by Holdings, the Borrower and its
consolidated subsidiaries during such period, excluding (i) Indebtedness
in respect of Revolving Loans, Swingline Loans and Letters of Credit
(unless accompanied by a permanent reduction of the Revolving
Commitments), (ii) Term Loans prepaid pursuant to Section 2.11(a),
2.11(c) or (d), (iii) repayments or prepayments of Capital Lease
Obligations and other Indebtedness financed by incurring other
Indebtedness, to the extent that mandatory principal payments in respect
of such other Indebtedness would, pursuant to this clause (f), be
deducted in determining Excess Cash Flow when made and (iv) Indebtedness
referred to in clauses (vii) and (viii) of Section 6.01(a).
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax
imposed by any other jurisdiction described in clause (a) above and (c) in the
case of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.19(b)), any withholding tax that (i) is in effect and
would apply to amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party to this Agreement (or designates a new lending office),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment),
to receive additional amounts from the Borrower with respect to any withholding
tax pursuant to Section 2.17(a), or (ii) is attributable to such Foreign
Lender's failure to comply with Section 2.17(e).
"Existing Capital Lease Obligations" means the Capital Lease
Obligations of Holdings described in Schedule 1.01(c).
"Existing Credit Agreement" means the Third Amended and Restated
Credit Agreement dated as of January 4, 1999, as amended, among Holdings, the
lenders named therein and certain other parties.
15
<PAGE> 21
"Existing Indebtedness" means all the existing Indebtedness of
Holdings and its subsidiaries (other than the Existing Notes and the Existing
Capital Lease Obligations) immediately prior to the Recapitalization, including
all amounts outstanding under the Existing Credit Agreement.
"Existing Notes" means Holdings's outstanding 10-1/2% senior
subordinated notes due August 1, 2006, in an aggregate principal amount equal
to $100,000,000.
"Existing Notes Indenture" means the Indenture dated July 30, 1996,
between Holdings and First Union National Bank of Carolina, as Trustee,
relating to the Existing Notes.
"Existing Notes Refinancing Date" means November 1, 2005.
"Federal Funds Effective Rate" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) 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 that is a Business Day, the average (rounded upwards,
if necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower.
"Foreign Lender" means any Lender that is organized under the laws of
a jurisdiction other than that in which the Borrower is located. For purposes
of this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Subsidiary" means any Subsidiary that is organized under the
laws of a jurisdiction other than the United States of America or any State
thereof or the District of Columbia.
16
<PAGE> 22
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having
the economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation, provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
"Guarantee Agreements" means the Parent Guarantee Agreement and the
Subsidiary Guarantee Agreement.
"Hazardous Materials" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes,
and all substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any derivative or similar agreement or
arrangement, including any interest rate protection agreement, foreign currency
exchange agreement, commodity price protection agreement or other interest or
currency exchange rate or commodity price hedging arrangement. "Holdings" means
Maxxim Medical, Inc., a Texas corporation.
17
<PAGE> 23
"Holdings Notes" means the senior unsecured notes issued by Holdings
in connection with the Recapitalization pursuant to the Holdings Notes
Indenture for gross cash proceeds of not less than $50,000,000.
"Holdings Notes Indenture" means the indenture or note agreement to be
entered into by Holdings in connection with the issuance of the Holdings Notes,
together with all instruments and other agreements entered into by Holdings in
connection therewith, all in form and substance satisfactory to the
Administrative Agent.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid (excluding current accounts
payable and accrued expenses incurred in the ordinary course of business), (d)
all obligations of such Person under conditional sale or other title retention
agreements relating to property acquired by such Person, (e) all obligations of
such Person in respect of the deferred purchase price of property or services
(excluding (x) current accounts payable and accrued expenses incurred in the
ordinary course of business and (y) until such time as such obligations must be
recognized as liabilities under GAAP, any obligations in respect of earn-out
arrangements, non-compete arrangements or long-term consulting or employment
arrangements, in each case incurred directly in connection with a Permitted
Acquisition), (f) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien on property owned or acquired by such Person, whether
or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by
such Person of Indebtedness of others, (h) all Capital Lease Obligations of
such Person, (i) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit and letters of guaranty and (j)
all obligations, contingent or otherwise, of such Person in respect of bankers'
acceptances. The Indebtedness of any Person shall include the Indebtedness of
any other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person's ownership interest in or other relationship with such entity, except
to the extent the terms of such Indebtedness provide that such Person is not
liable therefor.
18
<PAGE> 24
"Indemnified Taxes" means Taxes other than Excluded Taxes and Other
Taxes.
"Indemnity, Subrogation and Contribution Agreement" means the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit F, among the Borrower, the Subsidiary Loan Parties and the
Administrative Agent.
"Information Memorandum" means the Confidential Information Memorandum
dated July, 1999, relating to the Borrower and the Transactions.
"Interest Coverage Ratio" shall have the meaning set forth in Section
6.12.
"Interest Election Request" means a request by the Borrower to convert
or continue a Revolving Borrowing or Term Borrowing in accordance with Section
2.07.
"Interest Payment Date" means (a) with respect to any ABR Loan (other
than a Swingline Loan), the last day of each January, April, July and October,
(b) with respect to any Eurodollar Loan, the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a
Eurodollar Borrowing with an Interest Period of more than three months'
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months' duration after the first day of such Interest
Period, and (c) with respect to any Swingline Loan, the day that such Loan is
required to be repaid.
"Interest Period" means, with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect, provided, that (a) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a
19
<PAGE> 25
Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
"Investor" means the entities set forth on Schedule 1.01(a).
"Investor Equity Contribution" means a contribution of an aggregate
amount of not less than $130,400,000 in cash to Holdings as common equity.
"IPO" means an underwritten public offering by Holdings of Equity
Interests of Holdings pursuant to a registration statement filed with the
Securities and Exchange Commission in accordance with the Securities Act of
1933, as amended.
"Issuing Bank" means The Chase Manhattan Bank, in its capacity as the
issuer of Letters of Credit hereunder, and its successors in such capacity as
provided in Section 2.05(i). The Issuing Bank may, in its discretion, arrange
for one or more Letters of Credit to be issued by Affiliates of the Issuing
Bank, in which case the term "Issuing Bank" shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate.
"LC Disbursement" means a payment made by the Issuing Bank pursuant to
a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on
behalf of the Borrower at such time. The LC Exposure of any Revolving Lender at
any time shall be its Applicable Percentage of the total LC Exposure at such
time.
"Lenders" means the Persons listed on Schedule 2.01 and any other
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto
pursuant to an Assignment and Acceptance. Unless the context otherwise
requires, the term "Lenders" includes the Swingline Lender.
"Letter of Credit" means any letter of credit issued pursuant to this
Agreement.
"Leverage Ratio" means, on any date, the ratio of (a) Total Debt on
such date to (b) Consolidated EBITDA for
20
<PAGE> 26
the period of four consecutive fiscal quarters of the Borrower most recently
ended as of such date, all determined on a consolidated basis in accordance
with GAAP.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Dow Jones Market
Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the "LIBO Rate"
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate at which dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest
in, on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement and the Security Documents.
"Loan Parties" means Holdings, the Borrower and the Subsidiary Loan
Parties.
"Loans" means the loans made by the Lenders to the Borrower pursuant
to this Agreement.
"Management Equity Contribution" means a contribution by the
Continuing Shareholders of an aggregate amount of approximately $4,500,000 in
cash to Holdings as common equity.
21
<PAGE> 27
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise,
of Holdings, the Borrower and the Subsidiaries taken as a whole, (b) the
ability of any Loan Party to perform any of its obligations under any Loan
Document or (c) the rights of or benefits available to the Lenders under any
Loan Document.
"Material Indebtedness" means Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of Holdings, the Borrower and the Subsidiaries
in an aggregate principal amount exceeding $5,000,000. For purposes of
determining Material Indebtedness, the "principal amount" of the obligations of
Holdings, the Borrower or any Subsidiary in respect of any Hedging Agreement at
any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that Holdings, the Borrower or such Subsidiary would be required to
pay if such Hedging Agreement were terminated at such time.
"Merger" means the merger of the Purchaser with and into Holdings,
with Holdings as the surviving corporation in the Merger.
"Merger Agreement" means the Agreement and Plan of Merger dated June
13, 1999, between Holdings and the Purchaser.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means a mortgage, deed of trust, assignment of leases and
rents, leasehold mortgage or other security document granting a Lien on any
Mortgaged Property to secure the Obligations. Each Mortgage shall be
satisfactory in form and substance to the Collateral Agent.
"Mortgaged Property" means, initially, each parcel of real property
and the improvements thereto owned by a Loan Party and identified on Schedule
1.01(b), and includes each other parcel of real property and improvements
thereto with respect to which a Mortgage is granted pursuant to Section 5.12 or
5.13.
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any event, (a) the cash proceeds
received in respect of such event, including (i) any cash received in respect
of any non-cash proceeds, but only as and when received, (ii) in the case of
22
<PAGE> 28
a casualty, insurance proceeds and (iii) in the case of a condemnation or
similar event, condemnation awards and similar payments, net of (b) the sum of
(i) all reasonable fees and out-of-pocket expenses (including, in respect of
any asset sale, any out-of-pocket expenses relating to the relocation of assets
or personnel, any severance or other personnel costs, and any other
out-of-pocket expenses of a similar nature, in each case incurred within twelve
months of such asset sale) paid by Holdings, the Borrower and the Subsidiaries
to third parties in connection with such event, (ii) in the case of a sale,
transfer or other disposition of an asset (including pursuant to a sale and
leaseback transaction or a casualty or a condemnation or similar proceeding),
the amount of all payments required to be made by Holdings, the Borrower and
the Subsidiaries as a result of such event to repay Indebtedness (other than
Loans) secured by such asset or otherwise subject to mandatory prepayment as a
result of such event, and (iii) the amount of all taxes paid (or reasonably
estimated to be payable) by Holdings, the Borrower and the Subsidiaries, and
the amount of any reserves established by Holdings, the Borrower and the
Subsidiaries to fund contingent liabilities reasonably estimated to be payable,
in each case during the year that such event occurred or the next succeeding
year and that are directly attributable to such event (as determined reasonably
and in good faith by the chief financial officer of the Borrower).
"Net Working Capital" means, at any date, (a) the consolidated current
assets of Holdings, the Borrower and its consolidated subsidiaries as of such
date (excluding cash and Permitted Investments) minus (b) the consolidated
current liabilities of Holdings, the Borrower and its consolidated subsidiaries
as of such date (excluding current liabilities in respect of Indebtedness). Net
Working Capital at any date may be a positive or negative number. Net Working
Capital increases when it becomes more positive or less negative and decreases
when it becomes less positive or more negative.
"Obligations" has the meaning assigned to such term in (a) the
Security Agreement, (b) the Pledge Agreement and (c) the Guarantee Agreements.
"Other Taxes" means any and all present or future recording, stamp,
documentary, excise, transfer, sales, property or similar taxes, charges or
levies arising from any payment made under any Loan Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document.
23
<PAGE> 29
"Outstanding Existing Notes" means the Existing Notes that remain
outstanding after completion of the Debt Tender Offer.
"Parent Guarantee Agreement" means the Parent Guarantee Agreement,
substantially in the form of Exhibit D, made by Holdings in favor of the
Administrative Agent for the benefit of the Secured Parties.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"Perfection Certificate" means a certificate in the form of Exhibit C
or any other form approved by the Collateral Agent.
"Permitted Acquisition" means any acquisition that occurs after the
Closing Date of all or substantially all the assets of, or shares or other
Equity Interests in, a Person or division or line of business of a Person that
is engaged in a reasonably related (ancillary or complementary) line of
business or lines of business, as reasonably determined by the Board of
Directors of the Borrower (or any subsequent investment made in a previously
acquired Permitted Acquisition), that was not preceded by an unsolicited tender
offer for such Person, if immediately after giving effect thereto (a) no
Default or Event of Default shall have occurred and be continuing or would
result therefrom, (b) all transactions related thereto shall be consummated in
accordance with applicable law, (c) 100% of the Equity Interests of any
acquired or newly formed corporation, partnership, association or other
business entity are owned directly by the Borrower or a domestic Wholly Owned
Subsidiary and all actions required to be taken, if any, with respect to such
acquired or newly formed subsidiary under Section 5.12 shall have been taken,
and (d)(i) Holdings, the Borrower and the Subsidiaries shall be in compliance,
on a pro forma basis after giving effect to such acquisition or formation, with
the covenants contained in Sections 6.12, 6.13 and 6.14 recomputed as at the
last day of the most recently ended fiscal quarter of Holdings, the Borrower
and the Subsidiaries as if such acquisition had occurred on the first day of
each relevant period for testing such compliance, and the Borrower shall have
delivered to the Administrative Agent an officers' certificate to such effect,
together with all relevant financial information for such subsidiary or assets,
and (ii) any acquired or newly formed subsidiary shall not be liable for any
Indebtedness (except for Indebtedness permitted by 6.01).
24
<PAGE> 30
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 5.05;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 30
days or are being contested in compliance with Section 5.05;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary
course of business;
(e) judgment liens in respect of judgments that do not constitute an
Event of Default under clause (k) of Article VII; and
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere
with the ordinary conduct of business of Holdings, the Borrower or any
Subsidiary;
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof
25
<PAGE> 31
and having, at such date of acquisition, the highest credit rating
obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State
thereof that has a combined capital and surplus and undivided profits of
not less than $250,000,000 or a foreign bank that has a combined capital
and surplus and undivided profits of not less than $125,000,000; and
(d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in
clause (c) above.
"Permitted Refinancing Indebtedness" means unsecured Indebtedness, the
proceeds of which are used by Holdings or the Borrower substantially
simultaneously with the issuance or incurrence of such Permitted Refinancing
Indebtedness solely to purchase or redeem all or any of the Outstanding
Existing Notes, provided that (a) such Indebtedness is issued or incurred by
Holdings or the Borrower, (b) such Indebtedness accrues interest at a fixed
rate determined in good faith by the Board of Directors of Holdings or the
Borrower, as applicable, to be a market rate of interest for such Indebtedness
at the time of issuance thereof or, in the case of a bridge loan, at a floating
rate determined based on a formula with a base rate, spreads and interest rate
step-ups that are determined in good faith by the Board of Directors of
Holdings or the Borrower, as applicable, to be market rates of interest and
interest rate step-up levels for such Indebtedness at the time of issuance
thereof, (c) such Indebtedness does not have a final maturity, and does not
require any amortization, sinking fund or similar payment, and is not
mandatorily redeemable or redeemable at the option of the holder or holders
thereof (in whole or in part), in each case prior to the date that is six
months after the Tranche C Maturity Date, provided that any Indebtedness that
would constitute Permitted Refinancing Indebtedness but for the provisions
thereof giving holders thereof the right to require the Obligor thereof to
repurchase or redeem such Indebtedness upon the occurrence of an "asset sale"
or "Change of Control" occurring prior to the date that is six months after the
Tranche C Maturity Date shall constitute Permitted
26
<PAGE> 32
Refinancing Indebtedness if the "asset sale" or "Change of Control" provisions
applicable to such Indebtedness are not more favorable to the holders of such
Indebtedness than the "asset sale" provisions and the "Change of Control",
provisions, respectively, contained in the Subordinated Debt Documents, (d) the
subordination provisions of such Indebtedness are no less favorable to the
Lenders than the subordination provisions applicable to the Senior Subordinated
Notes, (e) the terms of such Indebtedness do not require Holdings, the Borrower
or the Subsidiaries to maintain any specified financial condition (other than
as a condition to the taking of specified actions), (f) the terms of such
Indebtedness are not materially more restrictive than the terms of the Senior
Subordinated Notes and (g) the terms of such Indebtedness are otherwise
reasonably satisfactory to the Administrative Agent.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower
or any ERISA Affiliate is an "employer" as defined in Section 3(5) of ERISA.
"Pledge Agreement" means the Pledge Agreement, substantially in the
form of Exhibit G, among Holdings, the Borrower, the other Subsidiaries party
thereto and the Collateral Agent for the benefit of the Secured Parties.
"Prepayment Event" means:
(a) any sale, transfer or other disposition (including pursuant to a
sale and leaseback transaction) of any property or asset of Holdings, the
Borrower or any Subsidiary, other than (i) dispositions described in
clauses (a), (b) and (c) of Section 6.05, (ii) in each fiscal year, cash
proceeds of up to and including $15,000,000 from any dispositions
described in clause (d) of Section 6.05 during such fiscal year and (iii)
other dispositions resulting in aggregate Net Proceeds not exceeding
$5,000,000 during any fiscal year of the Borrower; or
(b) any casualty or other insured damage to, or any taking under power
of eminent domain or by condemnation or similar proceeding of, any
property or
27
<PAGE> 33
asset of Holdings, the Borrower or any Subsidiary, but only to the extent
that the Net Proceeds therefrom have not been applied to repair, restore
or replace such property or asset within one year after such event; or
(c) the incurrence by Holdings, the Borrower or any Subsidiary of any
Indebtedness, other than Indebtedness permitted pursuant to Section 6.01.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by The Chase Manhattan Bank as its prime rate in effect at
its principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as
being effective.
"Purchaser" means Fox Paine Medic Acquisition Corporation, a Texas
corporation.
"Recapitalization" means the transactions described in the first
paragraph of the introductory statement of this Agreement, including the Equity
Contributions, the issuance of the Holdings Notes, the Asset Dropdown, the
Substitution, the Circon Acquisition and the Merger.
"Recapitalization Documents" means the Merger Agreement and the other
agreements and documents entered into pursuant thereto or in connection
therewith (other than the Loan Documents, the Subordinated Debt Documents and
the Holdings Notes Indenture).
"Register" has the meaning set forth in Section 9.04(c).
"Related Fund" means, with respect to any Lender that is a fund or
trust that makes, buys or invests in commercial loans, any other fund or trust
that makes, buys or invests in commercial loans and is managed by the same
investment advisor as such Lender.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Release" means any release, spill, emission, leaking, dumping,
injection, pouring, deposit, disposal, discharge, dispersal, leaching or
migration into the environment (including ambient air, surface water,
28
<PAGE> 34
groundwater, land surface or subsurface strata) or within any building,
structure, facility or fixture.
"Required Lenders" means, at any time, Lenders having Revolving
Exposures, Term Loans and unused Commitments representing more than 50% of the
sum of the total Revolving Exposures, outstanding Term Loans and unused
Commitments at such time.
"Restricted Payment" means any dividend or other distribution (whether
in cash, securities or other property) with respect to any Equity Interests in
Holdings, the Borrower or any Subsidiary, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit,
on account of the purchase, redemption, retirement, acquisition, cancelation or
termination of any Equity Interests in Holdings, the Borrower or any Subsidiary
or any option, warrant or other right to acquire any such Equity Interests in
Holdings, the Borrower or any Subsidiary.
"Retained Equity" means Shares having a value (based on the Cash
Merger Consideration) of approximately $13,300,000 and that will be held by the
Continuing Shareholders and, possibly, certain other existing stockholders of
Holdings immediately after the Closing Date.
"Revolving Availability Period" means the period from and including
the Closing Date to but excluding the earlier of the Revolving Maturity Date
and the date of termination of the Revolving Commitments.
"Revolving Commitment" means, with respect to each Lender, the
commitment, if any, of such Lender to make Revolving Loans and to acquire
participations in Letters of Credit and Swingline Loans hereunder, expressed as
an amount representing the maximum aggregate amount of such Lender's Revolving
Exposure hereunder, as such commitment may be (a) reduced from time to time
pursuant to Section 2.08 and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 9.04. The
initial amount of each Lender's Revolving Commitment is set forth on Schedule
2.01, or in the Assignment and Acceptance pursuant to which such Lender shall
have assumed its Revolving Commitment, as applicable. The initial aggregate
amount of the Lenders' Revolving Commitments is $50,000,000.
"Revolving Exposure" means, with respect to any Lender at any time,
the sum of the outstanding principal
29
<PAGE> 35
amount of such Lender's Revolving Loans and its LC Exposure and Swingline
Exposure at such time.
"Revolving Lender" means a Lender with a Revolving Commitment or, if
the Revolving Commitments have terminated or expired, a Lender with any
Revolving Exposure.
"Revolving Loan" means a Loan made pursuant to clause (d) of Section
2.01.
"Revolving Maturity Date" means the date that is six years after the
Closing Date or the first Business Day thereafter, if such date is not a
Business Day.
"S&P" means Standard & Poor's Ratings Service.
"Secured Parties" shall have the meaning given such term in the
Security Agreement.
"Security Agreement" means the Security Agreement, substantially in
the form of Exhibit H, among the Borrower, Holdings, the Subsidiary Loan
Parties and the Collateral Agent for the benefit of the Secured Parties.
"Security Documents" means the Security Agreement, the Guarantee
Agreements, the Pledge Agreement, the Indemnity, Subrogation and Contribution
Agreement, the Mortgages and each other security agreement or other instrument
or document executed and delivered pursuant to Section 5.12 or 5.13 to secure
any of the Obligations.
"Senior Adjusted Leverage Ratio" means, on any date, the ratio of (a)
Senior Debt on such date to (b) Adjusted Consolidated EBITDA for the period of
four consecutive fiscal quarters of the Borrower most recently ended as of such
date, all determined on a consolidated basis in accordance with GAAP.
"Senior Debt" means, with respect to the Borrower and the Subsidiaries
on a consolidated basis at any time (without duplication), Total Debt at such
time minus the sum of the aggregate principal amount of the Senior Subordinated
Notes, Existing Notes and Permitted Refinancing Indebtedness outstanding at
such time.
"Senior Subordinated Notes" means the $144,552,000 in aggregate
principal amount at maturity of senior subordinated discount notes issued by
the Borrower pursuant to the Subordinated Debt Documents.
30
<PAGE> 36
"Services Agreement" means the Services Agreement, substantially in
the form of Exhibit I, between the Borrower and Circon.
"Shares" means, collectively, all the shares of common stock of
Holdings outstanding immediately prior to the consummation of the Merger.
"Sold Entity or Business" has the meaning assigned to such term in the
definition of the term Adjusted Consolidated EBITDA.
"Sponsor" means Fox Paine Capital Fund L.P. and its Affiliates (other
than Affiliates that are operating companies or controlled by operating
companies).
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including
any marginal, special, emergency or supplemental reserves) expressed as a
decimal established by the Board to which the Administrative Agent is subject
(a) with respect to the Base CD Rate, for new negotiable nonpersonal time
deposits in dollars of over $100,000 with maturities approximately equal to
three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
the Board). Such reserve percentages shall include those imposed pursuant to
such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D or any comparable regulation. The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
"Subordinated Debt Documents" means the indenture, note agreement or
other agreement under which the Senior Subordinated Notes and/or any Permitted
Refinancing Indebtedness are issued and all other instruments, agreements and
other documents evidencing or governing the Senior Subordinated Notes and/or
any Permitted Refinancing Indebtedness or providing for any Guarantee or other
right in respect of any thereof.
"Subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of
31
<PAGE> 37
the parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as
any other corporation, limited liability company, partnership, association or
other entity of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent.
"Subsidiary" means any subsidiary of the Borrower. For purposes of the
representations and warranties made herein on (and the conditions to borrowing
on) the Closing Date, the term Subsidiary includes each of Holdings and its
subsidiaries but excludes Circon and its subsidiaries to the extent they
include the Circon Businesses.
"Subsidiary Guarantee Agreement" means the Subsidiary Guarantee
Agreement, substantially in the form of Exhibit E, made by the Subsidiary Loan
Parties in favor of the Administrative Agent for the benefit of the Secured
Parties.
"Subsidiary Loan Party" means any Subsidiary that is not a Foreign
Subsidiary.
"Substitution" means the process whereby the Borrower will succeed to,
and be substituted for, Holdings as the primary obligor under the indenture
relating to the Existing Notes, pursuant to Section 5.02 of that indenture.
"Swingline Exposure" means, at any time, the aggregate principal
amount of all Swingline Loans outstanding at such time. The Swingline Exposure
of any Lender at any time shall be its Applicable Percentage of the total
Swingline Exposure at such time.
"Swingline Lender" means The Chase Manhattan Bank, in its capacity as
lender of Swingline Loans hereunder.
"Swingline Loan" means a Loan made pursuant to Section 2.04.
"Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
32
<PAGE> 38
"Term Loan Commitments" means Tranche A Commitments, Tranche B
Commitments and Tranche C Commitments.
"Term Loans" means Tranche A Term Loans, Tranche B Term Loans and
Tranche C Term Loans.
"Test Period" means, for any determination made on a specific date,
the period of four consecutive fiscal quarters of the Borrower most recently
ended as of such date (taken as one accounting period).
"Three-Month Secondary CD Rate" means, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or
such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day is not a Business Day, on the next preceding Business
Day) by the Administrative Agent from three negotiable certificate of deposit
dealers of recognized standing selected by it.
"Total Adjusted Leverage Ratio" shall mean, on any date, the ratio of
(a) Total Debt as of such date to (b) Adjusted Consolidated EBITDA for the
period of four consecutive fiscal quarters of the Borrower most recently ended
as of such date, all determined on a consolidated basis in accordance with
GAAP.
"Total Debt" means, with respect to the Borrower and the Subsidiaries
on a consolidated basis at any time (without duplication), all Indebtedness
consisting of Capital Lease Obligations, Indebtedness for borrowed money and
Indebtedness in respect of the deferred purchase price of property or services
of the Borrower and the Subsidiaries on a consolidated basis at such time.
"Tranche A Commitment" means, with respect to each Lender, the
commitment, if any, of such Lender to make a Tranche A Term Loan hereunder on
the Closing Date, expressed as an amount representing the maximum aggregate
principal amount of the Tranche A Term Loan to be made by such Lender
hereunder, as such commitment may be (a) reduced from time
33
<PAGE> 39
to time pursuant to Section 2.08 and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 9.04. The
initial amount of each Lender's Tranche A Commitment is set forth on Schedule
2.01, or in the Assignment and Acceptance pursuant to which such Lender shall
have assumed its Tranche A Commitment, as applicable. The initial aggregate
amount of the Lenders' Tranche A Commitments is $80,000,000.
"Tranche A Lender" means a Lender with a Tranche A Commitment or an
outstanding Tranche A Term Loan.
"Tranche A Maturity Date" means the date that is six years after the
Closing Date or the first Business Day thereafter, if such date is not a
Business Day.
"Tranche A Term Loan" means a Loan made pursuant to clause (a) of
Section 2.01.
"Tranche B Commitment" means, with respect to each Lender, the
commitment, if any, of such Lender to make a Tranche B Term Loan hereunder on
the Closing Date, expressed as an amount representing the maximum aggregate
principal amount of the Tranche B Term Loan to be made by such Lender
hereunder, as such commitment may be (a) reduced from time to time pursuant to
Section 2.08 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial amount
of each Lender's Tranche B Commitment is set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed its
Tranche B Commitment, as applicable. The initial aggregate amount of the
Lenders' Tranche B Commitments is, subject to Section 2.08(c), $90,000,000.
"Tranche B Lender" means a Lender with a Tranche B Commitment or an
outstanding Tranche B Term Loan.
"Tranche B Maturity Date" means the date that is seven-and-one-half
years after the Closing Date or the first Business Day thereafter, if such date
is not a Business Day.
"Tranche B Rate" means, with respect to any Tranche B Term Loan, (a)
2.25% per annum, in the case of an ABR Loan, or (b) 3.25% per annum, in the
case of a Eurodollar Loan.
"Tranche B Term Loan" means a Loan made pursuant to clause (b) of
Section 2.01.
34
<PAGE> 40
"Tranche C Commitment" means, with respect to each Lender, the
commitment, if any, of such Lender to make a Tranche C Term Loan hereunder on
the Closing Date, expressed as an amount representing the maximum aggregate
principal amount of the Tranche C Term Loan to be made by such Lender
hereunder, as such commitment may be (a) reduced from time to time pursuant to
Section 2.08 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial amount
of each Lender's Tranche C Commitment is set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed its
Tranche C Commitment, as applicable. The initial aggregate amount of the
Lenders' Tranche C Commitments is, subject to Section 2.08(c), $90,000,000.
"Tranche C Lender" means a Lender with a Tranche C Commitment or an
outstanding Tranche C Term Loan.
"Tranche C Maturity Date" means the date that is eight-and-one-half
years after the Closing Date or the first Business Day thereafter, if such date
is not a Business Day.
"Tranche C Rate" means, with respect to any Tranche C Term Loan, (a)
2.50% per annum, in the case of an ABR Loan, or (b) 3.50% per annum, in the
case of a Eurodollar Loan.
"Tranche C Term Loan" means a Loan made pursuant to clause (c) of
Section 2.01.
"Transaction Costs" means the fees and expenses, including the Debt
Tender Premium, incurred by Holdings, the Borrower or any Subsidiary in
connection with the Transactions in an aggregate amount not to exceed
$52,200,000.
"Transactions" means, collectively, the transactions described in the
introductory statement of this Agreement, including the Recapitalization, the
borrowings under this Credit Agreement and the issuance of the Senior
Subordinated Notes and the Holdings Notes.
"Type", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the
Alternate Base Rate.
"Wholly Owned Subsidiary" means a Subsidiary all the Equity Interests
of which (other than directors'
35
<PAGE> 41
qualifying shares) are owned by the Borrower or another Wholly Owned
Subsidiary.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of
this Agreement, Loans may be classified and referred to by Class (e.g., a
"Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type
(e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified and
referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a
"Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving
Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein shall
apply equally to 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. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The word
"will" shall be construed to have the same meaning and effect as the word
"shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth
herein), (b) any reference herein to any Person shall be construed to include
such Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time, provided
that, if the Borrower notifies the Administrative
36
<PAGE> 42
Agent that the Borrower requests an amendment to any provision hereof to
eliminate the effect of any change occurring after the date hereof in GAAP or
in the application thereof on the operation of such provision (or if the
Administrative Agent notifies the Borrower that the Required Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in
accordance herewith.
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions set
forth herein, each Lender agrees (a) to make a Tranche A Term Loan to the
Borrower on the Closing Date in a principal amount not exceeding its Tranche A
Commitment, (b) to make a Tranche B Term Loan to the Borrower on the Closing
Date in a principal amount not exceeding its Tranche B Commitment, (c) to make
a Tranche C Term Loan to the Borrower on the Closing Date in a principal amount
not exceeding its Tranche C Commitment and (d) to make Revolving Loans to the
Borrower on the Closing Date and from time to time during the Revolving
Availability Period in an aggregate principal amount that will not result in
such Lender's Revolving Exposure exceeding such Lender's Revolving Commitment.
Within the foregoing limits and subject to the terms and conditions set forth
herein, the Borrower may borrow, prepay and reborrow Revolving Loans. Amounts
repaid in respect of Term Loans may not be reborrowed.
SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than a
Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the
same Class and Type made by the Lenders ratably in accordance with their
respective Commitments of the applicable Class. The failure of any Lender to
make any Loan required to be made by it shall not relieve any other Lender of
its obligations hereunder, provided that the Commitments of the Lenders are
several and no Lender shall be responsible for any other Lender's failure to
make Loans as required.
(b) Subject to Section 2.14, each Revolving Borrowing and Term
Borrowing shall be comprised entirely of
37
<PAGE> 43
ABR Loans or Eurodollar Loans as the Borrower may request in accordance
herewith, provided that all Borrowings made on the Closing Date must be made as
ABR Borrowings. Each Swingline Loan shall be an ABR Loan. Each Lender at its
option may make any Eurodollar Loan by causing any domestic or foreign branch
or Affiliate of such Lender to make such Loan, provided that any exercise of
such option shall not affect the obligation of the Borrower to repay such Loan
in accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR
Revolving Borrowing is made, such Borrowing shall be in an aggregate amount
that is an integral multiple of $1,000,000 and not less than $5,000,000,
provided that an ABR Revolving Borrowing may be in an aggregate amount that is
equal to the entire unused balance of the total Revolving Commitments or that
is required to finance the reimbursement of an LC Disbursement as contemplated
by Section 2.05(e). Each Swingline Loan shall be in an amount that is an
integral multiple of $500,000 and not less than $500,000. Borrowings of more
than one Type and Class may be outstanding at the same time, provided that
there shall not at any time be more than a total of fifteen Eurodollar
Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Revolving Maturity Date, Tranche A Maturity Date, Tranche B Maturity
Date or Tranche C Maturity Date, as applicable.
SECTION 2.03. Requests for Borrowings. To request a Revolving
Borrowing or Term Borrowing, the Borrower shall notify the Administrative Agent
of such request by telephone (a) in the case of a Eurodollar Borrowing, not
later than 12:00 noon, New York City time, three Business Days before the date
of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later
than 12:00 noon, New York City time, one Business Day before the date of the
proposed Borrowing, provided that any such notice of an ABR Revolving Borrowing
to finance the reimbursement of an LC Disbursement as contemplated by Section
2.05(e) may be given not later than 10:00 a.m., New York City time, on the date
of the proposed Borrowing. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Borrowing Request
38
<PAGE> 44
in a form approved by the Administrative Agent and signed by the Borrower. Each
such telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.02:
(i) whether the requested Borrowing is to be a Revolving Borrowing,
Tranche A Term Borrowing, Tranche B Term Borrowing or Tranche C Term
Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) the date of such Borrowing, which shall be a Business Day;
(iv) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
(v) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(vi) the location and number of the Borrower's account to which funds
are to be disbursed, which shall comply with the requirements of Section
2.06.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be
deemed to have selected an Interest Period of one month's duration. Promptly
following receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. Swingline Loans. (a) Subject to the terms and
conditions set forth herein, the Swingline Lender agrees to make Swingline
Loans to the Borrower from time to time during the Revolving Availability
Period (other than on the Closing Date), in an aggregate principal amount at
any time outstanding that will not result in (i) the aggregate principal amount
of outstanding Swingline Loans exceeding $10,000,000 or (ii) the sum of the
total Revolving Exposures exceeding the total Revolving Commitments. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Swingline Loans.
39
<PAGE> 45
(b) To request a Swingline Loan, the Borrower shall notify the
Administrative Agent of such request by telephone (confirmed by telecopy), not
later than 12:00 noon, New York City time, on the day of a proposed Swingline
Loan. Each such notice shall be irrevocable and shall specify the requested
date (which shall be a Business Day) and amount of the requested Swingline
Loan. The Administrative Agent will promptly advise the Swingline Lender of any
such notice received from the Borrower. The Swingline Lender shall make each
Swingline Loan available to the Borrower by means of a credit to the general
deposit account of the Borrower with the Swingline Lender (or, in the case of a
Swingline Loan made to finance the reimbursement of an LC Disbursement as
provided in Section 2.05(e), by remittance to the Issuing Bank) by 3:00 p.m.,
New York City time, on the requested date of such Swingline Loan.
(c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 12:00 noon, New York City time, on any
Business Day require the Revolving Lenders to acquire participations on such
Business Day in all or a portion of the Swingline Loans outstanding. Such
notice shall specify the aggregate amount of Swingline Loans in which Revolving
Lenders will participate. Promptly upon receipt of such notice, the
Administrative Agent will give notice thereof to each Revolving Lender,
specifying in such notice such Lender's Applicable Percentage of such Swingline
Loan or Swingline Loans. Each Revolving Lender hereby absolutely and
unconditionally agrees, upon receipt of notice as provided above, to pay to the
Administrative Agent, for the account of the Swingline Lender, such Lender's
Applicable Percentage of such Swingline Loan or Swingline Loans. Each Revolving
Lender acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or reduction or termination of the Commitments,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever. Each Revolving Lender shall comply with
its obligation under this paragraph by wire transfer of immediately available
funds, in the same manner as provided in Section 2.06 with respect to Loans
made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the
payment obligations of the Revolving Lenders), and the Administrative Agent
shall promptly pay to the Swingline Lender the amounts so received by it from
the Revolving Lenders. The Administrative Agent shall notify the Borrower of
any participations in any Swingline Loan acquired pursuant to this paragraph,
and
40
<PAGE> 46
thereafter payments in respect of such Swingline Loan shall be made to the
Administrative Agent and not to the Swingline Lender. Any amounts received by
the Swingline Lender from the Borrower (or other party on behalf of the
Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender
of the proceeds of a sale of participations therein shall be promptly remitted
to the Administrative Agent; any such amounts received by the Administrative
Agent shall be promptly remitted by the Administrative Agent to the Revolving
Lenders that shall have made their payments pursuant to this paragraph and to
the Swingline Lender, as their interests may appear. The purchase of
participations in a Swingline Loan pursuant to this paragraph shall not relieve
the Borrower of any default in the payment thereof.
SECTION 2.05. Letters of Credit. (a) General. Subject to the terms
and conditions set forth herein, the Borrower may request the issuance of
Letters of Credit for its own account, in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Revolving Availability Period. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of any form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the Issuing Bank relating to
any Letter of Credit, the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the
Issuing Bank and the Administrative Agent (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, and specifying the date of issuance,
amendment, renewal or extension (which shall be a Business Day), the date on
which such Letter of Credit is to expire (which shall comply with paragraph (c)
of this Section), the amount of such Letter of Credit, the name and address of
the beneficiary thereof and such other information as shall be necessary to
prepare, amend, renew or extend such Letter of Credit. If requested by the
Issuing Bank, the Borrower also shall submit a letter of credit application on
the Issuing Bank's standard form in connection with any request for a Letter of
Credit. A Letter of Credit shall be issued,
41
<PAGE> 47
amended, renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent
and warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed $25,000,000 and (ii) the total
Revolving Exposures shall not exceed the total Revolving Commitments.
(c) Expiration Date. Each Letter of Credit shall expire at or prior to
the close of business on the earlier of (i) the date one year after the date of
the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Revolving Maturity Date.
(d) Participations. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Revolving Lender, and each Revolving Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Lender's Applicable Percentage of the aggregate amount available to be
drawn under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Revolving Lender hereby absolutely and unconditionally agrees
to pay to the Administrative Agent, for the account of the Issuing Bank, such
Lender's Applicable Percentage of each LC Disbursement made by the Issuing Bank
and not reimbursed by the Borrower on the date due as provided in paragraph (e)
of this Section, or of any reimbursement payment required to be refunded to the
Borrower for any reason. Each Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including any amendment, renewal or extension of
any Letter of Credit or the occurrence and continuance of a Default or
reduction or termination of the Commitments, and that each such payment shall
be made without any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement
in respect of a Letter of Credit, the Borrower shall reimburse such LC
Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 3:00 p.m., New York City time, on the date that
such LC Disbursement is made, if the Borrower shall have received notice of
such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or,
42
<PAGE> 48
if such notice has not been received by the Borrower prior to such time on such
date, then not later than 3:00 p.m., New York City time, on (i) the Business
Day that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to 10:00 a.m., New York City time on the day of
receipt, provided that, if such LC Disbursement is not less than $5,000,000,
the Borrower may, subject to the conditions to borrowing set forth herein,
request in accordance with Section 2.03 or 2.04 that such payment be financed
with an ABR Revolving Borrowing or Swingline Loan in an equivalent amount and,
to the extent so financed, the Borrower's obligation to make such payment shall
be discharged and replaced by the resulting ABR Revolving Borrowing or
Swingline Loan. If the Borrower fails to make such payment when due, the
Administrative Agent shall notify each Revolving Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and
such Lender's Applicable Percentage thereof. Promptly following receipt of such
notice, each Revolving Lender shall pay to the Administrative Agent its
Applicable Percentage of the payment then due from the Borrower, in the same
manner as provided in Section 2.06 with respect to Loans made by such Lender
(and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of
the Revolving Lenders), and the Administrative Agent shall promptly pay to the
Issuing Bank the amounts so received by it from the Revolving Lenders. Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this paragraph, the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Revolving Lenders have made
payments pursuant to this paragraph to reimburse the Issuing Bank, then to such
Lenders and the Issuing Bank as their interests may appear. Any payment made by
a Revolving Lender pursuant to this paragraph to reimburse the Issuing Bank for
any LC Disbursement (other than the funding of ABR Revolving Loans or a
Swingline Loan as contemplated above) shall not constitute a Loan and shall not
relieve the Borrower of its obligation to reimburse such LC Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed
43
<PAGE> 49
strictly in accordance with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of any Letter of Credit or this Agreement, or any term or
provision therein, (ii) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect, (iii) payment by
the Issuing Bank under a Letter of Credit against presentation of a draft or
other document that does not comply with the terms of such Letter of Credit or
(iv) any other event or circumstance whatsoever, whether or not similar to any
of the foregoing, that might, but for the provisions of this Section,
constitute a legal or equitable discharge of, or provide a right of setoff
against, the Borrower's obligations hereunder. Neither the Administrative
Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties,
shall have any liability or responsibility by reason of or in connection with
the issuance or transfer of any Letter of Credit or any payment or failure to
make any payment thereunder (irrespective of any of the circumstances referred
to in the preceding sentence), or any error, omission, interruption, loss or
delay in transmission or delivery of any draft, notice or other communication
under or relating to any Letter of Credit (including any document required to
make a drawing thereunder), any error in interpretation of technical terms or
any consequence arising from causes beyond the control of the Issuing Bank,
provided that the foregoing shall not be construed to excuse the Issuing Bank
from liability to the Borrower to the extent of any direct damages (as opposed
to consequential damages, claims in respect of which are hereby waived by the
Borrower to the extent permitted by applicable law) suffered by the Borrower
that are caused by the Issuing Bank's failure to exercise care when determining
whether drafts and other documents presented under a Letter of Credit comply
with the terms thereof. The parties hereto expressly agree that, in the absence
of gross negligence or wilful misconduct on the part of the Issuing Bank (as
finally determined by a court of competent jurisdiction), the Issuing Bank
shall be deemed to have exercised care in each such determination. In
furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented that appear on their
face to be in substantial compliance with the terms of a Letter of Credit, the
Issuing Bank may, in its sole discretion, either accept and make payment upon
such documents without responsibility for further investigation, regardless of
any notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
44
<PAGE> 50
(g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder, provided that any failure to give or
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Revolving Lenders with respect to any such
LC Disbursement (other than with respect to the timing of such reimbursement
obligation as set forth in Section 2.05(e)).
(h) Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans,
provided that, if the Borrower fails to reimburse such LC Disbursement when due
pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Bank, except that interest accrued on and after the date of payment by
any Revolving Lender pursuant to paragraph (e) of this Section to reimburse the
Issuing Bank shall be for the account of such Lender to the extent of such
payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be replaced
at any time by written agreement among the Borrower, the Administrative Agent,
the replaced Issuing Bank and the successor Issuing Bank. The Administrative
Agent shall notify the Lenders of any such replacement of the Issuing Bank. At
the time any such replacement shall become effective, the Borrower shall pay
all unpaid fees accrued for the account of the replaced Issuing Bank pursuant
to Section 2.12(b). From and after the effective date of any such replacement,
(i) the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be
issued thereafter and (ii) references herein to the term "Issuing Bank" shall
be deemed to refer to such successor or to any previous Issuing Bank, or to
such successor and all previous Issuing Banks, as the context shall require.
After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank
shall remain a party hereto and shall continue to have all the rights and
obligations of an Issuing Bank under this Agreement with
45
<PAGE> 51
respect to Letters of Credit issued by it prior to such replacement, but shall
not be required to issue additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Revolving Lenders with LC Exposure representing greater
than 50% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders, an amount in cash equal to the LC Exposure as of such
date plus any accrued and unpaid interest thereon, provided that the obligation
to deposit such cash collateral shall become effective immediately, and such
deposit shall become immediately due and payable, without demand or other
notice of any kind, upon the occurrence of any Event of Default with respect to
the Borrower described in clause (h) or (i) of Article VII. Each such deposit
shall be held by the Administrative Agent as collateral for the payment and
performance of the obligations of the Borrower under this Agreement. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest
earned on the investment of such deposits, which investments shall be Permitted
Investments, made at the option and sole discretion of the Administrative Agent
and at the Borrower's risk and expense, such deposits shall not bear interest.
Interest or profits, if any, on such investments shall accumulate in such
account and shall be the Borrower's property held by the Collateral Agent for
the satisfaction of the reimbursement obligations of the Borrower for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated
(but subject to the consent of Revolving Lenders with LC Exposure representing
greater than 50% of the total LC Exposure), shall be applied to satisfy other
obligations of the Borrower under this Agreement. Moneys in such account shall
be applied by the Administrative Agent to reimburse the Issuing Bank for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrower for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated (but subject to the consent of Revolving Lenders with LC
Exposure representing greater than 50% of the total LC Exposure), be applied to
satisfy other obligations of the Borrower under this Agreement. If the Borrower
is required to provide an amount of cash collateral hereunder as a result of
the
46
<PAGE> 52
occurrence of an Event of Default, such amount plus any accrued interest or
realized profits on account of such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived. If the Borrower is required to
provide an amount of cash collateral hereunder pursuant to Section 2.11(b),
such amount plus any accrued interest or realized profits on account of such
amount (to the extent not applied as aforesaid) shall be returned to the
Borrower as and to the extent that, after giving effect to such return, the
Borrower would remain in compliance with Section 2.11(b) and no Default shall
have occurred and be continuing.
SECTION 2.06. Funding of Borrowings. (a) Each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer
of immediately available funds by 12:00 noon, New York City time, to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders, provided that Swingline Loans shall be made
as provided in Section 2.04. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in
like funds, to an account of the Borrower maintained with the Administrative
Agent in New York City and designated by the Borrower in the applicable
Borrowing Request, provided that ABR Revolving Loans made to finance the
reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be
remitted by the Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in
47
<PAGE> 53
the case of the Borrower, the interest rate applicable to ABR Loans. If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender's Loan included in such Borrowing.
SECTION 2.07. Interest Elections. (a) Each Revolving Borrowing and
Term Borrowing initially shall be of the Type specified in the applicable
Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an
initial Interest Period as specified in such Borrowing Request. Thereafter, the
Borrower may elect to convert such Borrowing to a different Type or to continue
such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest
Periods therefor, all as provided in this Section. The Borrower may elect
different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing. This Section shall not apply
to Swingline Borrowings, which may not be converted or continued.
(b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that
a Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Revolving Borrowing of the Type resulting from such election to be
made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in a form approved by the Administrative Agent and signed by the
Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02 and paragraph
(f) of this Section:
(i) the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated to each resulting
Borrowing (in which case the information to be specified pursuant to
clauses (iii) and (iv) below shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
48
<PAGE> 54
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of
such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Required Lenders, so notifies the Borrower, then, so long as an
Event of Default is continuing (i) no outstanding Borrowing may be converted to
or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
(f) A Borrowing of any Class may not be converted to or continued as a
Eurodollar Borrowing if after giving effect thereto (i) the Interest Period
therefor would commence before and end after a date on which any principal of
the Loans of such Class is scheduled to be repaid and (ii) the sum of the
aggregate principal amount of outstanding Eurodollar Borrowings of such Class
with Interest Periods ending on or prior to such scheduled repayment date plus
the aggregate principal amount of outstanding ABR Borrowings of such Class
would be less than the aggregate principal amount of Loans of such Class
required to be repaid on such scheduled repayment date.
SECTION 2.08. Termination and Reduction of Commitments. (a) Unless
previously terminated, (i) the Tranche A Commitments, Tranche B Commitments and
Tranche C
49
<PAGE> 55
Commitments shall terminate at 5:00 p.m., New York City time, on the Closing
Date and (ii) the Revolving Commitments shall terminate on (A) the Revolving
Maturity Date or (B) unless otherwise agreed in writing by Revolving Lenders
holding a majority of the Revolving Commitments, if more than $20,000,000 in
aggregate principal amount of the Existing Notes is neither (I) repurchased as
part of the Debt Tender Offer nor (II) repaid on or before the Existing Notes
Refinancing Date with the proceeds of the issuance or incurrence of Permitted
Refinancing Indebtedness, the Existing Notes Refinancing Date.
(b) The Borrower may at any time terminate, or from time to time
reduce, the Commitments of any Class, provided that (i) each reduction of the
Commitments of any Class shall be in an amount that is an integral multiple of
$1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not
terminate or reduce the Revolving Commitments if, after giving effect to any
concurrent prepayment of the Revolving Loans in accordance with Section 2.11,
the sum of the Revolving Exposures would exceed the total Revolving
Commitments.
(c) The Tranche B Commitments and Tranche C Commitments shall be
automatically and permanently reduced on the Closing Date by an amount equal to
the aggregate principal amount of the Outstanding Existing Notes on the Closing
Date, such reduction to be allocated pro rata between the Tranche B Commitments
and the Tranche C Commitments based on the aggregate principal amount of such
commitments on the Closing Date.
(d) The Borrower shall notify the Administrative Agent of any election
to terminate or reduce the Commitments under paragraph (b) of this Section at
least three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this Section shall be irrevocable, provided that a notice of termination of
the Revolving Commitments delivered by the Borrower may state that such notice
is conditioned upon the effectiveness of other credit facilities, in which case
such notice may be revoked by the Borrower (by notice to the Administrative
Agent on or prior to the specified effective date) if such condition is not
satisfied. Any termination or reduction of the Commitments of any Class shall
be permanent. Each reduction of the Commitments of any Class shall be made
ratably among the Lenders in accordance with their respective Commitments of
such Class.
50
<PAGE> 56
SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) The Borrower
hereby unconditionally promises to pay (i) to the Administrative Agent for the
account of each Lender the then unpaid principal amount of each Revolving Loan
of such Lender on the Revolving Maturity Date, (ii) to the Administrative Agent
for the account of each Lender the then unpaid principal amount of each Term
Loan of such Lender as provided in Section 2.10 and (iii) to the Swingline
Lender the then unpaid principal amount of each Swingline Loan on the earlier
of the Revolving Maturity Date and the first date after such Swingline Loan is
made that is the 15th or last day of a calendar month and is at least two
Business Days after such Swingline Loan is made, provided that (A) on each date
that a Revolving Borrowing is made and (B) if requested by the Swingline
Lender, on the last day of March, June, September and December of each year,
the Borrower shall repay all Swingline Loans then outstanding.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Class and Type thereof
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein, provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by it be
evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such
51
<PAGE> 57
Lender a promissory note payable to the order of such Lender (or, if requested
by such Lender, to such Lender and its registered assigns) and in a form
approved by the Administrative Agent. Thereafter, the Loans evidenced by such
promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more promissory
notes in such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered
assigns).
SECTION 2.10. Amortization of Term Loans. (a) Subject to adjustment
pursuant to paragraph (e) of this Section, the Borrower shall repay Tranche A
Term Borrowings on each date set forth below in the aggregate principal amount
set forth opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
October 31, 2000 $10,000,000
October 31, 2001 $12,000,000
October 31, 2002 $12,000,000
October 31, 2003 $14,000,000
October 31, 2004 $16,000,000
Tranche A Maturity Date $16,000,000
</TABLE>
provided, however, that if more than $20,000,000 in aggregate principal amount
of the Existing Notes is neither (i) repurchased as part of the Debt Tender
Offer nor (ii) repaid on or before the Existing Notes Refinancing Date with the
proceeds of the issuance or incurrence of Permitted Refinancing Indebtedness,
then all Tranche A Term Loans not previously repaid shall, unless otherwise
agreed in writing by Tranche A Lenders holding a majority of the outstanding
Tranche A Loans, be due and payable on the Existing Notes Refinancing Date.
(b) Subject to adjustment pursuant to paragraph (e) of this Section,
the Borrower shall repay Tranche B Term Borrowings on each date set forth below
in the aggregate principal amount set forth opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
October 31, 2000 $250,000
October 31, 2001 $250,000
October 31, 2002 $250,000
October 31, 2003 $250,000
October 31, 2004 $250,000
October 31, 2005 $250,000
October 31, 2006 $40,000,000
Tranche B Maturity Date $48,500,000
</TABLE>
52
<PAGE> 58
provided, however, that if more than $20,000,000 in aggregate principal amount
of the Existing Notes is neither (i) repurchased as part of the Debt Tender
Offer nor (ii) repaid on or before the date that is 91 days after the Existing
Notes Refinancing Date with the proceeds of the issuance or incurrence of
Permitted Refinancing Indebtedness, then all Tranche B Term Loans not
previously repaid shall, unless otherwise agreed in writing by Tranche B
Lenders holding a majority of the outstanding Tranche B Loans, be due and
payable on the date that is 91 days after the Existing Notes Refinancing Date.
(c) Subject to adjustment pursuant to paragraph (e) of this Section,
the Borrower shall repay Tranche C Term Borrowings on each date set forth below
in the aggregate principal amount set forth opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
October 31, 2000 $250,000
October 31, 2001 $250,000
October 31, 2002 $250,000
October 31, 2003 $250,000
October 31, 2004 $250,000
October 31, 2005 $250,000
October 31, 2006 $250,000
October 31, 2007 $30,000,000
Tranche C Maturity Date $58,250,000
</TABLE>
provided, however, that if more than $20,000,000 in aggregate principal amount
of the Existing Notes is neither (i) repurchased as part of the Debt Tender
Offer nor (ii) repaid on or before the date that is 182 days after the Existing
Notes Refinancing Date with the proceeds of the issuance or incurrence of
Permitted Refinancing Indebtedness, then all Tranche C Term Loans not
previously repaid shall, unless otherwise agreed in writing by Tranche C
Lenders holding a majority of the outstanding Tranche C Loans, be due and
payable on the date that is 182 days after Existing Notes Refinancing Date.
(d) To the extent not previously paid, (i) all Tranche A Term Loans
shall be due and payable on the Tranche A Maturity Date, (ii) all Tranche B
Term Loans shall be due and payable on the Tranche B Maturity Date and (iii)
all Tranche C Term Loans shall be due and payable on the Tranche C Maturity
Date.
(e) Any prepayment of a Term Loan of any Class, and any reduction of a
Term Loan Commitment of any Class
53
<PAGE> 59
pursuant to Section 2.08(c), shall be applied to reduce the subsequent
scheduled repayments of the Term Loans of such Class to be made pursuant to
this Section ratably. If the initial aggregate amount of the Lenders' Term
Commitments of any Class exceeds the aggregate principal amount of Term Loans
of such Class that are made on the Closing Date, then the scheduled repayments
of Term Borrowings of such Class to be made pursuant to this Section shall be
reduced ratably by an aggregate amount equal to such excess.
Each payment of Borrowings pursuant to this Section 2.10 shall be
accompanied by accrued interest on the principal amount paid to but excluding
the date of payment.
(f) Prior to any repayment of any Term Borrowings of any Class
hereunder, the Borrower shall select the Borrowing or Borrowings of the
applicable Class to be repaid and shall notify the Administrative Agent by
telephone (confirmed by telecopy) of such selection not later than 11:00 a.m.,
New York City time, three Business Days before the scheduled date of such
repayment. Each repayment of a Borrowing shall be applied ratably to the Loans
included in the repaid Borrowing. Repayments of Term Borrowings shall be
accompanied by accrued interest on the amount repaid.
SECTION 2.11. Prepayment of Loans. (a) The Borrower shall have the
right at any time and from time to time to prepay any Borrowing in whole or in
part, subject to the requirements of this Section.
(b) In the event that and on each occasion on which the sum of the
Revolving Exposures exceeds the total Revolving Commitments, the Borrower shall
prepay Revolving Borrowings or Swingline Borrowings (or, if no such Borrowings
are outstanding, deposit cash collateral in an account with the Administrative
Agent pursuant to Section 2.05(j)) in an aggregate amount equal to such excess.
(c) In the event that and on each occasion on which any Net Proceeds
are received by or on behalf of Holdings, the Borrower or any Subsidiary in
respect of any Prepayment Event, the Borrower shall, within three Business Days
after such Net Proceeds are received, prepay Term Borrowings in an aggregate
amount equal to such Net Proceeds, provided that, in the case of any event
described in clause (a) of the definition of the term Prepayment Event, if the
Borrower shall deliver to the Administrative Agent a certificate of a Financial
Officer to the effect that the Borrower and the Subsidiaries intend to apply
the Net Proceeds from such event, within 360 days after receipt
54
<PAGE> 60
of such Net Proceeds, to either (i) acquire real property, equipment or other
tangible assets to be used in the business of the Borrower and the Subsidiaries
or all of the outstanding capital stock of an entity owning such assets or (ii)
effect investments constituting Permitted Acquisitions permitted by Section
6.04(j), and certifying that no Default has occurred and is continuing, then no
prepayment shall be required pursuant to this paragraph in respect of such
event except to the extent of any Net Proceeds therefrom that have not been so
applied by the end of such 360-day period, at which time a prepayment shall be
required in an amount equal to the Net Proceeds that have not been so applied.
(d) Following the end of each fiscal year of the Borrower, commencing
with the fiscal year ending on or about October 31, 2000, the Borrower shall
prepay Term Borrowings in an aggregate amount equal to the excess, if any, of
(i) 50% of Excess Cash Flow for such fiscal year over (ii) the aggregate
principal amount of Term Borrowings prepaid during such fiscal year pursuant to
Section 2.11(a). Each prepayment pursuant to this paragraph shall be made on or
before the date on which financial statements are delivered pursuant to Section
5.01 with respect to the fiscal year for which Excess Cash Flow is being
calculated (and in any event within 90 days after the end of such fiscal year).
(e) In the event of any optional or mandatory prepayment of Term
Borrowings made at a time when Term Borrowings of more than one Class remain
outstanding, the Borrower shall select Term Borrowings to be prepaid so that
the aggregate amount of such prepayment is allocated among the Tranche A Term
Borrowings, Tranche B Term Borrowings and Tranche C Term Borrowings pro rata
based on the aggregate principal amount of outstanding Borrowings of each such
Class, provided that any Lender holding Tranche B Term Loans or Tranche C Term
Loans may elect on not less than one Business Day's prior written notice to the
Administrative Agent with respect to any mandatory prepayment to be made
pursuant to Section 2.11(c) or (d), not to have such prepayment applied to such
Lender's Tranche B Term Loans or Tranche C Term Loans, in which case the amount
not so applied shall be applied to prepay Tranche A Term Borrowings and, after
all outstanding Tranche A Term Borrowings have been prepaid, shall be retained
by the Borrower. Prior to any optional or mandatory prepayment of Borrowings
hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid
and shall specify such selection in the notice of such prepayment pursuant to
paragraph (f) of this Section.
55
<PAGE> 61
(f) The Borrower shall notify the Administrative Agent (and, in the
case of prepayment of a Swingline Loan, the Swingline Lender) by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 12:00 noon, New York City
time, three Business Days before the date of prepayment, (ii) in the case of
prepayment of an ABR Borrowing, not later than 12:00 noon, New York City time,
one Business Day before the date of prepayment or (iii) in the case of
prepayment of a Swingline Loan, not later than 12:00 noon, New York City time,
on the date of prepayment. Each such notice shall be irrevocable and shall
specify the prepayment date, the principal amount of each Borrowing or portion
thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably
detailed calculation of the amount of such prepayment, provided that, if a
notice of optional prepayment is given in connection with a conditional notice
of termination of the Revolving Commitments as contemplated by Section 2.08,
then such notice of prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.08. Promptly following receipt of any such
notice (other than a notice relating solely to Swingline Loans), the
Administrative Agent shall advise the Lenders of the contents thereof. Each
partial prepayment of any Borrowing shall be in an amount that would be
permitted in the case of an advance of a Borrowing of the same Type as provided
in Section 2.02, except as necessary to apply fully the required amount of a
mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably
to the Loans included in the prepaid Borrowing. Prepayments shall be
accompanied by accrued interest to the extent required by Section 2.13.
SECTION 2.12. Fees. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Revolving Lender a commitment fee,
which shall accrue at the Applicable Rate on the average daily unused amount of
the Revolving Commitment of such Lender during the period from and including
the Closing Date to but excluding the date on which such Commitment terminates.
Accrued commitment fees shall be payable in arrears on the last day of January,
April, July and October of each year and on the date on which the Revolving
Commitments terminate, commencing on the first such date to occur after the
date hereof. All commitment fees shall be computed on the basis of a year of
360 days and shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). For purposes of computing commitment
fees with respect to Revolving Commitments, a Revolving Commitment of a Lender
shall be deemed to be used to the extent of the
56
<PAGE> 62
outstanding Revolving Loans and LC Exposure of such Lender (and the Swingline
Exposure of such Lender shall be disregarded for such purpose).
(b) The Borrower agrees to pay (i) to the Administrative Agent for the
account of each Revolving Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the same Applicable
Rate as interest on Eurodollar Revolving Loans on the average daily amount of
such Lender's LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the Closing
Date to but excluding the later of the date on which such Lender's Revolving
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at
the rate of 0.25% per annum on the average daily amount of the LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the Closing Date to but excluding the
later of the date of termination of the Revolving Commitments and the date on
which there ceases to be any LC Exposure, as well as the Issuing Bank's
standard fees with respect to the issuance, amendment, renewal or extension of
any Letter of Credit or processing of drawings thereunder. Participation fees
and fronting fees accrued through and including the last day of January, April,
July and October of each year shall be payable on the third Business Day
following such last day, commencing on the first such date to occur after the
Closing Date, provided that all such fees shall be payable on the date on which
the Revolving Commitments terminate and any such fees accruing after the date
on which the Revolving Commitments terminate shall be payable on demand. Any
other fees payable to the Issuing Bank pursuant to this paragraph shall be
payable within 10 days after demand. All participation fees and fronting fees
shall be computed on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day).
(c) The Borrower agrees to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed
upon between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
commitment fees and participation fees, to the Lenders entitled thereto. Fees
paid shall not be refundable under any circumstances.
57
<PAGE> 63
SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing
(including each Swingline Loan) shall bear interest at the Alternate Base Rate
plus the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest
at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus
the rate otherwise applicable to such Loan as provided in the preceding
paragraphs of this Section or (ii) in the case of any other amount, 2% plus the
rate applicable to ABR Revolving Loans as provided in paragraph (a) of this
Section.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and, in the case of Revolving Loans, upon
termination of the Revolving Commitments, provided that (i) interest accrued
pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in
the event of any repayment or prepayment of any Loan (other than a prepayment
of an ABR Revolving Loan prior to the end of the Revolving Availability
Period), accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment and (iii) in the event of
any conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a year of
360 days, except that interest computed by reference to the Alternate Base Rate
at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and
in each case shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). The applicable Alternate Base Rate
or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.
58
<PAGE> 64
SECTION 2.14. Alternate Rate of Interest. If prior to the
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do
not exist for ascertaining the Adjusted LIBO Rate for such Interest
Period; or
(b) the Administrative Agent is advised by the Required Lenders that
the Adjusted LIBO Rate for such Interest Period will not adequately and
fairly reflect the cost to such Lenders (or Lender) of making or
maintaining their Loans (or its Loan) included in such Borrowing for such
Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
SECTION 2.15. Increased Costs. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account
of, or credit extended by, any Lxender (except any such reserve
requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurodollar Loans
made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
59
<PAGE> 65
Issuing Bank of participating in, issuing or maintaining any Letter of Credit
or to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), in each
case by an amount deemed material by such Lender, then in accordance with
clause (c) below, the Borrower will pay to such Lender or the Issuing Bank, as
the case may be, such additional amount or amounts as will compensate such
Lender or the Issuing Bank, as the case may be, for such additional costs
incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's or the Issuing Bank's capital or on the capital
of such Lender's or the Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made by, or participations in
Letters of Credit held by, such Lender, or the Letters of Credit issued by the
Issuing Bank, to a level below that which such Lender or the Issuing Bank or
such Lender's or the Issuing Bank's holding company could have achieved but for
such Change in Law (taking into consideration such Lender's or the Issuing
Bank's policies and the policies of such Lender's or the Issuing Bank's holding
company with respect to capital adequacy), in each case by an amount deemed
material by such Lender, then in accordance with clause (c) below, the Borrower
will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank
or such Lender's or the Issuing Bank's holding company for any such reduction
suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or
its holding company, as the case may be, as specified in paragraph (a) or (b)
of this Section shall be delivered to the Borrower and shall be conclusive
absent manifest error. The Borrower shall pay such Lender or the Issuing Bank,
as the case may be, the amount shown as due on any such certificate within 10
days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation, provided
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs or reductions incurred
more than 270 days prior to the date that such Lender or the Issuing Bank, as
the case may be, notifies the Borrower of
60
<PAGE> 66
the Change in Law giving rise to such increased costs or reductions and of such
Lender's or the Issuing Bank's intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the 270-day period referred to above shall
be extended to include the period of retroactive effect thereof.
SECTION 2.16. Break Funding Payments. In the event of (a) the payment
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Revolving Loan or Term Loan on the date specified in any
notice delivered pursuant hereto (regardless of whether such notice may be
revoked under Section 2.11(f) and is revoked in accordance therewith), or (d)
the assignment of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto as a result of a request by the Borrower
pursuant to Section 2.19, then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a Eurodollar Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the Adjusted LIBO
Rate that would have been applicable to such Loan, for the period from the date
of such event to the last day of the then current Interest Period therefor (or,
in the case of a failure to borrow, convert or continue, for the period that
would have been the Interest Period for such Loan), over (ii) the amount of
interest which would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement
of such period, for dollar deposits of a comparable amount and period from
other banks in the eurodollar market. A certificate of any Lender setting forth
any amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.
SECTION 2.17. Taxes. (a) Any and all payments by or on account of any
obligation of the Borrower hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes, provided that if the Borrower shall be required
61
<PAGE> 67
to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the
sum payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) the Administrative Agent, Lender or Issuing Bank (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii)
the Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each Lender
and the Issuing Bank, within 10 Business Days after written demand therefor,
for the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on
or with respect to any payment by or on account of any obligation of the
Borrower hereunder or under any other Loan Document (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender or the Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy
of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the
62
<PAGE> 68
time or times prescribed by applicable law, such properly completed and
executed documentation prescribed by applicable law or reasonably requested by
the Borrower as will permit such payments to be made without withholding or at
a reduced rate, provided that such Foreign Lender has received written notice
from the Borrower advising it of the availability of such exemption or
reduction and supplying all applicable documentation.
(f) If the Administrative Agent or a Lender (or Transferee)
determines, in its sole discretion, that it has received a refund of any Taxes
or Other Taxes as to which it has been indemnified by the Borrower or with
respect to which the Borrower has paid additional amounts pursuant to this
Section 2.17, it shall pay over such refund to the Borrower (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrower
under this Section 2.17 with respect to the Taxes or Other Taxes giving rise to
such refund), net of all out-of-pocket expenses of the Administrative Agent or
such Lender (or Transferee) and without interest (other than any interest paid
by the relevant Governmental Authority with respect to such refund); provided,
however, that the Borrower, upon the request of the Administrative Agent or
such Lender (or Transferee), agrees to repay the amount paid over to the
Borrower (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to the Administrative Agent or such Lender (or
Transferee) in the event the Administrative Agent or such Lender (or
Transferee) is required to repay such refund to such Governmental Authority.
Nothing contained in this Section 2.17(f) shall require the Administrative
Agent or any Lender to make available its tax returns (or any other information
relating to its taxes which it deems confidential) to the Borrower or any other
Person.
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of
Setoffs. (a) The Borrower shall make each payment required to be made by it
hereunder or under any other Loan Document (whether of principal, interest,
fees or reimbursement of LC Disbursements, or of amounts payable under Section
2.15, 2.16 or 2.17, or otherwise) on or before the time expressly required
hereunder or under such other Loan Document for such payment (or, if no such
time is expressly required, prior to 12:00 noon, New York City time), on the
date when due, in immediately available funds, without setoff or counterclaim.
Any amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the
63
<PAGE> 69
Administrative Agent at its offices at 270 Park Avenue, New York, New York,
except payments to be made directly to the Issuing Bank or Swingline Lender as
expressly provided herein and except that payments pursuant to Sections 2.15,
2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto and
payments pursuant to other Loan Documents shall be made to the Persons
specified therein. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment under any Loan Document
shall be due on a day that is not a Business Day, the date for payment shall be
extended to the next succeeding Business Day, and, in the case of any payment
accruing interest, interest thereon shall be payable for the period of such
extension. All payments under each Loan Document shall be made in dollars.
(b) If at any time insufficient funds are received by and available to
the Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, towards payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, towards payment of
principal and unreimbursed LC Disbursements then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal and
unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans, Term Loans or participations in LC
Disbursements or Swingline Loans resulting in such Lender receiving payment of
a greater proportion of the aggregate amount of its Revolving Loans, Term Loans
and participations in LC Disbursements and Swingline Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Revolving Loans, Term Loans and participations in LC
Disbursements and Swingline Loans of other Lenders to the extent necessary so
that the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Revolving Loans, Term Loans and participations in LC
Disbursements and Swingline Loans, provided that (i) if any such participations
are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the
64
<PAGE> 70
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration
for the assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements to any assignee or participant, other than
to the Borrower or any Subsidiary or Affiliate thereof (as to which the
provisions of this paragraph shall apply). The Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against the Borrower rights of set off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to
the Lenders or the Issuing Bank, as the case may be, the amount due. In such
event, if the Borrower has not in fact made such payment, then each of the
Lenders or the Issuing Bank, as the case may be, severally agrees to repay to
the Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.18(d) or 9.03(c),
then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender's
obligations under such Sections until all such unsatisfied obligations are
fully paid.
SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a)
Prior to any Lender requesting compensation under Section 2.15, or the Borrower
paying any
65
<PAGE> 71
additional amount to any Lender or any Governmental Authority for the account
of any Lender pursuant to Section 2.17, such Lender 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, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.15 or 2.17, as the case may be, and (ii) would
not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.
(b) If any Lender requests compensation under Section 2.15, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement
to an assignee selected by the Borrower that shall assume such obligations
(which assignee may be another Lender, if a Lender accepts such assignment),
provided that (i) the Borrower shall have received the prior written consent of
the Administrative Agent (and, if a Revolving Commitment is being assigned, the
Issuing Bank and Swingline Lender), 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 LC Disbursements
and Swingline Loans, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder and under the other Loan Documents, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts) and (iii) in the case
of any such assignment resulting from a claim for compensation under Section
2.15 or payments required to be made pursuant to Section 2.17, such assignment
will result in a material reduction in such compensation or payments. 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 Borrower to require such assignment and delegation cease to
apply.
66
<PAGE> 72
ARTICLE III
Representations and Warranties
Each of Holdings and the Borrower represents and warrants to the
Lenders that:
SECTION 3.01. Organization; Powers. Each of Holdings, the Borrower and
the Subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and as proposed to be
conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required, except where the failure to
be so qualified could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.02. Authorization; Enforceability. The Transactions to be
entered into by each Loan Party are within such Loan Party's corporate powers
and have been duly authorized by all necessary corporate and, if required,
stockholder action. This Agreement has been duly executed and delivered by each
of Holdings and the Borrower and constitutes, and each other Loan Document to
which any Loan Party is to be a party, when executed and delivered by such Loan
Party, will constitute, a legal, valid and binding obligation of Holdings, the
Borrower or such Loan Party (as the case may be), enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
(a) do not require any consent or approval of, registration or filing with, or
any other action by or before, any Governmental Authority, except such as have
been obtained or made and are in full force and effect and except filings
necessary to perfect Liens created under the Loan Documents, (b) will not
violate any applicable law or regulation or the terms of the charter, by-laws
or other organizational documents of Holdings, the Borrower or any of the
Subsidiaries, or any order of any Governmental Authority, (c) will not violate
or result in a default under any indenture, agreement or other instrument
binding upon Holdings, the Borrower or any of the
67
<PAGE> 73
Subsidiaries or any of their assets, or give rise to a right thereunder to
require any payment to be made by Holdings, the Borrower or any of the
Subsidiaries, except where the aggregate amount of all such required payments
is less than $5,000,000 and where such default could not reasonably be expected
to result in a Material Adverse Effect, and (d) will not result in the creation
or imposition of any Lien on any asset of Holdings, the Borrower or any of the
Subsidiaries, except Liens created under the Loan Documents.
SECTION 3.04. Financial Condition; No Material Adverse Effect. (a)
Holdings has heretofore furnished to the Lenders its consolidated balance sheet
and related statements of income, stockholders' equity and cash flows (i) as of
and for the fiscal year ended November 1, 1998, reported on by KPMG, LLP,
independent public accountants, (ii) as of and for the fiscal quarter and the
portion of the fiscal year ended January 31, 1999, certified by its chief
financial officer, (iii) as of and for the fiscal quarter and the portion of
the fiscal year ended April 30, 1999, certified by its chief financial officer.
Such financial statements present fairly, in all material respects, the
financial position and results of operations and cash flows of the Borrower and
its consolidated subsidiaries as of such dates and for such periods in
accordance with GAAP, subject to year-end audit adjustments and the absence of
footnotes in the case of the statements referred to in clauses (ii) and (iii)
above.
(b) Holdings has heretofore furnished to the Lenders its pro forma
consolidated balance sheet as of the end of the most recently completed fiscal
quarter of Holdings and its subsidiaries ended after April 30, 1999, and that
is at least 45 days prior to the Closing Date, prepared giving effect to the
Transactions as if the Transactions had occurred on such date. Such pro forma
consolidated balance sheet (i) has been prepared in good faith based on the
same assumptions used to prepare the pro forma financial statements included in
the Information Memorandum (which assumptions are believed by Holdings and the
Borrower to be reasonable), (ii) is based on the best information available to
Holdings and the Borrower after due inquiry, (iii) accurately reflects all
adjustments necessary to give effect to the Transactions and (iv) presents
fairly, in all material respects, the pro forma financial position of Holdings
and its consolidated subsidiaries as of the end of the most recently completed
fiscal quarter of Holdings ended after April 30, 1999, and that is at least 45
days prior to the Closing Date, as if the Transactions had occurred on such
date.
68
<PAGE> 74
(c) Except as disclosed in the financial statements referred to above
or the notes thereto or in the Information Memorandum and except for the
Disclosed Matters, after giving effect to the Transactions, none of Holdings,
the Borrower or the Subsidiaries has, as of the Closing Date, any material
contingent liabilities, unusual long-term commitments or unrealized losses.
(d) Since November 1, 1998, there has been no material adverse effect
on the business, assets, liabilities (including, but not limited to, potential
Environmental Liabilities, litigation liabilities and other contingent
liabilities), prospects, results of operations or condition (financial or
otherwise) of Holdings, the Borrower and their respective subsidiaries, taken
as a whole.
SECTION 3.05. Properties. (a) Each of Holdings, the Borrower and the
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business (including its Mortgaged
Properties), except for such defects in title that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes.
(b) Each of Holdings, the Borrower and the Subsidiaries owns, or is
licensed to use, all trademarks, trade names, copyrights, patents and other
intellectual property material to its business, and the use thereof by
Holdings, the Borrower and the Subsidiaries does not infringe upon the rights
of any other Person, except for any such infringements that, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(c) Schedule 3.05(c) sets forth the address of each real property that
is owned or leased by Holdings, the Borrower or any of the Subsidiaries as of
the Closing Date.
(d) As of the Closing Date, neither Holdings, the Borrower nor any of
the Subsidiaries has received notice of, or has knowledge of, any pending or
contemplated condemnation proceeding affecting any Mortgaged Property or any
sale or disposition thereof in lieu of condemnation. Neither any Mortgaged
Property nor any interest therein is subject to any right of first refusal,
option or other contractual right to purchase such Mortgaged Property or
interest therein.
SECTION 3.06. Litigation and Environmental Matters. (a) There are no
actions, suits or proceedings by
69
<PAGE> 75
or before any arbitrator or Governmental Authority pending against or, to the
knowledge of Holdings or the Borrower, threatened against or affecting
Holdings, the Borrower or any of the Subsidiaries (i) as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (other than the Disclosed Matters) or (ii)
that involve any of the Loan Documents or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither Holdings, the Borrower
nor any of the Subsidiaries (i) has failed to comply with any Environmental Law
or to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has become subject to any
Environmental Liability, (iii) has received notice of any claim with respect to
any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each of Holdings,
the Borrower and the Subsidiaries is in compliance with all laws, regulations
and orders (including any Environmental Law or Applicable Law, margin
regulations and ERISA) of any Governmental Authority applicable to it or its
property and all indentures, agreements and other instruments binding upon it
or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. No Default has occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status. Neither Holdings,
the Borrower nor any of the Subsidiaries is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION 3.09. Taxes. Each of Holdings, the Borrower and the
Subsidiaries has timely filed or caused to
70
<PAGE> 76
be filed all Tax returns and reports required to have been filed and has paid
or caused to be paid all Taxes required to have been paid by it, except (a) any
Taxes that are being contested in good faith by appropriate proceedings and for
which Holdings, the Borrower or such Subsidiary, as applicable, has set aside
on its books reserves in accordance with GAAP or (b) failures to file or cause
to be filed or pay or cause to be paid that would not reasonably be expected to
result in a Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability to the Borrower or the Subsidiaries is reasonably expected
to occur, could reasonably be expected to result in a Material Adverse Effect.
The present value of all accumulated benefit obligations under each Plan (based
on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent audited financial
statements reflecting such amounts, exceed by more than $5,000,000 the fair
market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $10,000,000 the fair market value
of the assets of all such underfunded Plans.
SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders
all agreements, instruments and corporate or other restrictions to which
Holdings, the Borrower or any of the Subsidiaries is subject, and all other
matters known to any of them, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. Neither the
Information Memorandum nor any of the other reports, financial statements,
certificates or other information furnished by or on behalf of any Loan Party
to the Administrative Agent or any Lender in connection with the negotiation of
this Agreement or any other Loan Document or delivered hereunder or thereunder
(as modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, provided that, with respect to projected financial
information, Holdings and the Borrower represent only that such information was
prepared in good faith based upon assumptions believed to be reasonable at the
time such projections were prepared and delivered to the Administrative Agent.
71
<PAGE> 77
SECTION 3.12. Subsidiaries. Holdings does not have any subsidiaries
other than the Borrower and the Subsidiaries. Schedule 3.12 sets forth the
name of, and the ownership interest of the Borrower in, each Subsidiary and
identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of
the Closing Date.
SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of all
insurance maintained by or on behalf of the Borrower and the Subsidiaries as of
the Closing Date. As of the Closing Date, all premiums in respect of such
insurance have been paid. Holdings and the Borrower believe that the insurance
maintained by or on behalf of Holdings, the Borrower and the Subsidiaries is
adequate with respect to Holdings's, the Borrower's and the Subsidiaries'
businesses.
SECTION 3.14. Labor Matters. As of the Closing Date, there are no
strikes, lockouts or slowdowns against Holdings, the Borrower or any Subsidiary
pending or, to the knowledge of Holdings or the Borrower, threatened. The hours
worked by and payments made to employees of Holdings, the Borrower and the
Subsidiaries have not been in material violation of the Fair Labor Standards
Act or any other applicable Federal, state, local or foreign law dealing with
such matters. All payments due from Holdings, the Borrower or any Subsidiary,
or for which any claim may be made against Holdings, the Borrower or any
Subsidiary, on account of wages and employee health and welfare insurance and
other benefits, have been paid or accrued as a liability on the books of
Holdings, the Borrower or such Subsidiary. The consummation of the Transactions
will not give rise to any right of termination or right of renegotiation on the
part of any union under any collective bargaining agreement to which Holdings,
the Borrower or any Subsidiary is bound.
SECTION 3.15. Solvency. Immediately after the consummation of the
Transactions to occur on the Closing Date, and immediately following the making
of each Loan made on the Closing Date and after giving effect to the
application of the proceeds of such Loans, (a) the fair value of the assets of
each Loan Party, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of each Loan Party will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and
72
<PAGE> 78
matured; (c) each Loan Party will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (d) each Loan Party will not have unreasonably small
capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted following the Closing
Date.
SECTION 3.16. Senior Indebtedness. The Obligations of Holdings, the
Borrower and the Subsidiary Loan Parties all constitute "Senior Indebtedness"
under and as defined in the Subordinated Debt Documents, the Existing Notes
Indenture and the indenture or other instrument or agreement pursuant to which
any Permitted Refinancing Indebtedness is at the time outstanding.
SECTION 3.17. Year 2000. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (a) the computer systems
of Holdings, the Borrower and the Subsidiaries and (b) equipment containing
embedded microchips (including systems and equipment supplied by others or with
which Holdings's, the Borrower's or the Subsidiaries' systems interface) and
the testing of all such systems and equipment, as so reprogrammed, has been
completed in all material respects as of October 31, 1999. The cost to
Holdings, the Borrower and the Subsidiaries of such reprogramming and testing
and of the reasonably foreseeable consequences of the occurrence of the year
2000 to Holdings, the Borrower and the Subsidiaries (including reprogramming
errors and the failure of others' systems or equipment) will not result in a
Default or a Material Adverse Effect. Except for the reprogramming referred to
in the preceding sentence as may be necessary, the computer and management
information systems of Holdings, the Borrower and the Subsidiaries are and,
with ordinary course upgrading and maintenance, will continue for the term of
this Agreement to be, sufficient to permit Holdings, the Borrower and the
Subsidiaries to conduct their businesses without Material Adverse Effect.
SECTION 3.18. Security Interests. (a) When executed and delivered, the
Pledge Agreement will be effective to create in favor of the Collateral Agent,
for the ratable benefit of the Secured Parties, a legal, valid and enforceable
security interest in the Collateral (as defined in the Pledge Agreement) and,
when the portion of the Collateral constituting certificated securities (as
defined in the Uniform Commercial Code) is delivered to the Administrative
Agent, such security interest shall constitute a fully perfected first priority
Lien on, and security interest in, all right, title and interest of the pledgor
thereunder in such Collateral, in each case prior and superior in right to any
other Person.
73
<PAGE> 79
(b) The Security Agreement is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral (as defined in the
Security Agreement) and, when financing statements in appropriate form are
filed in the offices specified on Schedule 6 to each of the Perfection
Certificates, the Security Agreement shall constitute a fully perfected Lien
on, and security interest in, all right, title and interest of the grantors
thereunder in such Collateral to the extent perfection can be obtained by
filing Uniform Commercial Code financing statements, other than the
Intellectual Property (as defined in the Security Agreement) in which a
security interest may be perfected by filing, recording or registering a
security agreement, financing statement or analogous document in the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, in each case prior and superior in right to any other Person to the
extent perfection can be obtained by filing Uniform Commercial Code financing
statements, other than with respect to the rights of Persons pursuant to Liens
expressly permitted by Section 6.02.
(c) When the Security Agreement is filed in the United States Patent
and Trademark Office and the United States Copyright Office, the security
interest created thereunder shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan Parties in the
Intellectual Property (as defined in the Security Agreement) in which a
security interest may be perfected by filing, recording or registering a
security agreement, financing statement or analogous document in the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, in each case prior and superior in right to any other Person, other
than with respect to the rights of Persons pursuant to Liens expressly
permitted by Section 6.02 (it being understood that subsequent recordings in
the United States Patent and Trademark Office and the United States Copyright
Office may be necessary to perfect a lien on registered trademarks, trademark
applications and copyrights acquired by the Loan Parties after the date
hereof).
(d) Each Mortgage is effective to create, subject to the exceptions
listed in each title insurance policy covering such Mortgage, in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable Lien on all of the Loan Parties' right, title and
interest in and to the Mortgaged Properties thereunder and the proceeds
thereof, and when the Mortgages are filed in the offices specified on Schedule
3.18(d), the
74
<PAGE> 80
Mortgages shall constitute a Lien on all right, title and interest of the Loan
Parties in such Mortgaged Properties and the proceeds thereof, in each case
prior and superior in right to any other Person, other than with respect to the
rights of Persons pursuant to Liens expressly permitted by Section 6.02.
ARTICLE IV
Conditions of Lending
The obligations of the Lenders to make Loans and of the Issuing Bank
to issue Letters of Credit hereunder shall not become effective until the date
on which each of the following conditions is satisfied (or waived in accordance
with Section 9.02):
SECTION 4.01. Each Credit Event. The obligation of each Lender to make
a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue,
amend, renew or extend any Letter of Credit, is subject to receipt of the
request therefor in accordance herewith and to the satisfaction of the
following conditions:
(a) The representations and warranties of each Loan Party set forth in
the Loan Documents shall be true and correct on and as of the date of
such Borrowing or the date of issuance, amendment, renewal or extension
of such Letter of Credit, as applicable.
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter
of Credit, as applicable, no Default shall have occurred and be
continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter
of Credit shall be deemed to constitute a representation and warranty by
Holdings and the Borrower on the date thereof as to the matters specified in
paragraphs (a) and (b) of this Section.
SECTION 4.02. Closing Date. On the Closing Date:
(a) The Administrative Agent (or its counsel) shall have received from
each party hereto either (i) a counterpart of this Agreement signed on behalf
of such party or (ii) written evidence satisfactory to the Administrative Agent
(which may include telecopy transmission of a signed
75
<PAGE> 81
signature page of this Agreement) that such party has signed a counterpart of
this Agreement.
(b) The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent and the Lenders and dated the
Closing Date) of each of (i) Wachtell, Lipton, Rosen & Katz, counsel for
Holdings and the Borrower, substantially in the form of Exhibit B-1, (ii)
Shumaker, Loop & Kendrick, LLP, Florida counsel for Holdings and the Borrower,
substantially in the form of Exhibit B-2, and (iii) local counsel in each
jurisdiction where a Mortgaged Property is located, substantially in the form
of Exhibit B-3, and, in the case of each such opinion required by this
paragraph, covering such other matters relating to the Loan Parties, the Loan
Documents or the Transactions as the Required Lenders shall reasonably request.
Each of Holdings and the Borrower hereby requests such counsel to deliver such
opinions.
(c) 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 each Loan Party,
the authorization of the Transactions to occur on the Closing Date and any
other legal matters relating to the Loan Parties, the Loan Documents or the
Transactions, all in form and substance satisfactory to the Administrative
Agent and its counsel.
(d) The Administrative Agent shall have received a certificate, dated
the Closing Date and signed by the President, a Vice President or a Financial
Officer of the Borrower, confirming compliance with the conditions set forth in
paragraphs (a) and (b) of Section 4.01.
(e) The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the Closing Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses
(including fees, charges and disbursements of counsel) required to be
reimbursed or paid by any Loan Party hereunder or under any other Loan
Document.
(f) The Administrative Agent shall have received counterparts of the
Security Agreement, the Pledge Agreement and the Indemnity, Subrogation and
Contribution Agreement, each signed on behalf of the Borrower, Holdings and
each Subsidiary Loan Party, together with the following:
(i) stock certificates representing all the outstanding shares of
capital stock of the Borrower and
76
<PAGE> 82
each Subsidiary owned by or on behalf of any Loan Party as of the Closing
Date after giving effect to the Transactions (except that stock
certificates representing shares of common stock of a Foreign Subsidiary
may be limited to 65% of the outstanding shares of common stock of such
Foreign Subsidiary), promissory notes evidencing all intercompany
Indebtedness owed to any Loan Party by Holdings, the Borrower or any
Subsidiary as of the Closing Date after giving effect to the Transactions
and stock powers and instruments of transfer, endorsed in blank, with
respect to such stock certificates and promissory notes, provided that in
respect of any Foreign Subsidiary in respect of which stock certificates
are not available, the Administrative Agent shall have received such
other documents as it reasonably requests (including an agreement of the
kind described in Section 8-106(c)(2) of the Uniform Commercial Code);
(ii) all documents and instruments, including Uniform Commercial Code
financing statements, required by law or reasonably requested by the
Administrative Agent to be filed, registered or recorded to create or
perfect the Liens on the Collateral owned or to be acquired on or before
the Closing Date and intended to be created under the Security Agreement;
and
(iii) a completed Perfection Certificate dated the Closing Date and
signed by an executive officer or Financial Officer of the Borrower,
together with all attachments contemplated thereby, including the results
of a search of the Uniform Commercial Code (or equivalent) filings made
with respect to the Loan Parties, in the jurisdictions contemplated by
the Perfection Certificate and copies of the financing statements (or
similar documents) disclosed by such search and evidence reasonably
satisfactory to the Administrative Agent that the Liens indicated by such
financing statements (or similar documents) are permitted by Section 6.02
or have been released.
(g) The Administrative Agent shall have received (i) counterparts of a
Mortgage with respect to each Mortgaged Property owned or to be acquired by the
Borrower or any Subsidiary on the Closing Date, signed on behalf of the record
owner of such Mortgaged Property and (ii) a policy or policies of title
insurance issued by a nationally recognized title insurance company, insuring
the Lien of each such Mortgage as a valid first Lien on the Mortgaged Property
described therein, free of any other Liens except as permitted by Section 6.02,
together with such
77
<PAGE> 83
endorsements, coinsurance and reinsurance as the Collateral Agent or the
Required Lenders may reasonably request.
(h) The Administrative Agent shall have received evidence that the
insurance required by Section 5.07 and the Security Documents is in effect.
(i) All consents and approvals required to be obtained from any
Governmental Authority or other Person in connection with the Transactions
shall have been obtained, and all applicable waiting periods and appeal periods
shall have expired, in each case without the imposition of any conditions
reasonably expected to have a Material Adverse Effect or to affect the rights
or security of the Lenders hereunder and under the Security Documents.
(j) The Agents shall have received (a) unaudited consolidated balance
sheets and related statements of operations, stockholders' equity and cash
flows of Holdings, the Borrower and the Subsidiaries (excluding the Circon
Businesses) for the fiscal quarters ending after the end of the fiscal year
1998 no later than 45 days following the end of such fiscal quarters (and, to
the extent available, for each month preceding the Closing Date since the last
such quarter) and (b) a pro forma consolidated balance sheet of Holdings as of
the end of the most recently completed fiscal quarter of the Borrower that is
at least 45 days prior to the Closing Date, reflecting all pro forma
adjustments as if the Transactions had been consummated on such date.
(k) The Administrative Agent shall have received a solvency letter, in
form and substance satisfactory to the Lenders, from Valuation Research, Inc.,
with respect to the solvency of the Loan Parties after giving effect to the
Transactions.
(l) Each of the Guarantee Agreements of the Loan Parties (other than
the Borrower) shall have been duly executed by the parties thereto and
delivered to the Collateral Agent and shall be in full force and effect.
(m) (i) The Recapitalization and the other Transactions supposed to
occur on or prior to the Closing Date shall have been consummated or shall be
consummated simultaneously with or immediately following the borrowing of the
Term Loans on the Closing Date in accordance with the Recapitalization
Documents and applicable law, without giving effect to any amendment to or
waiver of the Recapitalization Documents that is adverse to the Lenders and not
reasonably satisfactory to the Agents, (ii) the Investor and the Continuing
Shareholders shall have made the
78
<PAGE> 84
Equity Contributions and (iii) the Agents shall (x) be satisfied with the
capitalization, structure and equity ownership of Holdings and the Borrower
after giving effect to the Transactions to occur on the Closing Date (it being
agreed that the capitalization, structure and equity ownership of Holdings and
the Borrower to the extent described elsewhere in this Agreement are
satisfactory to the Agents) and (y) be satisfied that the Transaction Costs
(including underwriting commissions and discounts and the Debt Tender Premium),
whether incurred or paid on or before the Closing Date, shall not exceed
$52,200,000. The Administrative Agent shall have received copies of the
Recapitalization Documents and all certificates, opinions and other documents
delivered thereunder, certified by a Financial Officer as complete and correct.
(n) After giving effect to the Transactions, neither Holdings, the
Borrower nor any of the Subsidiaries shall have outstanding any Indebtedness or
preferred stock other than Indebtedness permitted under Sections 6.01(a)(i)
through (viii). The Existing Credit Agreement and any related guarantee and
collateral documents shall have been terminated.
(o) There shall not be in effect with respect to Holdings a
shareholder rights plan (or any other "anti-takeover" measure) that would, in
the Administrative Agent's reasonable judgment, impose materially burdensome
conditions on the Recapitalization or render the purchase of shares of
Holdings's common stock as contemplated by the Recapitalization uneconomical.
(p) The pro forma Consolidated EBITDA of Holdings, the Borrower and
the Subsidiaries (excluding the Circon Businesses) for the twelve-month period
ending on (a) April 30, 1999, shall be at least $73,200,000 and (b) the last
day of the most recent fiscal quarter ended after April 30, 1999, and at least
45 days prior to the Closing Date shall not be materially less than $73,200,000
(and, except as otherwise agreed upon by the Administrative Agent, all pro
forma adjustments to Consolidated EBITDA for any such twelve-month period shall
be in compliance with generally accepted accounting principles and practices in
the United States and prepared in accordance with Regulation S-X under the
Securities Act of 1933, as amended).
(q) The Agents shall be reasonably satisfied as to the amount and
nature of any Environmental Liabilities and exposures and employee health and
safety exposures to which Holdings, the Borrower and the Subsidiaries may be
79
<PAGE> 85
subject after giving effect to the Transactions, and with the plans of the
Borrower with respect thereto, and the Agents shall have received an
environmental report reasonably satisfactory to the Administrative Agent
prepared by Pilko & Associates, Inc. with respect to any Environmental
Liabilities that may be attributable to such properties or operations as have
been specified by the Administrative Agent for review.
(r) The terms and conditions of the Senior Subordinated Notes, the
Holdings Notes and the Dividend Note (including terms and conditions relating
to the interest rate, interest payment dates and conditions, the maturity date
and repayments, redemptions or repurchases) and the provisions of the
Subordinated Debt Documents and the Holdings Notes Indenture shall be
satisfactory to the Administrative Agent (it being agreed that the terms and
conditions of the Holdings Notes as contained in the term sheet disclosed to
the Administrative Agent prior to June 12, 1999, are satisfactory to the
Administrative Agent). Without limiting the generality of the foregoing, the
terms of the Holdings Notes shall not require the payment of any cash interest
during the five-year period immediately following the Closing Date, and shall
not, except in circumstances agreed with the Administrative Agent, provide for
the mandatory repayment, redemption or repurchase of the Holdings Notes or the
repayment, redemption or repurchase thereof at the option of the holders
thereof, prior to the date that is 91 days after the Tranche C Maturity Date.
The Administrative Agent shall have received copies of the Subordinated Debt
Documents, Holdings Notes Indenture and the Dividend Note certified by a
Financial Officer as complete and correct.
(s) The Agents shall be reasonably satisfied with (a) the terms and
conditions of the Recapitalization Documents, (b) the terms and conditions of
the Debt Tender Offer and all related documentation and (c) the terms and
conditions of the Services Agreement and all other agreements, arrangements and
understandings between Holdings, the Borrower and the Subsidiaries on the one
hand and Circon and its subsidiaries on the other hand that are to be in effect
after the Circon Acquisition (it being understood and agreed that the terms and
conditions of the Recapitalization Documents and the Debt Tender Offer to the
extent described elsewhere in this Agreement are satisfactory to the Agents).
(t) (i) All conditions to the purchase of the Existing Notes in the
Debt Tender Offer shall have been satisfied without giving effect to any waiver
or amendment
80
<PAGE> 86
thereof that is adverse to the Lenders and not reasonably satisfactory to the
Agents, (ii) the Borrower shall have irrevocably accepted for purchase not less
than a majority in principal amount of the Existing Notes, (iii) the negative
covenants with respect to the Existing Notes shall have been eliminated or
modified in a manner reasonably satisfactory to the Administrative Agent,
including so that, after giving effect to the Transactions, no default or event
of default shall exist under the Existing Notes or this Agreement and (iv) any
"change of control" provisions with respect to the Existing Notes shall have
been eliminated or modified in a manner reasonably satisfactory to the
Administrative Agent or waived.
(u) The Agents shall have received the written assumptions for
Holdings's management's consolidated financial projections that were delivered
to the Administrative Agent prior to June 12, 1999, for Holdings, the Borrower
and the Subsidiaries for the period of ten years following the Closing Date,
including on a quarter-by-quarter basis for fiscal years 1999 and 2000.
The Administrative Agent shall notify the Borrower and the Lenders of
the Closing Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 5:00 p.m., New York City time, on
December 31, 1999 (and, in the event such conditions are not so satisfied or
waived at or prior to such time, the Commitments shall terminate at such time).
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall
have been paid in full and all Letters of Credit shall have expired or
terminated and all LC Disbursements shall have been reimbursed, each of
Holdings and the Borrower covenants and agrees with the Lenders that:
81
<PAGE> 87
SECTION 5.01. Financial Statements and Other Information. The Borrower
will furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year of the Borrower,
Holdings's audited consolidated and unaudited consolidating balance sheet
and related statements of operations, stockholders' equity and cash flows
as of the end of and for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all reported
on by KPMG LLP or other independent public accountants of recognized
national standing (without a "going concern" or like qualification or
exception and without any qualification or exception as to the scope of
such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and
results of operations of Holdings and its consolidated subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower, Holdings's consolidated and
consolidating balance sheet and related statements of operations,
stockholders' equity and cash flows as of the end of and for such fiscal
quarter and the then elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and
results of operations of Holdings and its consolidated subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject
to normal year-end audit adjustments and the absence of footnotes;
(c) within 30 days after the end of each of the first two fiscal
months of each fiscal quarter of the Borrower, Holdings's consolidated
balance sheet and related statements of operations (including statements
showing the amount of depreciation, amortizations, capital expenditures,
acquisitions and asset sales) as of the end of and for such fiscal month
and the then elapsed portion of the fiscal year, in a form, and
82
<PAGE> 88
prepared on a basis, reasonably acceptable to the Administrative Agent
(it being acknowledged that such balance sheet and statements will not be
deemed to be unacceptable solely because they do not comply with GAAP in
all respects);
(d) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the
Borrower (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Sections
6.12, 6.13, 6.14 and 6.15, (iii) stating whether any change in GAAP or in
the application thereof has occurred since the date of the Borrower's
audited financial statements referred to in Section 3.04 and, if any such
change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate and (iv) setting forth
reasonably detailed information regarding (x) any investments, loans,
advances and other transactions made pursuant to Section 6.04(i) and (y)
any sales, transfers and other dispositions of assets made pursuant to
Section 6.05(d), in each case since the date of the last certificate
provided pursuant to this Section 5.01(d) (or, in the case of the first
certificate given after the Closing Date, since the Closing Date);
(e) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during
the course of their examination of such financial statements of any
Default (which certificate may be limited to the extent required by
accounting rules or guidelines);
(f) prior to the commencement of each fiscal year of the Borrower, a
detailed consolidated budget for such fiscal year (including a projected
consolidated balance sheet and related statements of projected operations
and cash flow as of the end of and for such fiscal year and setting forth
the assumptions used for purposes of preparing such budget) and, promptly
when available, any significant revisions of such budget;
(g) promptly after the same become publicly available, copies of all
periodic and other reports,
83
<PAGE> 89
proxy statements and other materials filed by Holdings, the Borrower or
any Subsidiary with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by
Holdings to its shareholders generally, as the case may be; and
(h) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of
Holdings, the Borrower or any Subsidiary, or compliance with the terms of
any Loan Document, as the Administrative Agent or any Lender may
reasonably request in connection with the Loan Documents.
SECTION 5.02. Notices of Material Events. Holdings and the Borrower
will furnish to the Administrative Agent and each Lender prompt written notice
of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting
Holdings, the Borrower or any Affiliate thereof that, if adversely
determined, could reasonably be expected to result in a Material Adverse
Effect;
(c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to
result in liability of Holdings, the Borrower and the Subsidiaries in an
aggregate amount exceeding $3,000,000; and
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth
the details of the event or development requiring such notice and any action
taken or proposed to be taken with respect thereto.
SECTION 5.03. Information Regarding Collateral. (a) The Borrower will
furnish to the Administrative Agent prompt written notice of any change (i) in
any Loan Party's corporate name or in any trade name used to identify it in
84
<PAGE> 90
the conduct of its business or in the ownership of its properties, (ii) in the
location of any Loan Party's chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by
it is located (including the establishment of any such new office or facility),
(iii) in any Loan Party's identity or corporate structure or (iv) in any Loan
Party's Federal Taxpayer Identification Number. Holdings and the Borrower agree
not to effect or permit any change referred to in the preceding sentence unless
all filings have been made under the Uniform Commercial Code or otherwise that
are required in order for the Administrative Agent to continue at all times
following such change to have a valid, legal and perfected security interest in
all the Collateral. Holdings and the Borrower also agree promptly to notify the
Administrative Agent if any material portion of the Collateral is damaged or
destroyed.
(b) Each year, at the time of delivery of annual financial statements
with respect to the preceding fiscal year pursuant to clause (a) of Section
5.01, the Borrower shall deliver to the Administrative Agent a certificate of a
Financial Officer and the chief legal officer of the Borrower (i) setting forth
the information required pursuant to the Perfection Certificate or confirming
that there has been no change in such information since the date of the
Perfection Certificate delivered on the Closing Date or the date of the most
recent certificate delivered pursuant to this Section and (ii) certifying that
all Uniform Commercial Code financing statements (including fixture filings, as
applicable) or other appropriate filings, recordings or registrations,
including all refilings, rerecordings and reregistrations, containing a
description of the Collateral have been filed of record in each governmental,
municipal or other appropriate office in each jurisdiction identified pursuant
to clause (i) above to the extent necessary to protect and perfect the security
interests under the Security Documents for a period of not less than 18 months
after the date of such certificate (except as noted therein with respect to any
continuation statements to be filed within such period).
SECTION 5.04. Existence; Conduct of Business. Each of Holdings and the
Borrower will, and will cause each of the Subsidiaries to, do or cause to be
done all things necessary to preserve, renew or replace and keep in full force
and effect its legal existence and the rights, licenses, permits, privileges,
franchises, patents, copyrights, trademarks and trade names material to the
conduct of its business, provided that the foregoing shall
85
<PAGE> 91
not prohibit any merger, consolidation, liquidation or dissolution permitted
under Section 6.03.
SECTION 5.05. Payment of Obligations. Each of Holdings and the
Borrower will, and will cause each of the Subsidiaries to, pay its Indebtedness
and other obligations, including Tax liabilities, before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) Holdings, the
Borrower or such Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP, (c) such contest effectively suspends
collection of the contested obligation and the enforcement of any Lien securing
such obligation and (d) the failure to make payment pending such contest could
not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.06. Maintenance of Properties. Each of Holdings and the
Borrower will, and will cause each of the Subsidiaries to, keep and maintain
all property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted.
SECTION 5.07. Insurance. Each of Holdings and the Borrower will, and
will cause each of the Subsidiaries to, maintain, with financially sound and
reputable insurance companies or associations (a) insurance in such amounts
(with no greater risk retention) and against such risks as are customarily
maintained by companies of established repute engaged in the same or similar
businesses operating in the same or similar locations and (b) all insurance
required to be maintained pursuant to the Security Documents. The Borrower will
furnish to the Lenders, upon request of the Administrative Agent, information
in reasonable detail as to the insurance so maintained.
SECTION 5.08. Casualty and Condemnation. The Borrower (a) will furnish
to the Administrative Agent and the Lenders prompt written notice of any
casualty or other insured damage to any material portion of the Collateral or
the commencement of any action or proceeding for the taking of any Collateral
or any part thereof or interest therein under power of eminent domain or by
condemnation or similar proceeding and (b) will ensure that the Net Proceeds of
any such event (whether in the form of insurance proceeds, condemnation awards
or otherwise) are collected and applied in accordance with the applicable
provisions of the Security Documents.
86
<PAGE> 92
SECTION 5.09. Books and Records; Inspection and Audit Rights. Each of
Holdings and the Borrower will, and will cause each of the Subsidiaries to,
keep proper books of record and account in which full, true and correct entries
are made of all dealings and transactions in relation to its business and
activities. Each of Holdings and the Borrower will, and will cause each of the
Subsidiaries to, permit any representatives designated by the Administrative
Agent or any Lender, upon reasonable prior notice, to visit and inspect its
properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.
SECTION 5.10. Compliance with Laws. Each of Holdings and the Borrower
will, and will cause each of the Subsidiaries to, comply with all laws, rules,
regulations and orders, including Environmental Laws and Applicable Laws, of
any Governmental Authority applicable to it or its property, including all
regulatory reporting and accounting requirements, except where the failure to
do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 5.11. Use of Proceeds and Letters of Credit. (a) The proceeds
of the Term Loans, together with the cash portion of the proceeds of the Circon
Acquisition Consideration (which will be transferred by Circon Parent to the
Borrower), the proceeds of the repayment of the Dividend Note (which will be
transferred by Circon Parent to the Borrower) and the issuance of the Senior
Subordinated Notes, will be transferred by the Borrower by means of dividend or
intercompany advance to Holdings on the Closing Date and used by Holdings,
together with the proceeds from the Equity Contributions and the issuance of
the Holdings Notes, only for (i) the payment of the Cash Merger Consideration,
(ii) the repayment of the Existing Indebtedness, (iii) the purchase of all
Existing Notes tendered and not withdrawn pursuant to the Debt Tender Offer and
(iv) the payment of the Transaction Costs (including the Debt Tender Premium).
(b) The proceeds of Revolving Loans, other than those referred to in
paragraph (a) above, will be used by the Borrower for general corporate
purposes, including (i) at any time after the Closing Date, Permitted
Acquisitions and (ii) if the aggregate principal amount of the Outstanding
Existing Notes is less than or equal to $10,000,000, to repurchase or redeem
all or any of the Outstanding Existing Notes.
87
<PAGE> 93
(c) Letters of credit will be used by the Borrower for general
corporate purposes.
(d) No part of the proceeds of any Loan will be used, whether directly
or indirectly, for any purpose that entails a violation of any of the
Regulations of the Board, including Regulations G, U and X.
SECTION 5.12. Additional Subsidiaries. If any additional Subsidiary is
formed or acquired after the Closing Date, the Borrower will notify the
Administrative Agent thereof and (a) if such Subsidiary is a Subsidiary Loan
Party, the Borrower will cause such Subsidiary to become a party to the
Subsidiary Guarantee Agreement, the Indemnity, Subrogation and Contribution
Agreement and each other applicable Security Document within ten Business Days
after such Subsidiary is formed or acquired, and, within fifteen Business Days
after such Subsidiary is formed or acquired, take such actions to create and
perfect Liens on such Subsidiary's assets to secure the Obligations as the
Administrative Agent or the Required Lenders shall reasonably request and (b)
if any Equity Interest in or Indebtedness of such Subsidiary are owned by or on
behalf of any Loan Party, the Borrower will cause such Equity Interests and
promissory notes evidencing such Indebtedness to be pledged pursuant to the
Pledge Agreement within ten Business Days after such Subsidiary is formed or
acquired (except that, if such Subsidiary is a Foreign Subsidiary, shares of
common stock of such Subsidiary to be pledged pursuant to the Pledge Agreement
may be limited to 65% of the outstanding shares of common stock of such
Subsidiary).
SECTION 5.13. Further Assurances. (a) Each of Holdings and the
Borrower will, and will cause each Subsidiary Loan Party to, execute any and
all further documents, financing statements, agreements and instruments, and
take all such further actions (including the filing and recording of financing
statements, fixture filings, mortgages, deeds of trust and other documents),
which may be required under any applicable law, or which the Administrative
Agent or the Required Lenders may reasonably request, to effectuate the
transactions contemplated by the Loan Documents or to grant, preserve, protect
or perfect the Liens created or intended to be created by the Security
Documents or the validity or priority of any such Lien, all at the expense of
the Loan Parties. Holdings and the Borrower also agree to provide to the
Administrative Agent, from time to time upon request, evidence reasonably
satisfactory to the Administrative Agent as to the perfection and priority of
the Liens created or intended to be created by the Security Documents.
88
<PAGE> 94
(b) If any material assets (including any real property or
improvements thereto or any interest therein) are acquired by the Borrower or
any Subsidiary Loan Party after the Closing Date (other than assets
constituting Security under the Security Agreement that become subject to the
Lien of the Security Agreement upon acquisition thereof), the Borrower will
notify the Administrative Agent and the Lenders thereof, and, if requested by
the Administrative Agent or the Required Lenders, the Borrower will cause such
assets to be subjected to a Lien securing the Obligations and will take, and
cause the Subsidiary Loan Parties to take, such actions as shall be necessary
or reasonably requested by the Administrative Agent to grant and perfect such
Liens, including actions described in paragraph (a) of this Section, all at the
expense of the Loan Parties.
SECTION 5.14. Interest Rate Protection. As promptly as practicable,
and in any event within 120 days after the Closing Date, the Borrower will
enter into, and thereafter for a period of not less than three years will
maintain in effect, one or more interest rate protection agreements on such
terms and with such parties as shall be reasonably satisfactory to the
Administrative Agent, the effect of which shall be to fix or limit during such
three-year period the interest cost to the Borrower with respect to at least
50% of the outstanding Term Loans.
SECTION 5.15. Corporate Formalities. The Borrower will establish and
comply with the corporate formalities and procedures specified on Schedule
5.15.
ARTICLE VI
Negative Covenants
Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, each of Holdings and the Borrower covenants and
agrees with the Lenders that:
SECTION 6.01. Indebtedness; Certain Equity Securities. (a) Holdings
and the Borrower will not, and will not permit any Subsidiary to, create,
incur, assume or permit to exist any Indebtedness, except:
(i) Indebtedness created under the Loan Documents;
89
<PAGE> 95
(ii) the Senior Subordinated Notes in an aggregate principal amount
at maturity not to exceed $144,552,000 and, in the case of Holdings, the
Holdings Notes in an aggregate principal amount at maturity not to exceed
$98,549,000;
(iii) the Existing Capital Lease Obligations;
(iv) (A) in the case of the Borrower, the obligations related to
Indebtedness under the Substitution, (B) in the case of Holdings, the
obligations of Holdings pursuant to Section 5.02 of the Existing Notes
Indenture after the Substitution and (C) in the case of the Subsidiaries
who have, at the date hereof, given Guarantees of the Existing Notes
under the Existing Notes Indenture, their obligations under such
Guarantees as of the date hereof;
(v) Permitted Refinancing Indebtedness in an aggregate principal
amount not to exceed the aggregate principal amount of the Outstanding
Existing Notes on the date such Permitted Refinancing Indebtedness is
issued or incurred;
(vi) Indebtedness existing on the date hereof and set forth in
Schedule 6.01 and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount
thereof or result in an earlier maturity date or decreased weighted
average life thereof;
(vii) Indebtedness of the Borrower to any Wholly Owned Subsidiary and
of any Wholly Owned Subsidiary to the Borrower or any other Wholly Owned
Subsidiary, provided that Indebtedness of any Wholly Owned Subsidiary
that is not a Loan Party to the Borrower or any Wholly Owned Subsidiary
Loan Party shall be subject to Section 6.04;
(viii) Guarantees by the Borrower of Indebtedness of any Subsidiary
and by any Subsidiary of Indebtedness of the Borrower or any other
Subsidiary, provided that Guarantees by the Borrower or any Subsidiary
Loan Party of (A) Senior Subordinated Notes, (B) Existing Notes, (C)
Permitted Refinancing Indebtedness or (D) Indebtedness of any Subsidiary
that is not a Loan Party shall be subject to Section 6.04;
(ix) Indebtedness of the Borrower or any Subsidiary incurred to
finance the acquisition, construction or improvement of any fixed or
capital
90
<PAGE> 96
assets, including Capital Lease Obligations and any Indebtedness assumed
in connection with the acquisition of any such assets or secured by a
Lien on any such assets prior to the acquisition thereof, provided that
such Indebtedness is incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement, and
extensions, renewals and replacements of any such Indebtedness that do
not increase the outstanding principal amount thereof, provided that the
aggregate principal amount of Indebtedness permitted by this clause (ix)
shall not exceed $20,000,000 at any time outstanding;
(x) Indebtedness of any Person that becomes a Subsidiary after the
date hereof, provided that (A) such Indebtedness exists at the time such
Person becomes a Subsidiary and is not created in contemplation of or in
connection with such Person becoming a Subsidiary and (B) the aggregate
principal amount of Indebtedness permitted by this clause (x) shall not
exceed $10,000,000 at any time outstanding;
(xi) other unsecured Indebtedness of the Borrower or any Subsidiary
in an aggregate principal amount not exceeding $10,000,000 at any time
outstanding;
(xii) Indebtedness in respect of Hedging Agreements permitted by
Section 6.07; and
(xiii) Indebtedness incurred by the Borrower or any of the
Subsidiaries constituting reimbursement obligations with respect to
letters of credit issued in the ordinary course of business, including
letters of credit in respect of workers' compensation claims or
self-insurance.
(b) Holdings will not create, incur, assume or permit to exist any
Indebtedness except (i) the Holdings Notes, (ii) the Guarantees of the Senior
Subordinated Notes, (iii) Indebtedness in respect of the Outstanding Existing
Notes pursuant to Section 5.02 of the Existing Notes Indenture, (iv) the
Permitted Refinancing Indebtedness or any Guarantee thereof and (v)
Indebtedness created under the Loan Documents.
(c) Neither Holdings nor the Borrower will, nor will they permit any
Subsidiary to, issue any preferred stock or other preferred Equity Interests.
SECTION 6.02. Liens. (a) Holdings and the Borrower will not, and will
not permit any Subsidiary to,
91
<PAGE> 97
create, incur, assume or permit to exist any Lien on any property or asset now
owned or hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect of any thereof, except:
(i) Liens created under the Loan Documents;
(ii) Permitted Encumbrances;
(iii) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 6.02,
provided that (A) such Lien shall not apply to any other property or
asset of Holdings, the Borrower or any Subsidiary and (B) such Lien shall
secure only those obligations that it secures on the date hereof and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
(iv) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date
hereof prior to the time such Person becomes a Subsidiary, provided that
(A) such Lien is not created in contem plation of or in connection with
such acquisition or such Person becoming a Subsidiary, as the case may
be, (B) such Lien shall not apply to any other property or assets of the
Borrower or any Subsidiary and (C) such Lien shall secure only those
obligations that it secures on the date of such acquisition or the date
such Person becomes a Subsidiary, as the case may be and extensions,
renewals and replacements thereof that do not increase the outstanding
principal amount thereof; and
(v) Liens on fixed or capital assets acquired, constructed or
improved by the Borrower or any Subsidiary, provided that (A) such
security interests secure Indebtedness permitted by clause (ix) of
Section 6.01(a), (B) such security interests and the Indebtedness secured
thereby are incurred prior to or within 90 days after such acquisition or
the completion of such construction or improvement, (C) the Indebtedness
secured thereby does not exceed 80% of the cost of acquiring,
constructing or improving such fixed or capital assets and (D) such
security interests shall not apply to any other property or assets of the
Borrower or any Subsidiary;
92
<PAGE> 98
(b) Holdings will not create, incur, assume or permit to exist any
Lien on any property or asset now owned or hereafter acquired by it, or assign
or sell any income or revenues (including accounts receivable) or rights in
respect thereof, except Liens created under the Pledge Agreement or the
Security Agreement and Permitted Encumbrances.
SECTION 6.03. Fundamental Changes. (a) Neither Holdings nor the
Borrower will, nor will they permit any Subsidiary to, merge into or
consolidate with any other Person, or permit any other Person to merge into or
consolidate with it, or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing (i) Holdings and the Purchaser may consummate the
Merger, (ii) any Subsidiary may merge into the Borrower in a transaction in
which the Borrower is the surviving corporation, (iii) any Person may merge
with or into or consolidate with any Subsidiary in a transaction in which the
surviving entity is a Subsidiary and (if any party to such merger is a
Subsidiary Loan Party) the surviving entity is a Subsidiary Loan Party, (iv)
any Subsidiary may merge into or consolidate with any other Person or permit
any other Person to merge into or consolidate with it in any sale or other
disposition permitted under Section 6.05, (v) any Subsidiary (other than a
Subsidiary Loan Party) may liquidate or dissolve if the Borrower determines in
good faith that such liquidation or dissolution is in the best interests of the
Borrower and is not materially disadvantageous to the Lenders and (vi) the
Borrower may merge with an Affiliate incorporated solely for the purpose of
reincorporating the Borrower in another jurisdiction, provided that Holdings
pledges the stock of the surviving entity to the Collateral Agent as security
for the Obligations and, in connection with such merger, Holdings and its
subsidiaries execute such other documents as are reasonably requested by the
Administrative Agent to effect the purposes of this Agreement and the other
Loan Documents, provided further that any such merger or consolidation
involving a Person that is not a Wholly Owned Subsidiary immediately prior to
such merger or consolidation shall not be permitted unless also permitted by
Sections 6.04 and 6.08.
(b) The Borrower will not, and will not permit any of the Subsidiaries
to, engage to any material extent in any business other than businesses of the
type conducted by the Borrower and the Subsidiaries on the date of execution of
this Agreement and businesses reasonably related thereto.
93
<PAGE> 99
(c) Holdings will not engage in any business or activity other than
the ownership of all the outstanding shares of capital stock of the Borrower,
the issuance of the Holdings Notes and activities incidental thereto, including
rental payments, computer services, professional and consultant services,
investment services, printing, travel and other miscellaneous services.
Holdings will not own or acquire any assets (other than shares of capital stock
of the Borrower, cash and Permitted Investments) or incur any liabilities
(other than liabilities under the Loan Documents, liabilities imposed by law,
including tax liabilities, liabilities under the Holdings Notes and other
liabilities incidental to its existence and permitted business and activities).
SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions. The Borrower will not, and will not permit any of the
Subsidiaries to, purchase, hold or acquire (including pursuant to any merger
with any Person that was not a Wholly Owned Subsidiary prior to such merger)
any Equity Interests in or evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing)
of, make or permit to exist any loans or advances to, Guarantee any obligations
of, or make or permit to exist any investment or any other interest in, any
other Person, or purchase or otherwise acquire (in one transaction or a series
of transactions) any assets of any other Person constituting a business unit,
except:
(a) pursuant to the Transactions;
(b) Permitted Investments;
(c) Investments permitted pursuant to Section 2.11(c);
(d) investments existing on the date hereof and set forth on Schedule
6.04(d);
(e) investments by the Borrower and the Subsidiaries in Equity
Interests in their respective Subsidiaries, provided that (i) any such
Equity Interests held by a Loan Party shall be pledged pursuant to the
Pledge Agreement (subject to the limitations applicable to common stock
of a Foreign Subsidiary referred to in Section 5.12) and (ii) the
aggregate amount of investments by Loan Parties in, and loans and
advances by Loan Parties to, and Guarantees by Loan Parties of
Indebtedness of, Subsidiaries that are not Loan Parties (excluding all
such investments,
94
<PAGE> 100
loans, advances and Guarantees existing on the Closing Date to the extent
set forth on Schedule 6.04(e)) shall not exceed $15,000,000 (based on
cost and net of any cash distributed by such Subsidiaries that are not
Loan Parties to Loan Parties that represent a return of paid-in capital
or repayment of principal) at any time outstanding;
(f) loans or advances made by the Borrower to any Subsidiary and made
by any Subsidiary to the Borrower or any other Subsidiary, provided that
(i) any such loans and advances made by a Loan Party shall be evidenced
by a promissory note pledged pursuant to the Pledge Agreement and (ii)
the amount of such loans and advances made by Loan Parties to
Subsidiaries that are not Loan Parties shall be subject to the limitation
set forth in clause (e) above;
(g) Guarantees constituting Indebtedness permitted by Section 6.01,
provided that, other than in respect of the Guarantees in effect on the
date hereof in respect of the Outstanding Existing Notes, (i) neither
Holdings, the Borrower nor any Subsidiary shall Guarantee the Senior
Subordinated Notes, the Outstanding Existing Notes or any Permitted
Refinancing Indebtedness unless (A) Holdings or such Subsidiary, as
applicable, also has Guaranteed the Obligations pursuant to a Guarantee
Agreement, (B) such Guarantee of the Senior Subordinated Notes, the
Outstanding Existing Notes or such Permitted Refinancing Indebtedness, as
applicable, is subordinated to such Guarantee of the Obligations on terms
no less favorable to the Lenders than the subordination provisions of the
Senior Subordinated Notes, the Outstanding Existing Notes or such
Permitted Refinancing Indebtedness, as applicable, and (C) such Guarantee
of the Senior Subordinated Notes or such Permitted Refinancing
Indebtedness, as applicable, provides for the release and termination
thereof, without action by any party, (x) upon, in the case of a
Subsidiary, the applicable Subsidiary's ceasing to be a subsidiary as a
result of any foreclosure under any of the Security Documents or any
other exercise of remedies in respect thereof if that Subsidiary is
released from its Guarantee of the Obligations and (y) in the
circumstances set forth in Section 11.02(b) of the indenture forming part
of the Subordinated Debt Documents relating to the Senior Subordinated
Notes (as in effect on the date hereof) and (ii) the aggregate principal
amount of Indebtedness of Subsidiaries that are not Loan Parties that is
95
<PAGE> 101
Guaranteed by any Loan Party shall be subject to the limitation set forth
in clause (e) above;
(h) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes
with, customers and suppliers, in each case in the ordinary course of
business;
(i) investments constituting Permitted Acquisitions not to exceed
$75,000,000 (based on cost and net of any cash distributed by the entity
that was the subject of the Permitted Acquisition to the extent that such
distribution represents a return of paid-in capital or repayment of
principal) in the aggregate (which amount will be deemed to (x) include
(A) the amount of any Indebtedness acquired or assumed in connection with
Permitted Acquisitions and (B) as soon as such obligations must be
recognized as liabilities under GAAP, any obligations in respect of
earn-out arrangements, non-compete arrangements or long-term consulting
or employment arrangements, in each case incurred directly in connection
with a Permitted Acquisition, and (y) exclude the amount of any Equity
Interests (other than Disqualified Stock) in Holdings issued to (A) the
seller in such Permitted Acquisition or (B) the Investor or a third party
reasonably acceptable to the Administrative Agent to provide proceeds
solely to be used by the Borrower to consummate such Permitted
Acquisition);
(j) investments constituting Permitted Acquisitions that are made
using the Net Proceeds of a sale, transfer or other disposition of assets
effected pursuant to Section 6.05(d) (other than any Net Proceeds that
have already been used for purposes permitted under Section 2.11) and
that are made within 360 days after receipt of such Net Proceeds, to the
extent that the Equity Interests or assets acquired in the Permitted
Acquisition become subject to the Security Documents pursuant to Section
5.12 or 5.13 (the "Secured Assets"), provided that if a particular
Permitted Acquisition is comprised of Secured Assets and Equity Interests
and assets that will not be Secured Assets (the "Unsecured Assets") then
(x) the investment in the Unsecured Assets must be permitted by Section
6.04(i) as if it were a separate Permitted Acquisition and (y) for the
purposes of determining whether the investment
96
<PAGE> 102
in such Permitted Acquisition is permitted pursuant to Section 6.04(i)
and this Section 6.04(j), the aggregate cost of the investment in such
Permitted Acquisition shall be allocated on a pro rata basis between the
Secured Assets and the Unsecured Assets based upon the gross profit
earned during the twelve months immediately prior to the date of the
Permitted Acquisition in respect of such assets as calculated in
accordance with GAAP;
(k) Loans and advances to employees, directors or consultants in the
ordinary course of business of the Borrower and the Subsidiaries as
presently conducted by Holdings in an aggregate principal amount
(excluding all such loans and advances existing on the Closing Date to
the extent set forth on Schedule 6.04(k), and any refinancings thereof on
substantially similar terms) not to exceed $5,000,000;
(l) Investments by the Borrower in Hedging Agreements permitted under
Section 6.07;
(m) receivables owing to the Borrower or any Subsidiary if created or
acquired in the ordinary course of business and payable or dischargeable
in accordance with customary trade terms (and any receivables and/or
securities received in full or partial satisfaction thereof from
financially troubled debtors to the extent necessary in order to prevent
or limit loss), provided, however, that such trade terms may include such
concessionary trade terms as the Borrower or any such Subsidiary deems
reasonable under the circumstances;
(n) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary course
of business; and
(o) Investments that are made exclusively with Equity Interests of
Holdings (other than Disqualified Stock); and
(p) other investments in an aggregate amount not to exceed $5,000,000.
SECTION 6.05. Asset Sales. The Borrower will not, and will not permit
any of the Subsidiaries to, sell, transfer, lease or otherwise dispose of any
asset, including
97
<PAGE> 103
any Equity Interest owned by it, nor will the Borrower permit
any of the Subsidiaries to issue any additional Equity Interest in such
Subsidiary, except:
(a) the sales, transfers and other dispositions comprising the Circon
Acquisition, the Asset Dropdown and any associated transaction forming
part of the Transactions;
(b) sales of inventory, used or surplus equipment and Permitted
Investments in the ordinary course of business;
(c) sales, transfers and dispositions to the Borrower or a
Wholly-Owned Subsidiary, provided that any such sales, transfers or
dispositions involving a Subsidiary that is not a Loan Party shall be
made in compliance with Section 6.09; and
(d) sales, transfers and other dispositions of assets (other than
Equity Interests in a Subsidiary) that are not permitted by any other
clause of this Section, provided that the aggregate fair market value of
all assets sold, transferred or otherwise disposed of in reliance upon
this clause (c) shall not exceed (x) $50,000,000 in aggregate during the
period from the Closing Date until the last day of the fiscal year ending
on or about October 31, 2001, (y) $15,000,000 during any fiscal year of
the Borrower thereafter or (z) $80,000,000 in the aggregate during the
term of this Agreement, provided, however, that assets with an aggregate
book value of less than $100,000 sold, transferred or otherwise disposed
of in a single transaction or a series of related transactions shall not
be included in the determination of the aggregate fair market value of
assets sold, transferred or otherwise disposed of in reliance upon this
clause (d);
provided that all sales, transfers, leases and other dispositions permitted
hereby (other than those permitted by clause (c) above) shall be made for fair
value and (other than those permitted by clause (c) above) shall be made for at
least 50% cash consideration.
SECTION 6.06. Sale and Leaseback Transactions. The Borrower will not,
and will not permit any of the Subsidiaries to, enter into any arrangement,
directly or indirectly, whereby it shall sell or transfer any property, real or
personal, used or useful in its business, whether now owned or hereinafter
acquired, and thereafter rent or lease such property or other property that it
intends to use
98
<PAGE> 104
for substantially the same purpose or purposes as the property sold or
transferred, except for any such sale of any fixed or capital assets that is
made for cash consideration in an amount not less than the cost of such fixed
or capital asset and is consummated within 90 days after the Borrower or such
Subsidiary acquires or completes the construction of such fixed or capital
asset.
SECTION 6.07. Hedging Agreements. The Borrower will not, and will not
permit any of the Subsidiaries to, enter into any Hedging Agreement, other than
(a) Hedging Agreements required by Section 5.14 and (b) Hedging Agreements
entered into in the ordinary course of business to hedge or mitigate risks to
which the Borrower or any Subsidiary is exposed in the conduct of its business
or the management of its liabilities. Solely for the avoidance of doubt,
Holdings and the Borrower acknowledge that a Hedging Agreement entered into for
speculative purposes or of a speculative nature (which shall be deemed to
include any Hedging Agreement under which Holdings, the Borrower or any of the
Subsidiaries is or may become obliged to make any payment (x) in connection
with the purchase by any third party of any capital stock or any Indebtedness
or (y) as a result of changes in the market value of any capital stock or any
Indebtedness) is not a Hedging Agreement entered into in the ordinary course of
business to hedge or mitigate risks.
SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness.
(a) Neither Holdings nor the Borrower will, nor will they permit any Subsidiary
to, declare or make, or agree to pay or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
except (i) Holdings may repurchase Shares, and acquire stock options for cash,
pursuant to the Merger; (ii) Holdings may declare and pay dividends with
respect to its capital stock payable solely in additional shares of its common
stock; (iii) Subsidiaries may declare and pay dividends ratably with respect to
their capital stock; (iv) the Borrower may pay dividends to Holdings in amounts
equal to amounts expended by Holdings to repurchase or otherwise acquire shares
of, or options to purchase shares of, common stock of Holdings from employees,
former employees, consultants, former consultants, directors or former
directors of Holdings, the Borrower or any Subsidiary (or permitted transferees
of such employees, former employees, consultants, former consultants, directors
or former directors), pursuant to the terms of agreements (including employment
agreements) or plans (or amendments thereto) approved by the Board of Directors
of Holdings under which such individuals purchase or sell, or are
99
<PAGE> 105
granted the option to purchase or sell, shares of such common stock of
Holdings, provided, however, that the aggregate amount paid to Holdings
pursuant to this clause (iv) shall not exceed in any calendar year the sum of
(x) $6,500,000 plus (y) the Net Proceeds received since the date of this
Agreement and not previously credited to any repurchase or other acquisition of
such shares or options to purchase shares of common stock pursuant to this
clause (iv) received by Holdings and contributed to the Borrower from the sale
of Equity Interests to employees, consultants and directors of Holdings, the
Borrower or any Subsidiary; (v) the Borrower may pay dividends to Holdings at
such times and in such amounts equal to the amounts required for Holdings to
pay taxes, franchise fees and other fees required to maintain its corporate
existence and provide for other operating costs of up to $1,000,000 during any
fiscal year (other than liabilities in respect of the Holdings Notes); (vi) the
Borrower may pay dividends to Holdings in amounts equal to amounts necessary
for Holdings to make loans or advances to employees in the ordinary course of
business in accordance with past practices of Holdings, but in any event not to
exceed, when aggregated with amounts loaned or advanced under Section 6.04(j),
$5,000,000 in the aggregate outstanding at any one time; (vii) any purchase,
repurchase, retirement, defeasance or other acquisition or retirement for value
of Equity Interests of Holdings made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Equity Interests of Holdings (other than
Disqualified Stock and other than Equity Interests issued or sold to the
Borrower or a Subsidiary or an employee stock ownership plan or other trust
established by the Borrower or any of the Subsidiaries); and (viii) the
Borrower may at any time after the date that is five years after the Closing
Date, provided that no Default or Event of Default has occurred and is
continuing or will occur as a result of such payment and to the extent
permitted by the Subordinated Debt Documents and the Existing Notes Debenture
in each case as in effect on the date hereof, pay dividends to Holdings when
and to the extent necessary to fund payments of interest accrued and payable on
the Holdings Notes.
(b) Neither Holdings nor the Borrower will, nor will they permit any
Subsidiary to, make or agree to pay or make, directly or indirectly, any
payment or other distribution (whether in cash, securities or other property)
of or in respect of principal of or interest on any Indebtedness, or any
payment or other distribution (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
100
<PAGE> 106
redemption, retirement, acquisition, cancelation or termination of any
Indebtedness (including the Holdings Notes), except:
(i) payment of Indebtedness created under the Loan Documents;
(ii) the purchase of Existing Notes either (x) pursuant to the Debt
Tender Offer, (y) financed with the proceeds of the Permitted Refinancing
Indebtedness or (z) to the extent permitted by Section 5.11(b), with the
proceeds of a Revolving Loan;
(iii) the repayment or repurchase of the Existing Indebtedness on the
Closing Date;
(iv) payment of regularly scheduled interest and principal payments
as and when due in respect of any Indebtedness, other than (A) payments
in respect of the Senior Subordinated Notes or Outstanding Existing Notes
prohibited by the subordination provisions thereof and (B) payments in
cash in respect of interest on the Holdings Notes prior to the date that
is five years after the Closing Date;
(v) refinancings of Indebtedness to the extent permitted by Section
6.01; and
(vi) payment of secured Indebtedness that becomes due as a result of
the voluntary sale or transfer of the property or assets securing such
Indebtedness.
SECTION 6.09. Transactions with Affiliates. Neither Holdings nor the
Borrower will, nor will they permit any Subsidiary to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions with,
any of its Affiliates, except (a) transactions in the ordinary course of
business that do not involve Holdings and are at prices and on terms and
conditions not less favorable to the Borrower or such Subsidiary than could be
obtained on an arm's-length basis from unrelated third parties, (b)
transactions between or among the Borrower and the Subsidiary Loan Parties not
involving any other Affiliate, (c) any Restricted Payment permitted by Section
6.08, (d) any issuance by Holdings of securities or by the Borrower of debt
securities, or other payments, awards or grants in cash, securities (other
than, in respect of the Borrower, Equity Interests) or otherwise pursuant to,
or the funding of, employment arrangements, stock options and stock ownership
plans approved by the
101
<PAGE> 107
Board of Directors of the Borrower, (e) the grant of stock options or similar
rights in respect of Equity Interests in Holdings to employees and directors of
the Borrower pursuant to plans approved by the Board of Directors of the
Borrower, (f) customary indemnification and insurance arrangements in favor of
officers, directors, employees and consultants of Holdings, the Borrower or any
Subsidiary, (g) the payment of management fees by the Borrower or any
Subsidiary, provided that such fees shall not exceed an aggregate amount per
annum equal to 2.0% of the Consolidated EBITDA of Holdings for the fiscal year
most recently ended, and provided further that no Default or Event of Default
has occurred and is continuing, (h) the existence of, or the performance by
Holdings, the Borrower or any Subsidiary of the obligations under the terms of,
any stockholders agreements (including any registration rights agreement or
purchase agreement related thereto) to which it is a party as of the Closing
Date, which agreements are listed on Schedule 6.09(h), as such agreements may
be amended on terms reasonably satisfactory to the Administrative Agent from
time to time pursuant to the terms thereof, provided, however, that the terms
of any such amendment are no less favorable to the Lenders than the terms of
any such agreements in effect as of the Closing Date, and (i) the issuance of
Equity Interests (other than Disqualified Stock) of Holdings for cash to the
Sponsor, the Continuing Shareholders or other senior management of the
Borrower.
SECTION 6.10. Restrictive Agreements. Neither Holdings nor the
Borrower will, nor will they permit any Subsidiary to, directly or indirectly,
enter into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the ability of Holdings,
the Borrower or any Subsidiary to create, incur or permit to exist any Lien
upon any of its property or assets or (b) the ability of any Subsidiary to pay
dividends or other distributions with respect to any shares of its capital
stock or to make or repay loans or advances to the Borrower or any other
Subsidiary or to Guarantee Indebtedness of the Borrower or any other
Subsidiary, provided that (i) the foregoing shall not apply to restrictions and
conditions imposed by law or by any Loan Document, any Subordinated Debt
Document, the Holdings Notes Indenture or any indenture or other instrument or
agreement pursuant to which any Permitted Refinancing Indebtedness is issued or
incurred (provided that the restrictions or conditions imposed by such
indenture, instrument or agreement are no more restrictive than those contained
in the Subordinated Debt Documents), (ii) the foregoing shall not apply to
restrictions and conditions existing on the date hereof identified on Schedule
6.10 (but shall apply to
102
<PAGE> 108
any extension or renewal of, or any amendment or modification expanding the
scope of, any such restriction or condition), (iii) the foregoing shall not
apply to customary restrictions and conditions contained in agreements relating
to the sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, (iv) clause (a) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness, (v) clause (a)
of the foregoing shall not apply to customary provisions in leases and other
contracts restricting the assignment thereof, (vi) clause (a) of the foregoing
shall not apply to restrictions on cash or other deposits imposed by customers
under contracts entered into in the ordinary course of business on the parties
to such contracts and (vii) clause (a) of the foregoing shall not apply to any
encumbrance or restriction on the assets of any joint venture that is (A)
contained in any joint venture agreement or other similar agreement with
respect to such joint venture that was entered into in the ordinary course of
business and (B) customary for such types of agreements.
SECTION 6.11. Amendment of Material Documents. Neither Holdings nor
the Borrower will, nor will they permit any Subsidiary to, amend, modify or
waive any of its rights under (a) any Subordinated Debt Document or indenture
or other instrument or agreement under which any Permitted Refinancing
Indebtedness is issued or incurred, (b) the Holdings Notes Indenture, (c) its
certificate of incorporation, by-laws or other organizational documents, (d)
the Services Agreement or (e) any other material document or agreement, in each
case in any manner that would impair in any material respect the value of the
interests or rights of Holdings, the Borrower or such Subsidiary thereunder or
that would impair in any material respect the rights or interests of any Agent
or any Lender.
SECTION 6.12. Interest Coverage Ratio. The Borrower will not permit
the ratio (the "Interest Coverage Ratio") of Adjusted Consolidated EBITDA of
the Borrower to Consolidated Cash Interest Expense for (a) the fiscal quarter
period ended as of January 31, 2000, to be less than 1.50 to 1.00, (b) the two
fiscal quarter period ended as of April 30, 2000, to be less than 1.50 to 1.00,
(c) the three fiscal quarter period ended as of July 31, 2000, to be less than
1.55 to 1.00 or (d) any Test Period ending on the last day of any fiscal
quarter included in any period (or
103
<PAGE> 109
ending on any date) set forth on the table below to be less than the ratio set
forth opposite such period or date:
<TABLE>
<CAPTION>
Period: Ratio:
------- ------
<S> <C>
August 1, 2000, to April 30, 2001 1.55 to 1.00
May 1, 2001, to October 31, 2001 1.65 to 1.00
November 1, 2001, to April 30, 2002 1.70 to 1.00
May 1, 2002, to October 31, 2002 1.75 to 1.00
November 1, 2002, to April 30, 2003 1.80 to 1.00
May 1, 2003, to October 31, 2003 1.90 to 1.00
November 1, 2003, to April 30, 2004 1.90 to 1.00
May 1, 2004, to October 31, 2004 2.00 to 1.00
November 1, 2004, to April 30, 2005 2.20 to 1.00
May 1, 2005, to October 31, 2005 2.20 to 1.00
November 1, 2005, to April 30, 2006 2.40 to 1.00
May 1, 2006, to October 31, 2006 2.40 to 1.00
November 1, 2006, to April 30, 2007 3.00 to 1.00
May 1, 2007, to October 31, 2007 3.25 to 1.00
November 1, 2007, and thereafter 3.50 to 1.00
</TABLE>
SECTION 6.13. Total Adjusted Leverage Ratio. The Borrower will not
permit the Total Adjusted Leverage Ratio as of the last day of any fiscal
quarter included in any period (or ending on any date) set forth below to be
more than the ratio set forth in the table below opposite such period or date:
<TABLE>
<CAPTION>
Period: Ratio:
------- ------
<S> <C>
Closing Date to January 31, 2000 6.50 to 1.00
February 1, 2000, to April 30, 2000 6.50 to 1.00
May 1, 2000, to October 31, 2000 6.20 to 1.00
November 1, 2000, to April 30, 2001 5.80 to 1.00
May 1, 2001, to October 31, 2001 5.65 to 1.00
November 1, 2001, to April 30, 2002 5.50 to 1.00
May 1, 2002, to October 31, 2002 5.25 to 1.00
November 1, 2002, to April 30, 2003 5.00 to 1.00
May 1, 2003, to October 31, 2003 4.85 to 1.00
November 1, 2003, to April 30, 2004 4.75 to 1.00
May 1, 2004, to October 31, 2004 4.50 to 1.00
November 1, 2004, to April 30, 2005 4.35 to 1.00
May 1, 2005, to October 31, 2005 4.25 to 1.00
November 1, 2005, to April 30, 2006 4.00 to 1.00
May 1, 2006, to October 31, 2006 3.60 to 1.00
November 1, 2006, to April 30, 2007 3.00 to 1.00
May 1, 2007, to October 31, 2007 2.75 to 1.00
November 1, 2007, and thereafter 2.75 to 1.00
</TABLE>
104
<PAGE> 110
SECTION 6.14. Senior Adjusted Leverage Ratio. The Borrower will not
permit the Senior Adjusted Leverage Ratio as of the last day of any fiscal
quarter included in any period (or ending on any date) set forth below to be
more than the ratio set forth in the table below opposite such period or date:
<TABLE>
<CAPTION>
Period: Ratio:
------- ------
<S> <C>
Closing Date to January 31, 2000 4.30 to 1.00
February 1, 2000, to April 30, 2000 4.20 to 1.00
May 1, 2000, to October 31, 2000 4.10 to 1.00
November 1, 2000, to April 30, 2001 3.75 to 1.00
May 1, 2001, to October 31, 2001 3.75 to 1.00
November 1, 2001, to April 30, 2002 3.50 to 1.00
May 1, 2002, to October 31, 2002 3.30 to 1.00
November 1, 2002, to April 30, 2003 3.30 to 1.00
May 1, 2003, to October 31, 2003 3.00 to 1.00
November 1, 2003, to April 30, 2004 3.00 to 1.00
May 1, 2004, to October 31, 2004 2.80 to 1.00
November 1, 2004, to April 30, 2005 2.60 to 1.00
May 1, 2005, to October 31, 2005 2.60 to 1.00
November 1, 2005, to April 30, 2006 2.40 to 1.00
May 1, 2006, to October 31, 2006 2.25 to 1.00
November 1, 2006, to April 30, 2007 1.75 to 1.00
May 1, 2007, to October 31, 2007 1.75 to 1.00
November 1, 2007, and thereafter 1.75 to 1.00
</TABLE>
SECTION 6.15. Capital Expenditures. (a) The Borrower will not, and
will not permit any of the Subsidiaries to, make any Capital Expenditures that
would
105
<PAGE> 111
cause the aggregate amount of such Capital Expenditures made by the Borrower
and the Subsidiaries in any fiscal year of the Borrower (i) ending on or about
October 31, 1999, to exceed $25,000,000, (ii) ending on or about October 31,
2000, October 31, 2001, or October 31, 2002 to exceed $15,000,000 and (ii)
ending thereafter to exceed $20,000,000, provided that (x) expenditures made in
connection with the replacement, substitution or restoration of assets (i) to
the extent financed from insurance proceeds paid on account of the loss of or
damage to the assets being replaced or restored or (ii) with awards of
compensation arising from the taking by eminent domain or condemnation of the
assets being replaced, (y) the purchase price of equipment that is purchased
simultaneously with the trade-in of existing equipment to the extent that the
gross amount of such purchase price is reduced by the credit granted by the
seller of such equipment for the equipment being traded in at such time and (z)
the purchase price of plant, property or equipment made within one year of the
sale of any asset to the extent purchased for an aggregate amount not in excess
of the amount of the Net Proceeds of such sale shall not be included in the
calculation of Capital Expenditures pursuant to this Section 6.15.
(b) Notwithstanding the foregoing, the Borrower may in any fiscal
year, upon written notice to the Administrative Agent, increase the amount of
Capital Expenditures permitted to be made during such fiscal year pursuant to
this Section 6.15 by an amount equal to the lesser of (i) the total unused
amount of Capital Expenditures permitted to be made pursuant to this Section
6.15 for the immediately preceding fiscal year (minus the amount of any unused
Capital Expenditures permitted to be made pursuant to this Section 6.15 that
were carried forward to such preceding fiscal year pursuant to this paragraph
(b)) and (ii) 50% of the amount of Capital Expenditures permitted to be made
pursuant to this Section 6.15 for the immediately preceding fiscal year (minus
the amount of any unused Capital Expenditures permitted to be made pursuant to
this Section 6.15 that were carried forward to such preceding fiscal year
pursuant to this paragraph (b)).
SECTION 6.16. Fiscal Year. Holdings and the Borrower will not, and
will not permit the Subsidiaries to, change the financial reporting convention
by which Holdings, the Borrower and the Subsidiaries determine the dates on
which their fiscal years and fiscal quarters will end.
106
<PAGE> 112
ARTICLE VII
Events of Default
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as
the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in clause (a) of
this Article) payable under this Agreement or any other Loan Document,
when and as the same shall become due and payable, and such failure shall
continue unremedied for a period of three Business Days;
(c) any representation or warranty made or deemed made by or on behalf
of Holdings, the Borrower or any Subsidiary in or in connection with any
Loan Document or any amendment or modification thereof or waiver
thereunder, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document or
any amendment or modification thereof or waiver thereunder, shall prove
to have been incorrect in any material respect when made or deemed made;
(d) Holdings or the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in Section 5.02, 5.04 (with
respect to the existence of Holdings or the Borrower) or 5.11 or in
Article VI;
(e) any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document (other than those
specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied for a period of 30 days after notice thereof
from the Administrative Agent to the Borrower (which notice will be given
at the request of any Lender);
(f) Holdings, the Borrower or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in
respect of any
107
<PAGE> 113
Material Indebtedness, when and as the same shall become due and payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee
or agent on its or their behalf to cause any Material Indebtedness to
become due, or to require the prepayment, repurchase, redemption or
defeasance thereof, prior to its scheduled maturity, provided that this
clause (g) shall not apply to secured Indebtedness that becomes due as a
result of the voluntary sale or transfer of the property or assets
securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of Holdings, the Borrower or any Subsidiary or its
debts, or of a substantial part of its assets, under any Federal, state
or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for Holdings,
the Borrower or any Subsidiary or for a substantial part of its assets,
and, in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any
of the foregoing shall be entered;
(i) Holdings, the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or petition described in
clause (h) of this Article, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar
official for Holdings, the Borrower or any Subsidiary or for a
substantial part of its assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or
(vi) take any action for the purpose of effecting any of the foregoing;
108
<PAGE> 114
(j) Holdings, the Borrower or any Subsidiary shall become unable,
admit in writing its inability or fail generally to pay its debts as they
become due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 (after giving effect to insurance
payments, if any) shall be rendered against Holdings, the Borrower, any
Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by
a judgment creditor to attach or levy upon any assets of Holdings, the
Borrower or any Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events for
which liability of the Borrower or the Subsidiaries is reasonably
expected to occur, could reasonably be expected to result in liability of
the Borrower and the Subsidiaries in an aggregate amount exceeding (i)
$5,000,000 in any year or (ii) $15,000,000 for all periods;
(m) (i) any Lien purported to be created under any Security Document
shall cease to be, or shall be asserted by any Loan Party not to be, a
valid and perfected Lien on any Collateral, having a value in excess of
$10,000,000, with the priority required by the applicable Security
Document, except (A) as a result of the sale or other disposition of the
applicable Collateral in a transaction permitted under the Loan Documents
or (B) as a result of the Administrative Agent's failure to maintain
possession of any stock certificates, promissory notes or other
instruments delivered to it under the Security Agreement or (ii) the
Obligations of the Borrower, or the obligations of Holdings or any
Subsidiaries pursuant to a Guarantee Agreement, shall cease to constitute
senior indebtedness under the subordination provisions of any document or
instrument evidencing any permitted subordinated Indebtedness or such
subordination provisions shall be invalidated or otherwise cease to be
legal, valid and binding obligations of the parties thereto, enforceable
in accordance with their terms; or
(n) a Change in Control shall occur;
109
<PAGE> 115
then, and in every such event (other than an event with respect to the
Borrower described in clause (h) or (i) of this Article), and at any time
thereafter during the continuance of such event, the Administrative Agent
may, and at the request of the Required Lenders shall, by notice to the
Borrower, take either or both of the following actions, at the same or
different times: (i) terminate the Commitments, and thereupon the
Commitments shall terminate immediately, and (ii) declare the Loans then
outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be
declared to be due and payable), and thereupon the principal of the Loans
so declared to be due and payable, together with accrued interest thereon
and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
the Borrower; and in case of any event with respect to the Borrower
described in clause (h) or (i) of this Article, the Commitments shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other obligations
of the Borrower accrued hereunder, shall automatically become due and
payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.
ARTICLE VIII
The Administrative Agent
Each of the Lenders and the Issuing Bank hereby irrevocably appoints
the Administrative Agent as its agent and authorizes the Administrative Agent
to take such actions on its behalf and to exercise such powers as are delegated
to the Administrative Agent by the terms of the Loan Documents, together with
such actions and powers as are reasonably incidental thereto. For purposes of
this Article VIII and for the purposes of Article IX, all references to the
Administrative Agent are deemed to include the Collateral Agent.
The bank serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with Holdings, the Borrower or any Subsidiary or any
Affiliate of any of the foregoing as if it were not the Administrative Agent
hereunder.
110
<PAGE> 116
The Administrative Agent shall not have any duties or obligations
except those expressly set forth in the Loan Documents. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any
duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated by the Loan
Documents that the Administrative Agent is required to exercise in writing by
the Required Lenders (or such other number or percentage of the Lenders as
shall be necessary under the circumstances as provided in Section 9.02), and
(c) except as expressly set forth in the Loan Documents, the Administrative
Agent shall not have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to Holdings, the Borrower or any
of the Subsidiaries that is communicated to or obtained by the bank serving as
Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by
it with the consent or at the request of the Required Lenders (or such other
number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02) or in the absence of its own gross
negligence or wilful misconduct. The Administrative Agent shall not be deemed
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by Holdings, the Borrower or a Lender, and
the Administrative Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with any Loan Document, (ii) the contents of any certificate,
report or other document delivered thereunder or in connection therewith, (iii)
the performance or observance of any of the covenants, agreements or other
terms or conditions set forth in any Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of any Loan Document or any other
agreement, instrument or document, or (v) the satisfaction of any condition set
forth in Article IV or elsewhere in any Loan Document, other than to confirm
receipt of items expressly required to be delivered to the Administrative
Agent.
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing believed by it to be
111
<PAGE> 117
genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon. The Administrative Agent may consult
with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
The Administrative Agent may perform any of and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent
may resign at any time by notifying the Lenders, the Issuing Bank and the
Borrower. Upon any such resignation, the Required Lenders shall have the right,
in consultation with the Borrower, to appoint a successor. If no successor
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Administrative Agent gives
notice of its resignation, then the retiring Administrative Agent may, on
behalf of the Lenders and the Issuing Bank, appoint a successor Administrative
Agent which shall be a bank with an office in New York, New York, or an
Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After the Administrative Agent's resignation hereunder, the
provisions of this Article and Section 9.03 shall continue in effect for the
benefit of such retiring Administrative Agent, its sub-
112
<PAGE> 118
agents and their respective Related Parties in respect of any actions taken or
omitted to be taken by any of them while it was acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement, any other Loan Document or related agreement or any document
furnished hereunder or thereunder.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to Holdings or the Borrower, to it at 10300 49th Street North,
Clearwater, Florida 33762, Attention of Paulee Day (Telecopy No. (727)
561-2180);
(b) if to the Administrative Agent, to The Chase Manhattan Bank, Loan
and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New
York, New York 10081, Attention of Anne Bowles (Telecopy No. (212)
552-7500), with a copy to The Chase Manhattan Bank, 270 Park Avenue, New
York, New York 10017, Attention of Stephen Rochford (Telecopy No. (212)
270-5135);
(c) if to the Issuing Bank, to it at 270 Park Avenue, 10th Floor, New
York, New York 10017, Attention of Anne Bowles (Telecopy No. (212)
552-7500);
(d) if to the Swingline Lender, to it at 270 Park Avenue, 10th Floor,
New York, New York 10017, Attention of Anne Bowles (Telecopy No. (212)
552-7500); and
113
<PAGE> 119
(e) if to any other Lender, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.
SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the
Administrative Agent, the Issuing Bank or any Lender in exercising any right or
power hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent, the
Issuing Bank and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of any Loan Document or consent to
any departure by any Loan Party therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) of this Section, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. Without limiting the generality of the foregoing,
the making of a Loan or issuance of a Letter of Credit shall not be construed
as a waiver of any Default, regardless of whether the Administrative Agent, any
Lender or the Issuing Bank may have had notice or knowledge of such Default at
the time.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by Holdings, the Borrower and the Required Lenders or, in the case
of any other Loan Document, pursuant to an agreement or agreements in writing
entered into by the Administrative Agent and the Loan Party or Loan Parties
that are parties thereto, in each case with the consent of the Required
Lenders, provided that no such agreement shall (i) increase the Commitment of
any Lender without the written consent of such Lender, (ii) reduce the
principal amount of any Loan or LC Disbursement or reduce the rate of
114
<PAGE> 120
interest thereon, or reduce any fees payable hereunder, without the written
consent of each Lender affected thereby, (iii) postpone the date of any
scheduled payment of the principal amount of any Loan or LC Disbursement, or
any interest thereon, or any fees payable hereunder, or reduce the amount of,
waive or excuse any such scheduled payment, or postpone the scheduled date of
expiration of any Commitment, without the written consent of each Lender
affected thereby, (iv) change Section 2.18(b) or (c) in a manner that would
alter the pro rata sharing of payments required thereby, without the written
consent of each Lender, (v) change any of the provisions of this Section or the
definition of the term "Required Lenders" or any other provision of any Loan
Document specifying the number or percentage of Lenders (or Lenders of any
Class) required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Lender (or each Lender of such Class, as the case may be), (vi) release
Holdings or any material Subsidiary Loan Party from its Guarantee under the
applicable Guarantee Agreement (except as expressly provided in such Guarantee
Agreement), or limit its liability in respect of such Guarantee, without the
written consent of each Lender, (vii) release all or substantially all of the
Collateral from the Liens of the Security Documents, without the written
consent of each Lender (except as expressly provided in such Security
Documents), (viii) change any provisions of any Loan Document in a manner that
by its terms adversely affects the rights in respect of payments due to Lenders
holding Loans of any Class differently than those holding Loans of any other
Class, without the written consent of Lenders holding a majority in interest of
the outstanding Loans and unused Commitments of each affected Class or (ix)
change the rights of the Tranche B Lenders or Tranche C Lenders to decline
mandatory prepayments as provided in Section 2.11, without the written consent
of Tranche B Lenders or Tranche C Lenders, as applicable, holding a majority of
the outstanding Tranche B Term Loans or Tranche C Term Loans, as applicable;
provided further that (A) no such agreement shall amend, modify or otherwise
affect the rights or duties of the Administrative Agent, the Issuing Bank or
the Swingline Lender without the prior written consent of the Administrative
Agent, the Issuing Bank or the Swingline Lender, as the case may be, and (B)
any waiver, amendment or modification of this Agreement that by its terms
affects the rights or duties under this Agreement of the Revolving Lenders (but
not the Tranche A Lenders, Tranche B Lenders and Tranche C Lenders), the
Tranche A Lenders (but not the Revolving Lenders, Tranche B Lenders and Tranche
C Lenders), the Tranche B Lenders (but not the Revolving Lenders, Tranche A
Lenders and Tranche C
115
<PAGE> 121
Lenders) or the Tranche C Lenders (but not the Revolving Lenders, the Tranche A
Lenders and the Tranche B Lenders) may be effected by an agreement or
agreements in writing entered into by Holdings, the Borrower and requisite
percentage in interest of the affected Class of Lenders that would be required
to consent thereto under this Section if such Class of Lenders were the only
Class of Lenders hereunder at the time. Notwithstanding the foregoing, any
provision of this Agreement may be amended by an agreement in writing entered
into by Holdings, the Borrower, the Required Lenders and the Administrative
Agent (and, if their rights or obligations are affected thereby, the Issuing
Bank and the Swingline Lender) if (i) by the terms of such agreement the
Commitment of each Lender not consenting to the amendment provided for therein
shall terminate upon the effectiveness of such amendment and (ii) at the time
such amendment becomes effective, each Lender not consenting thereto receives
payment in full of the principal of and interest accrued on each Loan made by
it and all other amounts owing to it or accrued for its account under this
Agreement and the other Loan Documents, provided that each such Lender shall
thereafter remain entitled to its rights under Sections 2.15, 2.16, 2.17 and
9.03 and Article VIII.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower
shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent, in connection with
the syndication of the credit facilities provided for herein, their due
diligence investigation of Holdings, the Borrower and the Subsidiaries, the
preparation and administration of the Loan Documents or any amendments,
modifications or waivers of the provisions thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), (ii) all
reasonable out-of-pocket expenses incurred by the Issuing Bank in connection
with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder and (iii) all out-of-pocket expenses incurred
by the Administrative Agent, the Issuing Bank or any Lender, including the
fees, charges and disbursements of any counsel for the Administrative Agent,
the Issuing Bank or any Lender, in connection with the enforcement or
protection of its rights in connection with the Loan Documents, including its
rights under this Section, or in connection with the Loans made or Letters of
Credit issued hereunder, including all such out-of-pocket expenses incurred
during any workout, restructuring or negotiations in respect of such Loans or
Letters of Credit.
116
<PAGE> 122
(b) The Borrower shall indemnify the Administrative Agent, the Issuing
Bank and each Lender, and each Related Party of any of the foregoing Persons
(each such Person being called an "Indemnitee") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of any
Loan Document or any other agreement or instrument contemplated hereby, the
performance by the parties to the Loan Documents of their respective
obligations thereunder or the consummation of the Transactions or any other
transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use
of the proceeds therefrom (including any refusal by the Issuing Bank to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such
Letter of Credit), (iii) any actual or alleged presence, Release or threatened
Release of Hazardous Materials on or from any Mortgaged Property or any other
property currently or formerly owned or operated by the Borrower or any of its
Subsidiaries, or any Environmental Liability related in any way to the Borrower
or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto, provided that such indemnity shall not, as
to any Indemnitee, be available to the extent that (i) such losses, claims,
damages, liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or wilful misconduct of such Indemnitee or (ii) such losses,
claims, damages, liabilities or related expenses of a Lender result from
disputes among such Lender and one or more other Lenders.
(c) To the extent that the Borrower fails to pay any amount required
to be paid by it to the Administrative Agent, the Issuing Bank or the Swingline
Lender under paragraph (a) or (b) of this Section, each Lender severally agrees
to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender,
as the case may be, such Lender's pro rata share (determined as of the time
that the applicable unreimbursed expense or indemnity payment is sought) of
such unpaid amount, provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred
by or asserted against the Administrative Agent, the Issuing Bank or the
Swingline Lender in its capacity as
117
<PAGE> 123
such. For purposes hereof, a Lender's "pro rata share" shall be determined
based upon its share of the sum of the total Revolving Exposures, outstanding
Term Loans and unused Commitments at the time.
(d) To the extent permitted by applicable law, neither Holdings nor
the Borrower shall assert, and each hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement or any agreement or
instrument contemplated hereby, the Transactions, any Loan or Letter of Credit
or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable not later than
ten days after written demand therefor.
SECTION 9.04. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit), except that
the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be
null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent,
the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.
(b) Any Lender may assign to one or more additional banks or other
financial institutions (or such other entity as consented to by the Borrower
and the Administrative Agent), all or a portion of its rights and obligations
under this Agreement (including all or a portion of its Commitment and the
Loans at the time owing to it), provided that (i) except in the case of an
assignment to a Lender or an Affiliate of a Lender or Related Fund of any
Lender (other than an assignment of all or any portion of a Lender's Revolving
Commitment to an assignee that was not a Revolving Lender immediately prior to
such assignment), each of the Borrower and the Administrative Agent (and, in
the
118
<PAGE> 124
case of an assignment of all or a portion of a Revolving Commitment or any
Lender's obligations in respect of its LC Exposure or Swingline Exposure, the
Issuing Bank and the Swingline Lender) must give their prior written consent to
such assignment (which consent shall not be unreasonably withheld or delayed,
it being understood that, without limitation, the Borrower shall have the right
to withhold its consent to any assignment if (x) increased costs would result
therefrom or (y) if in order for such assignment to comply with applicable law,
the Borrower would be required to obtain the consent of, or make any filing or
registration with, any Governmental Authority), (ii) except in the case of an
assignment to a Lender or an Affiliate or Related Fund of a Lender or an
assignment of the entire remaining amount of the assigning Lender's Commitment
or Loans, the amount of the Commitment or Loans of the assigning Lender subject
to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 unless each of the Borrower and the
Administrative Agent otherwise consent, (iii) each partial assignment shall be
made as an assignment of a proportionate part of all the assigning Lender's
rights and obligations under this Agreement, except that this clause (iii)
shall not be construed to prohibit the assignment of a proportionate part of
all the assigning Lender's rights and obligations in respect of one Class of
Commitments or Loans, (iv) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Acceptance, together with
a processing and recordation fee of $3,500, and (v) the assignee, if it shall
not be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; and provided further that any consent of the Borrower otherwise
required under this paragraph shall not be required if an Event of Default
under clause (h) or (i) of Article VII has occurred and is continuing. Subject
to acceptance and recording thereof pursuant to paragraph (d) of this Section,
from and after the effective date specified in each Assignment and Acceptance
the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of the assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections
2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of rights
119
<PAGE> 125
or obligations under this Agreement that does not comply with this paragraph
shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (e)
of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive, and Holdings, the Borrower, the
Administrative Agent, the Issuing Bank and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower, the
Issuing Bank and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent, the Issuing Bank or the Swingline Lender, sell
participations to one or more banks or other entities (a "Participant") in all
or a portion of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it),
provided that (i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (iii) Holdings, the
Borrower, the Administrative Agent, the Issuing Bank and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement. Any
120
<PAGE> 126
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce the Loan
Documents and to approve any amendment, modification or waiver of any provision
of the Loan Documents, provided that such agreement or instrument may provide
that such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first proviso to Section
9.02(b) that affects such Participant. Subject to paragraph (f) of this
Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.18(c) as though it were a
Lender.
(f) A Participant shall not be entitled to receive any greater payment
under Section 2.15 or 2.17 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower's
prior written consent. A Participant that would be a Foreign Lender if it were
a Lender shall not be entitled to the benefits of Section 2.17 unless the
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
2.17(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest, provided that no such pledge or assignment
of a security interest shall release a Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.
(h) Notwithstanding anything to the contrary contained herein, any
Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an
"SPV"), identified as such in writing from time to time by the Granting Lender
to the Administrative Agent and the Borrower, the option to provide to the
Borrower all or any part of any Loan that such Granting Lender would otherwise
be obligated to make to the Borrower pursuant to this Agreement, provided that
121
<PAGE> 127
(i) nothing herein shall constitute a commitment by any SPV to make any Loan
and (ii) if an SPV elects not to exercise such option or otherwise fails to
provide all or any part of such Loan, the Granting Lender shall be obligated to
make such Loan pursuant to the terms hereof. The making of a Loan by an SPV
hereunder shall utilize the Commitment of the Granting Lender to the same
extent, and as if, such Loan were made by such Granting Lender. Each party
hereto hereby agrees that no SPV shall be liable for any indemnity or similar
payment obligation under this Agreement (all liability for which shall remain
with the Granting Lender). In furtherance of the foregoing, each party hereto
hereby agrees (which agreement shall survive the termination of this Agreement)
that, prior to the date that is one year and one day after the payment in full
of all outstanding commercial paper or other senior indebtedness of any SPV, it
will not institute against, or join any other person in instituting against,
such SPV any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under the laws of the United States or any State thereof. In
addition, notwithstanding anything to the contrary in this Section 9.04, any
SPV may (i) with notice to, but without the prior written consent of, the
Borrower and the Administrative Agent and without paying any processing fee
therefor, assign all or a portion of its interests in any Loans to the Granting
Lender or to any financial institutions (consented to by the Borrower and the
Administrative Agent) providing liquidity and/or credit support to or for the
account of such SPV to support the funding or maintenance of Loans and (ii)
disclose on a confidential basis any non-public information relating to its
Loans to any rating agency, commercial paper dealer or provider of any surety,
guarantee or credit or liquidity enhancement to such SPV. As this Section
9.04(h) applies to any particular SPV, this section may not be amended without
the written consent of such SPV.
SECTION 9.05. Survival. All covenants, agreements, representations and
warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that the Administrative Agent, the Issuing
Bank or any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and
122
<PAGE> 128
effect as long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under this Agreement is outstanding and unpaid
or any Letter of Credit is outstanding and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and
Article VIII shall survive and remain in full force and effect regardless of
the consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which
when taken together shall constitute a single contract. This Agreement, the
other Loan Documents and any separate letter agreements with respect to fees
payable to the Administrative Agent constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all
previous agreements and understandings, oral or written, relating to the
subject matter hereof. Except as provided in Section 4.02, this Agreement shall
become effective when it shall have been executed by the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof
which, when taken together, bear the signatures of each of the other parties
hereto, and thereafter shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Delivery of an
executed counterpart of a signature page of this Agreement by telecopy shall be
effective as delivery of a manually executed counterpart of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.08. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted
by law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time
123
<PAGE> 129
held and other obligations at any time owing by such Lender or Affiliate to or
for the credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Agreement held
by such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
Process. (a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
(b) Each of Holdings and the Borrower hereby irrevocably and
unconditionally submits, for itself and its property, to the non-exclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to any Loan Document, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement or any other Loan Document
shall affect any right that the Administrative Agent, the Issuing Bank or any
Lender may otherwise have to bring any action or proceeding relating to this
Agreement or any other Loan Document against Holdings, the Borrower or its
properties in the courts of any jurisdiction.
(c) Each of Holdings and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any other Loan Document in any court referred to in paragraph (b) of this
Section. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
124
<PAGE> 130
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Administrative Agent, the
Issuing Bank and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (f) subject to a written
agreement containing provisions substantially the same as those of this
Section, to any assignee of or Participant in, or any prospective assignee of
or Participant in, any of its rights or obligations under this Agreement or
(ii) prospective direct or indirect counterparties in swap agreements to be
entered into in
125
<PAGE> 131
connection with Loans made hereunder, (g) with the consent of the Borrower or
(h) to the extent such Information (i) becomes publicly available other than as
a result of a breach of this Section or (ii) becomes available to the
Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis
from a source other than Holdings or the Borrower. For the purposes of this
Section, "Information" means all information received from Holdings or the
Borrower relating to Holdings or the Borrower or their respective businesses,
other than any such information that was made available to the Administrative
Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to
disclosure by Holdings or the Borrower. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised
customary procedures for handling confidential information of the same nature
as the Information in accordance with safe and sound banking practices.
SECTION 9.13. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any
Loan, together with all fees, charges and other amounts which are treated as
interest on such Loan under applicable law (collectively the "Charges"), shall
exceed the maximum lawful rate (the "Maximum Rate") which may be contracted
for, charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor)
126
<PAGE> 132
until such cumulated amount, together with interest thereon at the Federal
Funds Effective Rate to the date of repayment, shall have been received by such
Lender.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
MAXXIM MEDICAL, INC.,
by /s/ Kenneth W. Davidson
----------------------------------
Name: Kenneth W. Davidson
Title: President, Chief Executive
Officer, and Chairman
MAXXIM MEDICAL GROUP, INC.,
by /s/ Kenneth W. Davidson
----------------------------------
Name: Kenneth W. Davidson
Title: President, Chief Executive
Officer, Secretary, and
Treasurer
THE CHASE MANHATTAN BANK, individually
and as Administrative Agent and
Collateral Agent,
by /s/ William P. Rindfuss
----------------------------------
Name: William P. Rindfuss
Title: Vice President
127
<PAGE> 133
BANKERS TRUST COMPANY, individually and
as Co-Syndication Agent,
by /s/ M.A. Orlando
----------------------------------
Name: M.A. Orlando
Title: Principal
MERRILL LYNCH CAPITAL CORPORATION,
individually and as Co-Syndication Agent,
by /s/ Christopher K. Stout
----------------------------------
Name: Christopher K. Stout
Title: Vice President
CREDIT SUISSE FIRST BOSTON, individually
and as Co-Documentation Agent,
by /s/ Robert Hetu
----------------------------------
Name: Robert Hetu
Title: Vice President
by
/s/ Karl M. Studer
----------------------------------
Name: Karl M. Studer
Title: Director
CANADIAN IMPERIAL BANK OF COMMERCE, as
Co-Documentation Agent,
by /s/ John Livingston
----------------------------------
Name: John Livingston
Title: Executive Director CIBC
World Markets Corp.,
as Agent
128
<PAGE> 134
CIBC INC.,
by /s/ John Livingston
----------------------------------
Name: John Livingston
Title: Executive Director CIBC
World Markets Corp.,
as Agent
BANK ONE, NA,
by /s/ L. Richard Schiller
----------------------------------
Name: L. Richard Schiller
Title: Vice President
BHF (USA) CAPITAL CORPORATION,
by /s/ Michael Pellerito
----------------------------------
Name: Michael Pellerito
Title: Assistant Vice President
by
/s/ Patrick S. Marsh
----------------------------------
Name: Patrick S. Marsh
Title: Associate
SCOTIABANC INC.,
by /s/ Frank F. Sandler
----------------------------------
Name: Frank F. Sandler
Title: Relationship Manager
129
<PAGE> 135
THE BANK OF NEW YORK,
by /s/ David C. Siegel
----------------------------------
Name: David C. Siegel
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH,
by /s/ Martin D. Golden
----------------------------------
Name: Martin D. Golden
Title: Vice President
FIRST SOURCE FINANCIAL LLP, by First
Source Financial, Inc., its
Agent/Manager,
by /s/ David C. Wagner
----------------------------------
Name: David C. Wagner
Title: Vice President
FIRST UNION NATIONAL BANK,
by /s/ Jim Redman
----------------------------------
Name: Jim Redman
Title: Senior Vice President
FOOTHILL CAPITAL CORPORATION,
by /s/ Sean Dixon
----------------------------------
Name: Sean Dixon
Title: Vice President
130
<PAGE> 136
FRANKLIN FLOATING RATE TRUST,
by /s/ Chauncey Lufkin
----------------------------------
Name: Chauncey Lufkin
Title: Vice President
THE FUJI BANK, LIMITED,
by /s/ Teiji Teramoto
----------------------------------
Name: Teiji Teramoto
Title: Vice President and Manager
GENERAL ELECTRIC CAPITAL CORPORATION,
by /s/ John P. Crosby
----------------------------------
Name: John P. Crosby
Title: Duly Authorized Signatory
STEIN ROE & FARNHAM INCORPORATED, as
agent for Keyport Life Insurance Company,
by /s/ Brian W. Good
----------------------------------
Name: Brian W. Good
Title: Vice President and
Portfolio Manager
WELLS FARGO BANK N.A.,
by /s/ John Stewart
----------------------------------
Name: John Stewart
Title: Vice President
PARIBAS,
by /s/ Larry Robinson
----------------------------------
Name: Larry Robinson
Title: Vice President
by /s/ Rosine K. Matthews
----------------------------------
Name: Rosine K. Matthews
Title: Vice President
<PAGE> 1
Exhibit 10.2
STOCKHOLDERS' AGREEMENT
DATED AS OF
NOVEMBER 12, 1999
BY AND AMONG
MAXXIM MEDICAL, INC.
AND
THE INVESTORS LISTED
ON THE SIGNATURE PAGES HERETO
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS...................................................................3
ARTICLE II RESTRICTIONS ON TRANSFERS OF STOCK............................................8
2.1 General Limitations on Transfers..............................................8
2.1.1 Transfers Generally...................................................8
2.1.2 Recordation...........................................................8
2.1.3 Obligations of Transferees............................................8
2.1.4 Transfers to Competitors..............................................8
2.2 Compliance with Securities Laws...............................................9
2.3 Permitted Transfers...........................................................9
2.3.1 FPC Transfers.........................................................9
2.3.2 Rollover Investors...................................................10
2.3.3 Permitted Transferees................................................10
2.3.4 Transfer by Permitted Transferees....................................10
2.3.5 Other Transfer Restrictions..........................................10
2.3.6 Transfers by Mezzanine Investor......................................11
2.3.7 Transfer by Discount Note Purchaser..................................12
2.4 Right of First Offer.........................................................12
2.4.1 Right of First Offer.................................................12
2.4.2 First Offer Notice...................................................13
2.4.3 First Offer Election.................................................13
2.4.4 Sale Agreement; Reoffer..............................................13
2.5 Tag-Along Rights.............................................................13
2.5.1 Sale Notice..........................................................13
2.5.2 Tag-Along Election...................................................14
2.5.3 Seller's Rights to Transfer..........................................14
2.6 Drag-Along Right.............................................................15
2.6.1 Exercise.............................................................15
2.6.2 Sale Agreement.......................................................16
2.6.3 No Liability.........................................................16
2.7 Additional Provisions Relating to Restrictions on Transfers..................16
2.7.1 Legends..............................................................16
2.7.2 Copy of Agreement....................................................17
2.7.3 Termination of Restrictions..........................................17
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE III REGISTRATION RIGHTS..........................................................18
3.1 Piggyback and Demand Registrations...........................................18
3.1.1 Piggyback Registrations..............................................18
3.1.2 Demand Registrations.................................................19
3.1.3 Expenses.............................................................19
3.1.4 Priority in Piggyback and Demand Registrations.......................19
3.1.5 Underwriting Requirements............................................20
3.2 Registration Procedures......................................................20
3.3 Indemnification..............................................................23
3.4 Holdback Agreement...........................................................26
3.5 Deferral.....................................................................27
ARTICLE IV EXECUTIVE MANAGEMENT INVESTORS' PUT RIGHTS...................................28
4.1 Put Rights...................................................................28
ARTICLE V MISCELLANEOUS................................................................29
5.1 Effectiveness; Term..........................................................29
5.2 No Voting or Conflicting Agreements..........................................29
5.3 Composition of the Board of Directors........................................30
5.4 Approval of Stock Incentive Plan by Stockholders.............................30
5.5 Specific Performance.........................................................30
5.6 Notices......................................................................31
5.7 Successors and Assigns.......................................................31
5.8 Recapitalizations and Exchanges Affecting Common Stock.......................31
5.9 Governing Law................................................................31
5.10 Descriptive Headings, Etc....................................................31
5.11 Amendment....................................................................31
5.12 Severability.................................................................32
5.13 Further Assurances...........................................................32
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
5.14 Complete Agreement; Counterparts.............................................32
5.15 Certain Transactions.........................................................32
5.16 No Third-Party Beneficiaries.................................................33
SIGNATURES........................................................................34
</TABLE>
Exhibits
- --------
Exhibit A - Stock Incentive Plan
Schedules
- ---------
Schedule I - Stockholder Holdings of Common Stock, Options and Warrants
Schedule II - Reinvestment Shares
Schedule 2.3.7(a) - Transfer by Discount Note Purchaser
-iii-
<PAGE> 5
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, dated as of November 12, 1999 (the
"Agreement"), by and among MAXXIM MEDICAL, INC., a Texas Corporation (the
"Company"), FOX PAINE CAPITAL FUND, L.P., a Delaware limited partnership (the
"Fund"), FPC INVESTORS, L.P., a Delaware limited partnership ("FPC Investors"
and, together with the Fund and the Co-Investors (as defined below), "FPC"),
MAXXIM COINVESTMENT FUND I, LLC, a Delaware limited liability company, MAXXIM
COINVESTMENT FUND II, LLC, a Delaware limited liability company, MAXXIM
COINVESTMENT FUND III, LLC, a Delaware limited liability company, MAXXIM
COINVESTMENT FUND IV, LLC, a Delaware limited liability company, MAXXIM
COINVESTMENT FUND V, LLC, a Delaware limited liability company (such
coinvestment funds, collectively, the "Co-Investors"), and GS Mezzanine
Partners, L.P. and GS Mezzanine Partners Offshore, L.P. (collectively, the
"Mezzanine Investor"), and Kenneth W. Davidson, acting in his individual
capacity and as President of Davidson Management, Inc., the general partner of
Davidson Management International Limited Partnership, a Nevada limited
partnership, Peter M. Graham, David L. Lamont, Henry T. DeHart, Jack F. Cahill,
Alan S. Blazei, Joseph D. Dailey, Suzanne R. Garon (such executives and the
related entities so listed, collectively, the "Executive Management
Investors"), and Ernest J. Henley and Davis C. Henley (together with the
Executive Management Investors, the "Rollover Investors"), and Chase Equity
Associates, L.P., Nationwide Life Insurance Company, John Hancock Mutual Life
Insurance Company, John Hancock Variable Life Insurance Company, Signature 3
Limited, Merrill Lynch International, The Northwestern Mutual Life Insurance
Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank AG,
New York Branch, CIBC WMC, Inc., Credit Suisse First Boston Corporation
(collectively, and together with the Mezzanine Investor, the "Discount Note
Purchasers" and, together with the Rollover Investors, the Mezzanine Investor,
the "Other Investors"). John Hancock Mutual Life Insurance Company, John
Hancock Variable Life Insurance Company, Signature 3 Limited and Merrill Lynch
International shall be treated as a single Discount Note Purchase for purposes
of this Agreement. References herein to the Company shall mean the Company as
the surviving corporation in the Merger (as defined below). Employees,
directors, consultants and certain other Persons (as defined below) having
significant business relationships with the Company and its Affiliates (as
defined below) may be issued shares of Common Stock (as defined below) (or
other equity securities of the Company) or securities convertible into or
exchangeable for Common Stock (or other equity securities of the Company)
subject to the terms of this Agreement and, if so issued, the Company, without
the consent of any other party hereto, may amend this Agreement to allow any
such Person the Company so chooses to become an additional Executive Management
Investor hereunder and listing such Person on Schedule I hereto, subject to
such Person becoming a signatory to this Agreement. The parties hereto (other
than the Company) and any other Person who shall hereafter acquire shares of
Common Stock (or other equity securities of the Company) or securities
convertible into or exchangeable for Common Stock (or other equity securities
of the Company) pursuant to the provisions of, and/or subject to the
restrictions and rights set forth in, this Agreement (including through
participation in certain Company stock or option plans) are sometimes
hereinafter referred to individually as a "Stockholder" or collectively as the
"Stockholders."
<PAGE> 6
RECITALS
WHEREAS, as of the Effective Date (as defined below), the
Company will have authorized 40,000,000 shares of Common Stock, par value
$0.001 per share ("Common Stock"), each share of which is entitled to one vote
on all Stockholder matters as more specifically provided in the restated
articles of incorporation, as amended of the Company (the "Certificate"), and
of which 5,770,704 shares of Common Stock will be issued and outstanding
immediately after the Effective Date. In addition, the Company will have
reserved, as of the Effective Date, 1,172,875 shares of Common Stock for
issuance pursuant to the Company 1999 Stock Incentive Plan (the "Stock
Incentive Plan"), 118,910 shares of Common Stock for issuance pursuant to the
Warrant Agreement (as defined herein) and 144,132 shares of Common Stock for
issuance pursuant to the Mezzanine Warrant Agreement (as defined below);
WHEREAS, pursuant to the Agreement and Plan of Merger, dated as
of June 13, 1999, as amended by Amendment No. 1 to Merger Agreement, dated as
of October 1, 1999, by and between Fox Paine Medic Acquisition Corporation, a
Texas corporation ("Fox Paine Medic") and the Company (the "Merger Agreement"),
Fox Paine Medic will be merged with and into the Company (the "Merger") with
the Company as the surviving corporation in the Merger;
WHEREAS, in connection with the issuance by Maxxim Medical
Group, Inc., a Delaware corporation ("Maxxim Medical Group"), of its Senior
Discount Subordinated Notes due 2009 (the "Notes"), the Company has entered
into a warrant agreement with the Discount Notes Purchasers (the "Warrant
Agreement") that provides for, among other things, issuance of Note Purchaser
Warrants (as defined below) to the Discount Notes Purchasers;
WHEREAS, in connection with the issuance by the Company of its
Senior Discount Notes due 2010 (the "Holdco Notes"), the Company has entered
into a warrant agreement with the Mezzanine Investor (the "Mezzanine Warrant
Agreement") that provides for, among other things, the issuance of Mezzanine
Warrants (as defined below) to the Mezzanine Investor;
WHEREAS, in connection with the Merger, the Company will enter
into employment agreements (the "Employment Agreements") and option agreements
with the Executive Management Investors; and
WHEREAS, the parties hereto desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the Common Stock that
the parties hereto own, or may hereafter acquire, and to provide for certain
rights and obligations in respect thereof as hereinafter provided.
NOW, THEREFORE, in consideration of the premises and of the
terms and conditions contained herein, the parties hereto agree as follows:
-2-
<PAGE> 7
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings ascribed to them below:
"Affected Holder" shall have the meaning ascribed to it in
Section 5.11 hereof.
"Affiliate" of a Person shall mean a Person, directly or
indirectly, controlled by, controlling or under common control with such
Person, and, in the case of the entities included in FPC, their equity holders.
"Agreement" shall have the meaning ascribed to it in the
Preamble hereto.
"Applicable Federal Rate" shall have the meaning ascribed to it
in Section 4.1 hereof.
"Certificate" shall have the meaning ascribed to it in the
Recitals hereof.
"Claims" shall mean losses, claims, damages or liabilities,
joint or several, actions or proceedings (whether commenced or threatened).
"Co-Investors" shall have the meaning ascribed to it in the
Preamble hereto.
"Common Stock" shall have the meaning ascribed to it in the
Recitals hereof.
"Company" shall have the meaning ascribed to it in the Preamble
hereto.
"Competitor" shall have the meaning ascribed to it in Section
2.1.4.
"Demand Registration" shall have the meaning ascribed to it in
Section 3.1.2 hereof.
"Discount Note Purchasers" shall have the meaning ascribed to it
in the Preamble hereto.
"Drag-Along Right" shall have the meaning ascribed to it in
Section 2.6.1 hereof.
"Drag-Along Seller" shall have the meaning ascribed to it in
Section 2.6.2 hereof.
"Effective Date" shall have the meaning ascribed to it in
Section 5.1.1 hereof.
"Employment Agreements" shall have the meaning ascribed to it in
the Recitals hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
-3-
<PAGE> 8
"Executive Management Investors" shall have the meaning ascribed
to it in the Preamble hereto.
"Fair Market Value" shall mean fair value as reasonably
determined by the Board of Directors of the Company in light of all
circumstances, including comparable recent bona fide third-party sales;
provided, however, that such determination may be challenged by any Stockholder
(but no such challenge may be made more than once in any 12-month period if the
value is at least equal to the prior value determined by the last such
challenge), whereupon the Board of Directors of the Company will appoint an
independent appraiser, which appraiser shall in any event be unrelated to the
Company and its Stockholders, to make such determination; and provided, further
that, if such determination by the independent appraiser is greater than 105%
of the fair value determination by the Board of Directors of the Company, the
Company will pay all costs and expenses associated with the independent
appraisal, otherwise the costs and expenses associated with the independent
appraisal will be paid by the challenging Stockholder or Stockholders, as the
case may be.
"First Offer Notice" shall have the meaning ascribed to it in
Section 2.4.2 hereof.
"Fox Paine Medic" shall have the meaning ascribed to it in the
Recitals hereof.
"FPC" shall have the meaning ascribed to it in the Preamble
hereto.
"FPC Affiliate Transferee" shall have the meaning ascribed to it
in Section 2.3.1 hereof.
"FPC Investors" shall have the meaning ascribed to in the
Preamble hereto.
"Fund" shall have the meaning ascribed to it in the Preamble
hereto.
"Goldman Sachs" shall have the meaning ascribed to it in Section
2.3.6(a) hereof.
"Holdco Notes" shall have the meaning ascribed to it in the
Recitals hereof.
"Initiating Party" shall have the meaning ascribed to it in
Section 3.1.2 hereof.
"Initiator" shall have the meaning ascribed to it in Section
2.4.1 hereof.
"IPO" shall mean an underwritten initial public offering or
public offerings (on a cumulative basis) of shares of Common Stock pursuant to
a registration statement or registration statements under the Securities Act
with aggregate gross proceeds to the Company of at least $50 million.
"Maxxim" shall have the meaning ascribed to it in the Preamble
hereto.
"Maxxim Medical Group" shall have the meaning ascribed to it in
the Recitals hereof.
"Merger" shall have the meaning ascribed to it in the Recitals
hereof.
-4-
<PAGE> 9
"Merger Agreement" shall have the meaning ascribed to it in the
Recitals hereof.
"Mezzanine Investor" shall have the meaning ascribed to it in
the Preamble hereto.
"Mezzanine Investor Permitted Transferee" shall have the meaning
ascribed to it in Section 2.3.6(b) and 2.3.6(c) hereto.
"Mezzanine Warrant Agreement" shall have the meaning ascribed to
it in the Recitals hereof.
"Mezzanine Warrants" shall mean warrants to purchase shares of
Common Stock issued pursuant to the Mezzanine Warrant Agreement.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Nasdaq" shall mean The Nasdaq Stock Market, Inc.
"Note Purchaser Warrants" shall mean warrants to purchase shares
of Common Stock issued pursuant to the Warrant Agreement.
"Notes" shall have the meaning ascribed to it in the Recitals
hereof.
"Offer Shares" shall have the meaning ascribed to it in Section
2.5.1 hereof.
"Offeree Stockholders" shall have the meaning ascribed to it in
Section 2.5.1 hereof.
"Options" shall mean options to purchase shares of Common Stock
from the Company, whether granted pursuant to the Stock Incentive Plan or
otherwise, but shall exclude Warrants.
"Other Investors" shall have the meaning ascribed to it in the
Preamble hereto.
"Permitted Transferee" shall have the meaning ascribed to it in
Sections 2.3.3 and 2.3.4 hereof.
"Person" shall mean an individual, corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization,
government (or any department or agency thereof) or other entity.
"Piggyback Notice" shall have the meaning ascribed to it in
Section 3.1.1 hereof.
"Piggyback Registration" shall have the meaning ascribed to it
in Section 3.1.1 hereof.
"Proposed Transferee" means a Person or group (as defined in
Section 13(d)(3) of the Exchange Act) other than any Stockholders or their
Affiliates (whether any such Affiliate is such prior to or upon consummation of
the proposed Transfer, but not solely by virtue of
-5-
<PAGE> 10
becoming a party to this Agreement), to whom Common Stock is proposed to be
Transferred pursuant to the terms of Section 2.5.3(a) or 2.6 of this Agreement.
"Purchasing Stockholder" shall have the meaning ascribed to it
in Section 2.4.3 hereof.
"Registrable Securities" shall mean shares of Common Stock;
provided, however, as to any particular Registrable Securities, once issued,
such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (ii) such
securities shall have been sold pursuant to Rule 144 (or any successor
provision under the Securities Act), (iii) such securities shall have been
otherwise transferred and new certificates for such securities not bearing a
legend restricting further transfer shall have been delivered by the Company,
or (iv) such securities shall have ceased to be outstanding (and, in the case
of shares of Common Stock underlying Options granted under the Stock Incentive
Plan, underlying Mezzanine Warrants or Note Purchaser Warrants granted under
the Warrant Agreement, or underlying Options or warrants granted otherwise,
such shares of Common Stock shall have ceased to be outstanding after issuance
pursuant to the exercise of such Options or warrants).
"Registration Expenses" shall mean any and all expenses incident
to performance of or compliance with Article III, including, without
limitation, (i) all SEC and stock exchange or the NASD registration and filing
fees, (ii) all fees and expenses of complying with securities or "blue sky"
laws (including reasonable fees and disbursements of counsel for the
underwriters in connection with "blue sky" qualifications of the Registrable
Securities), (iii) all printing, messenger and delivery expenses, (iv) the fees
and disbursements of counsel for the Company and of the Company's independent
public accountants, including the expenses of any special audits and/or "cold
comfort" letters required by or incident to such performance and compliance,
(v) the reasonable fees and disbursements of one counsel retained by the
Stockholders such counsel to be chosen by the Stockholders by vote of a
plurality of the shares of such Stockholders being registered) as a group in
connection with each such registration, (vi) any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities and the
reasonable fees and expenses of any special experts retained in connection with
the requested registration, including any fee payable to a qualified
independent underwriter within the meaning of the rules of the NASD, but
excluding underwriting discounts and commissions and transfer taxes, if any,
(vii) internal expenses of the Company (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties) and (viii) securities acts liability insurance (if the
Company elects to obtain such insurance).
"Reinvestment Shares" shall mean the shares of Common Stock
purchased by certain Executive Management Investors with the proceeds received
from the cash out of certain of their stock options in the Merger, in the
amounts set forth on Schedule II hereto.
"Restricted Stock" shall have the meaning, if any, ascribed to
it in an employment agreement with anyone who is or becomes a Management
Investor.
"Rollover Investors" shall have the meaning ascribed to it in
the Preamble hereto.
-6-
<PAGE> 11
"Rule 144" shall mean Rule 144 under the Securities Act.
"Sale Notice" shall have the meaning ascribed to it is Section
2.5.1.
"SEC" shall mean the Securities and Exchange Commission.
"Section 3.1 Sale Number" shall have the meaning ascribed to it
in Section 3.1.4 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Stock Incentive Plan" shall have the meaning ascribed to it in
the Recitals hereof.
"Stockholder" shall have the meaning ascribed to it in the
Recitals hereof.
"Subsidiary Dividend" shall have the meaning ascribed to it in
Section 4.1(a) hereof.
"Tag-Along Right" shall have the meaning ascribed to it in
Section 2.5.3(a) hereof.
"Tag-Along Seller" shall have the meaning ascribed to it in
Section 2.5.3(b) hereof.
"Tag-Along Shares" shall have the meaning ascribed to it in
Section 2.5.2 hereof.
"Transfer" shall mean to sell, assign, pledge or encumber or
otherwise transfer, directly or indirectly, whether or not for consideration.
"Transfer Shares" shall have the meaning ascribed to it in
Section 2.4.1 hereof.
"Transferee" shall mean any Person to whom a Transfer is made,
regardless of the method of Transfer.
"Transferor" shall mean any Person by whom a Transfer is made,
regardless of the method of Transfer.
"Violation" shall have the meaning ascribed to it in Section
3.3(a) hereof.
"Warrant Agreement" shall have the meaning ascribed to it in the
Recitals hereof.
"Warrants" shall mean the Note Purchaser Warrants and the
Mezzanine Warrants.
-7-
<PAGE> 12
ARTICLE II
RESTRICTIONS ON TRANSFERS OF STOCK
2.1 General Limitations on Transfers.
2.1.1 Transfers Generally. (a) No Rollover Investor shall, at any
time prior to an IPO, Transfer any shares of Common Stock, unless such Transfer
is made in accordance with Sections 2.1, 2.2, 2.3, 2.4, 2.5 or 2.6 or pursuant
to Section 3.1, and any Transfer by any Rollover Investor of any shares of
Common Stock owned as of the date hereof or hereafter acquired in violation of
such provisions shall be null and void.
(b) As used in this Agreement, Common Stock shall include any
shares of Restricted Stock granted to any of the Rollover Investors; provided,
however, that, to the extent the Transfer thereof is otherwise prohibited or
restricted, no rights to Transfer, including pursuant to Sections 2.3, 2.4 and
2.5 and Article III, shall be granted hereunder.
2.1.2 Recordation. The Company shall not record upon its books any
Transfer of shares of Common Stock held or owned by any of the Stockholders to
any other Person, except Transfers in accordance with this Agreement.
2.1.3 Obligations of Transferees. No Transfer of shares of Common
Stock by a Stockholder otherwise permitted pursuant to this Agreement (other
than pursuant to a Piggyback Registration, Demand Registration or pursuant to a
Tag-Along Right or Drag-Along Right) shall be effective unless (a) the
Transferee (including a Permitted Transferee pursuant to Section 2.3) shall
have executed an appropriate document in form and substance reasonably
satisfactory to the Company confirming that (i) the Transferee takes such
shares subject to all the terms and conditions of this Agreement to the same
extent as its Transferor was bound by and entitled to the benefits of such
provisions and (ii) the shares shall bear legends, substantially in the forms
required by Section 2.7, and (b) such document shall have been delivered to and
approved (as described above) by the Company prior to such Transferee's
acquisition of shares of Common Stock, such approval not to be unreasonably
withheld or delayed.
2.1.4 Transfers to Competitors. Notwithstanding anything to the
contrary in this Agreement, without the consent of the Board of Directors of
the Company, no Stockholder shall, at any time, directly or indirectly,
Transfer any shares of Common Stock to any Person who is a Competitor of the
Company or any of its subsidiaries and, in addition, Circon Holdings
Corporation, a Delaware corporation, and its subsidiaries ("Circon")
("Competitor" being defined herein as a Person that competes in a significant
way with a substantial business of the Company or any such subsidiary, and, in
addition, Circon or a Person that has a substantial investment in any such
competing entity; provided that an institutional investor or its Affiliates
that hold nonvoting debt or less than 5% of the publicly traded equity
securities of any such Competitor as a passive portfolio investment shall not
be a Competitor) or to any Affiliate of such a Competitor (other than Transfers
to the Company and its Affiliates) unless such Transfer (a) is made in
connection with the exercise of a Tag-Along Right (but not by the Initiator)
pursuant to Section 2.5 or in connection with the exercise of a Drag-Along
Right pursuant to Section 2.6, in which event such sale may be effected only in
accordance with Section 2.5 or
-8-
<PAGE> 13
Section 2.6, as applicable, or (b) is made in accordance with the terms of this
Agreement and is made pursuant to a widely distributed, underwritten public
offering registered under the Securities Act (or an underwritten offering
pursuant to the exercise of such other Stockholders piggyback registration
rights pursuant to Section 3.1.1) or pursuant to a sale effected through an
open market, nondirected broker's transaction pursuant to Rule 144 in which the
seller does not know that the buyer is a Competitor. For purposes of this
provision, the good faith determination of a majority of the entire Board of
Directors of the Company that a proposed Transferee is a Competitor, made
within 30 days of written notice to the Board of Directors of the Company of
the proposed Transfer, shall in all respects be conclusive.
2.2 Compliance with Securities Laws. No Stockholder shall Transfer any
shares of Common Stock unless the Transfer is made in accordance with the terms
of this Agreement and (a) the Transfer is pursuant to an effective registration
statement under the Securities Act and in compliance with any other applicable
federal securities laws and state securities or "blue sky" laws or (b) such
Stockholder shall have furnished the Company with (i) an opinion of counsel, if
reasonably requested by the Company, which opinion and counsel shall be
reasonably satisfactory to the Company, to the effect that no such registration
is required because of the availability of an exemption from registration under
the Securities Act and under any applicable state securities or "blue sky" laws
and that the Transfer otherwise complies with this Agreement and any other
applicable federal securities laws and state securities or "blue sky" laws and
(ii) such representation and covenants of such Stockholder as are reasonably
requested by the Company to ensure compliance with any applicable federal
securities laws and state securities or "blue sky" laws.
2.3 Permitted Transfers.
2.3.1 FPC Transfers. (a) FPC may Transfer any shares of Common
Stock to an Affiliate of FPC; provided, however, that, if FPC shall have
transferred any shares of Common Stock to an Affiliate of FPC (each, a "FPC
Affiliate Transferee"), and, thereafter, such FPC Affiliate Transferee ceases
to be an Affiliate of FPC (other than in connection with a liquidation or
dissolution of the relevant Affiliate of FPC), then such FPC Affiliate
Transferee shall, within 30 days from the date on which such FPC Affiliate
Transferee ceased to be an Affiliate of FPC, transfer such shares of Common
Stock back to FPC or one or more Affiliates of FPC.
(b) FPC and any Affiliate of FPC shall be free to Transfer shares
of Common Stock to any Person, in whole at any time or in part from time to
time; provided, however, that, if such Person is not FPC or an Affiliate of
FPC, such Transfer shall be subject to Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2 .6
and 3.1. Any Transfer by FPC or Affiliates of FPC of any shares of Common Stock
owned as of the date hereof or hereafter acquired in violation of such
provisions shall be null and void.
(c) No Transfer of shares of Common Stock by FPC or an Affiliate
of FPC otherwise permitted pursuant to this Section 2.3.1 shall be effective
unless (i) the Transferee (whether or not an Affiliate of FPC) shall have
executed an appropriate document in form and substance reasonably satisfactory
to the Company confirming that (A) the Transferee takes such shares subject to
all the terms and conditions of this Agreement to the same extent as its
-9-
<PAGE> 14
Transferor was bound by and entitled to the benefits of such provisions and (B)
the shares shall bear legends, substantially in the forms required by Section
2.7, and (ii) such document shall have been delivered to and approved (as
described above) by the Company prior to such Transferee's acquisition of
shares of Common Stock.
2.3.2 Rollover Investors. The restrictions contained in Section
2.1.1 with respect to Transfers by Rollover Investors of shares of Common Stock
shall not apply to any Transfer by a Rollover Investor: (a) to or among such
Rollover Investor's spouse, children (including adopted), grandchildren
(including adopted) or other living descendants, or executors, administrators,
testamentary trustees or to a trust or family partnership of which there are no
principal (i.e., corpus) beneficiaries or partners other than the grantor or
one or more of such Rollover Investor, spouse or described relatives,
executors, administrators, testamentary trustees, or by the laws of descent and
distribution and provided that, in the case of a trust, the existing
beneficiaries and/or trustee(s) and/or grantor(s) of such trust have the power
to act with respect to the trust's assets without court approval and, in the
case of a family partnership, that the partners thereof have the power to act
with respect to the partnership's assets without court approval and the
partnership is not permitted to (i) distribute assets to Persons who are not
among the relatives listed above or (ii) have partners who are not among the
relatives listed above, and, in any case, all the partners agree, for the
benefit of the Company and FPC, not to amend such provisions; (b) to a legal
representative of such Rollover Investor in the event such Rollover Investor
becomes mentally incompetent or to such Rollover Investor's personal
representative following the death of such Rollover Investor; or (c) with the
prior written approval of the Company, which approval may be granted or
withheld by the Board of Directors of the Company, in its sole and absolute
discretion.
2.3.3 Permitted Transferees. Transferees to whom Transfers are
permitted pursuant to Sections 2.3.2(a), 2.3.2(b) and 2.3.2(c) are referred to
herein as "Permitted Transferees." Any such permitted Transfer shall be subject
to the terms of this Agreement, including compliance with Sections 2.1.1 and
2.2.
2.3.4 Transfer by Permitted Transferees. The restrictions
contained in Section 2.1.1 with respect to Transfers by Rollover Investors of
shares of Common Stock shall not apply to any Transfer by a Permitted
Transferee of a Rollover Investor to such Rollover Investor or to another
Permitted Transferee of such Stockholder, and any such Transferee shall also be
a "Permitted Transferee," subject to the provisions of Section 2.3.3.
2.3.5 Other Transfer Restrictions. (a) The Mezzanine Investor
agrees that, prior to the consummation of an IPO, no Transfer of Mezzanine
Warrants (or shares of Common Stock issued upon exercise of the Mezzanine
Warrants) by the Mezzanine Investor or its direct or indirect Transferees shall
be effective if, following such Transfer, there are more than 10 holders of
Mezzanine Warrants and Note Purchaser Warrants (or Common Stock issued upon
exercise thereof), originally issued to the Mezzanine Investor, excluding
Mezzanine Investor Permitted Transferees, which securities are required to bear
the legend provided in Section 2.7.1(a), without the consent of the Company or
the Fund. Any Transfer by a Mezzanine Investor shall, other than to the extent
provided in Section 2.3.6, be subject to the terms of this Agreement, including
compliance with this Section 2.3.5(a) and Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6
and 3.1. Any Transfer by the Mezzanine Investor of Mezzanine Warrants (or
shares of
-10-
<PAGE> 15
Common Stock issued upon exercise of the Mezzanine Warrants) owned as of the
date hereof or hereafter acquired in violation of such provisions shall be null
and void.
(b) Each Discount Note Purchaser other than the Mezzanine Investor
agrees that, prior to the consummation of an IPO, no Transfer of Note Purchaser
Warrants (or shares of Common Stock issued upon exercise thereof) by such
Discount Note Purchaser or its direct or indirect Transferees shall be
effective, if, following such Transfer, there are more than 5 holders of Note
Purchaser Warrants originally issued to such Discount Note Purchaser (or Common
Stock issued upon exercise thereof), which securities are required to bear the
legend provided in Section 2.7.1(a), without the consent of the Company or the
Fund. Any Transfer by a Discount Note Purchaser shall, other than to the extent
provided in Section 2.3.7, be subject to the terms of this Agreement, including
compliance with this Section 2.3.5(b) and Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6
and 3.1. Any Transfer by the Discount Note Purchaser of Note Purchaser Warrants
(or shares of Common Stock issued upon exercise of the Mezzanine Warrants owned
as of the date hereof or hereafter acquired in violation of such provisions
shall be null and void.
(c) The restrictions contained in Sections 2.1.1, 2.4, 2.5 and 2.6
and the provisions contained in this Section 2.3 shall be in addition to and
not in lieu or limitation of any restrictions on the ownership or Transfer of
shares of Common Stock (including with respect to any Restricted Stock)
contained in any stock subscription agreement or Employment Agreement or in any
analogous provision of any employment, compensation or benefit agreement or
arrangement or other agreement between Fox Paine Medic or the Company or any of
its Affiliates and any Stockholder; provided, however, that, upon the
termination of any such Employment Agreement or other such agreement or
arrangement or lapsing of such restrictions, the restrictions and provisions
contained herein shall continue in full force and effect pursuant to this
Agreement.
2.3.6 (a) Transfers by Mezzanine Investor. The restrictions
contained in Section 2.3.5(a) with respect to Transfers by the Mezzanine
Investor of shares of Common Stock and Warrants shall not apply to (i) any
Transfer by a Mezzanine Investor to (A) its respective partners on a pro rata
basis on final liquidation of such Mezzanine Investor in accordance with its
terms or (B) Goldman, Sachs & Co., together with The Goldman Sachs Group, Inc.
(or any Person that succeeds to the business of The Goldman Sachs Group, Inc.
substantially as an entirety) (collectively, "Goldman Sachs") and any
subsidiaries of Goldman Sachs principally engaged in the investment or merchant
banking or private investment business and including any investment funds
controlled, directly or indirectly, by Goldman Sachs but no more than five such
entities or (ii) any bona fide pledge by a Mezzanine Investor to any lending or
financial institution (or any agent therefor) as security for any indebtedness
issued by such lender (but any exercise by the pledgee upon such security
without resale shall be subject to Section 2.3.5, and any sale by, to or for
the benefit of such pledgee shall be subject to all the terms of this
Agreement, including Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6 and 3.1). No
Transfer permitted pursuant to this Section 2.3.6 shall be effective unless the
Transferee shall have executed an appropriate document in form and substance
reasonably satisfactory to the Company confirming that the Transferee takes
such shares of Common Stock or Warrants subject to all of the terms and
conditions of this Agreement to the same extent as its Transferor was bound by
and entitled to the benefits of such provisions.
-11-
<PAGE> 16
(b) Mezzanine Investor Permitted Transferees. Transferees to whom
Transfers are permitted pursuant to Sections 2.3.6(a)(i) and 2.3.6(a)(ii) are
referred to herein as "Mezzanine Investor Permitted Transferees." Any Transfer
to a Mezzanine Investor Permitted Transferee pursuant to this Section 2.3.6.
shall be subject to the terms of this Agreement, including compliance with
Sections 2.1 and 2.2.
(c) Transfer by Mezzanine Investor Permitted Transferees. The
restrictions contained in Section 2.3.5(a) with respect to Transfers by the
Mezzanine Investor of shares of Common Stock shall not apply to any Transfer by
a Mezzanine Investor Permitted Transferee to the Mezzanine Investor or to
another Mezzanine Investor Permitted Transferee, and any such Transferee shall
also be a "Mezzanine Investor Permitted Transferee," subject to the provisions
of this Section 2.3.6.
2.3.7 Transfer by Discount Note Purchaser. (a) The restrictions
contained in Section 2.3.5(b) with respect to Transfers by Discount Note
Purchasers of shares of Common Stock and Warrants shall not apply to any
Transfer by a Discount Note Purchaser to any of its Affiliates that are under
common majority control with such Discount Note Purchaser, but to no more than
3 such entities by each Discount Note Purchaser or to a Transfer described in
Schedule 2.3.7(a). No Transfer permitted pursuant to this Section 2.3.7 shall
be effective unless the Transferee shall have executed an appropriate document
in form and substance reasonably satisfactory to the Company confirming that
the Transferee takes such shares of Common Stock or Warrants subject to all of
the terms and conditions of this Agreement to the same extent as its Transferor
was bound by and entitled to the benefits of such provisions.
(b) Discount Note Purchaser Permitted Transferees. Transferees to
whom Transfers are permitted pursuant to Section 2.3.7(a) are referred to
herein as "Discount Note Purchaser Permitted Transferees." Any such Transfer to
a Discount Note Purchaser Permitted Transferee shall be subject to the terms of
this Agreement, including compliance with Sections 2.1 and 2.2.
(c) The restrictions contained in Section 2.3.5(b) with respect to
Transfers by the Discount Note Purchasers of shares of Common Stock shall not
apply to any Transfer by a Discount Note Purchaser Permitted Transferee to such
Discount Note Purchaser or to another Discount Note Purchaser Permitted
Transferee, and any such Transferee shall also be a "Discount Note Purchaser
Permitted Transferee," subject to the provisions of this Section 2.3.7.
2.4 Right of First Offer.
2.4.1 Right of First Offer. Prior to an IPO, and subject to the
terms and conditions specified in this Section 2.4, the Stockholders shall have
a right of first offer if a Stockholder (the "Initiator") proposes to sell any
shares of Common Stock, or securities convertible into or exercisable for any
shares of Common Stock (the "Transfer Shares"), owned by it, other than to a
Transferee of such Stockholder permitted pursuant to Sections 2.3.1, 2.3.2,
2.3.4, 2.3.6 or 2.3.7. Each time the Initiator proposes to sell any Transfer
Shares, the Initiator must first make an offering of the Transfer Shares to the
other Stockholders in accordance with the following provisions of this Section
2.4.
-12-
<PAGE> 17
2.4.2 First Offer Notice. The Initiator shall give written notice
(the "First Offer Notice") to the Company and the other Stockholders stating
its bona fide intention to sell the Transfer Shares and specifying the number
of Transfer Shares, price (assuming in the case of any Options or Warrants,
that the same shall have been exercised in accordance with their terms before
such sale which shall be required in order to consummate such sale) and form of
consideration upon which the Initiator proposes to sell such Transfer Shares.
2.4.3 First Offer Election. Within seven business days of the date
of receipt of the First Offer Notice, the other Stockholders shall each deliver
a written notice to the Initiator and the Company stating whether such
Stockholder elects to purchase the Transfer Shares (and, if so, how many) at
the price and on the terms specified in the First Offer Notice. Any such
election to purchase shall be binding upon delivery and irrevocable without the
consent of the Initiator. If the offer of Transfer Shares is oversubscribed,
each Stockholder who delivered a written notice electing to purchase the
Transfer Shares (the "Purchasing Stockholders") shall receive a pro rata
portion of the Transfer Shares (but not in excess of the amount so elected to
purchase) equal to (a) the total number of Transfer Shares multiplied by (b) a
fraction (i) the numerator of which is the number of shares of Common Stock
plus the total number of shares of Common Stock then issuable upon the exercise
of Options or Warrants (in each case, whether vested or unvested) owned by such
Purchasing Stockholder and (ii) the denominator of which is the total number of
shares of Common Stock plus the total number of shares of Common Stock then
issuable upon the exercise of Options or Warrants (in each case, whether vested
or unvested) owned by all of the Purchasing Stockholders. Any shares not
allocated pursuant to the preceding sentence shall be reallocated iteratively
in accordance with the foregoing formula (with the denominator being Shares
owned only by Purchasing Stockholders who have not received the maximum amount
they elected) until all the Transfer Shares have been allocated.
2.4.4 Sale Agreement; Reoffer. If all of the Transfer Shares are
not elected to be purchased as provided in Section 2.4.3, the Initiator may,
during the 120-day period following the expiration of the seven business day
period provided in Section 2.4.3 and subject to the other restrictions
contained in Sections 2.1, 2.2, 2.3.5 and 2.5, enter into an agreement for the
sale of all the Transfer Shares to any Person at a price not less than, and
upon terms no more favorable to the offeree than those specified in the First
Offer Notice; provided, however, that any Proposed Transferee shall agree to
hold such Transfer Shares pursuant to the terms of this Agreement. If the
Initiator does not enter into an agreement for the sale of the Transfer Shares
within such period, or, if such agreement is not consummated within 120 days of
the execution thereof, the right provided hereunder shall be deemed to be
revived and such Transfer Shares shall not be offered unless first reoffered to
the other Stockholders in accordance with this Section 2.4.
2.5 Tag-Along Rights.
2.5.1 Sale Notice. If, prior to an IPO and following the offer
process required by Section 2.4, the Initiator proposes to sell any of the
Common Stock owned by it, other than (a) to a Transferee of such Stockholder
permitted pursuant to Sections 2.3.1, 2.3.2, 2.3.4, 2.3.6 or 2.3.7., (b)
Purchasing Stockholders pursuant to Section 2.4.3, (c) pursuant to the exercise
of a Drag-Along Right pursuant to Section 2.6, or (d) pursuant to a Piggyback
Registration, then the Initiator shall first give written notice (the "Sale
Notice") to the Company and to each of the
-13-
<PAGE> 18
other Stockholders (such other Stockholders, the "Offeree Stockholders"),
stating that the Initiator desires to make such sale, referring to Section 2.5,
specifying the number of shares of Common Stock proposed to be sold by the
Initiator pursuant to the offer (the "Offer Shares"), and, subject to the
requirements of Section 2.4.4, specifying the price, the form of consideration,
name and description of the purchaser (including controlling Persons) and the
material terms pursuant to which such sale is proposed to be made.
2.5.2 Tag-Along Election. Within seven business days of the date
of receipt of the Sale Notice, each Offeree Stockholder, other than the
Initiator, shall deliver to the Initiator and to the Company a written notice
stating whether the Offeree Stockholder elects to sell a pro rata portion of
its Common Stock (equal to (a) the total number of shares of Common Stock owned
by such Offeree Stockholder, plus the total number of shares of Common Stock
then issuable upon exercise of vested Options or Warrants then exercisable by
such Offeree Stockholder, multiplied by (b) a fraction, (i) the numerator of
which is the number of Offer Shares and (ii) the denominator of which is the
total number of shares of Common Stock held by the Initiator plus the total
number of shares of Common Stock then issuable upon exercise or conversion of
any convertible securities (including Options and Warrants), if applicable,
then exercisable or convertible by the Initiator) to such Proposed Transferee
on the same terms, purchase price and conditions as the Initiator (with respect
to each Offeree Stockholder, its "Tag-Along Shares"). An election pursuant to
the first sentence of this Section 2.5.2 shall constitute an irrevocable
commitment by the Offeree Stockholder making such election to sell such
Tag-Along Shares to the Proposed Transferee if the sale of Offer Shares to the
Proposed Transferee occurs on the terms contemplated hereby. Section 2.4 shall
not apply to an election pursuant to the first sentence of this Section 2.5.2.
Such terms may include a maximum number of shares such Proposed Transferee is
willing to purchase, and, in such case, the Initiator and the Offeree
Stockholders selling shares pursuant hereto shall be cut back pro rata based on
the number of shares each such Stockholder is electing to sell.
2.5.3 Seller's Rights to Transfer.
(a) Third-Party Sale; Tag-Along Buyer. A sale to a Proposed
Transferee pursuant to this Section 2.5 shall only be consummated if the
Proposed Transferee shall purchase, within 120 days of the date of the Sale
Notice (or such shorter period as required by Section 2.4.4), concurrently with
and on the same terms and conditions and at the same price as the Offer Shares,
all of each Offeree Stockholder's Tag-Along Shares with respect to such sale,
in accordance with their elections pursuant to Section 2.5.2, and subject to
the last sentence thereof (the "Tag-Along Right").
(b) Sale Agreement. Each Offeree Stockholder electing to sell
Tag-Along Shares (a "Tag-Along Seller") agrees to cooperate in consummating
such a sale, including, without limitation, by becoming a party to the sales
agreement and all other appropriate related agreements, delivering, at the
consummation of such sale, stock certificates and other instruments for such
Common Stock duly endorsed for transfer, free and clear of all liens and
encumbrances, and voting or consenting in favor of such transaction (to the
extent a vote or consent is required) and taking any other necessary or
appropriate action in furtherance thereof, including the execution and delivery
of any other appropriate agreements, certificates, instruments and other
documents. The foregoing notwithstanding, in connection with such sale,
-14-
<PAGE> 19
a Tag-Along Seller, as such, shall not be required to make any representations
and warranties with respect to the Company or the Company's business or with
respect to any other seller. In addition, each Tag-Along Seller shall be
severally responsible for its proportionate share of the third-party expenses
of sale incurred by the sellers in connection with such sale and the monetary
obligations and liabilities incurred by the sellers in connection with such
sale. Such monetary obligations and liabilities shall include (to the extent
such obligations are incurred) obligations and liabilities for indemnification
(including for (i) breaches of representations and warranties made in
connection with such sale by the Company or any other seller with respect to
the Company or the Company's business, (ii) breaches of covenants in effect
prior to closing and (iii) other matters), and shall also include amounts paid
into escrow or subject to holdbacks, and amounts subject to post-closing
purchase price adjustments provided all such obligations are equally applicable
on a several and not joint basis to each Tag-Along Seller based on the
consideration received by such Tag-Along Seller. The foregoing notwithstanding,
(i) without the written consent of a Tag-Along Seller, the amount of such
obligations and liabilities for which such Tag-Along Seller shall be
responsible shall not exceed the gross proceeds received by such Tag-Along
Seller in such sale, (ii) a Tag-Along Seller shall not be obligated to enter
into any non-compete or other post-closing covenant that restricts its
activities in any way and (iii) a Tag-Along Seller shall not be responsible for
the fraud of any other seller or for any indemnification obligations and
liabilities for breaches of representations and warranties made by any other
seller with respect to such other seller's (A) ownership of and title to shares
of capital stock of the Company, (B) organization, (C) authority and (D)
conflicts and consents.
(c) No Liability. Notwithstanding any other provision contained in
this Section 2.5.3, there shall be no liability on the part of the Company or
the Initiator in the event that the sale pursuant to this Section 2.5.3 is not
consummated for any reason whatsoever. The decision whether to effect a
Transfer pursuant to this Section 2.5.3 shall be in the sole and absolute
discretion of the Initiator.
2.6 Drag-Along Right.
2.6.1 Exercise. If, prior to an IPO, FPC proposes to make a sale,
in a bona fide arm's-length transaction or series of related transactions to a
Person not controlled by Fox Paine & Company, LLC, of at least 50% of its
shares of Common Stock to a Proposed Transferee, including pursuant to a stock
sale, merger, business combination, recapitalization, consolidation,
reorganization, restructuring or similar transaction, FPC shall have the right
(a "Drag-Along Right"), exercisable upon 15 days' prior written notice to the
other Stockholders, to require the other Stockholders to sell their shares of
Common Stock and, at the election of FPC, Options or Warrants (in each case,
whether vested or unvested) equal to (a) the total number of shares of Common
Stock owned by such Stockholder, plus the total number of shares of Common
Stock then issuable upon the exercise of Options or Warrants (in each case,
whether vested or unvested), multiplied by (b) a fraction (i) the numerator of
which is the number of shares of Common Stock FPC proposes to sell to the
Proposed Transferee and (ii) the denominator of which is the total number of
shares of Common Stock held by FPC plus the total number of shares then
issuable upon exercise or conversion of any convertible securities, if
applicable, then exercisable or convertible by FPC, to the Proposed Transferee
on the same terms and conditions and at the same price (in the case of Options
or Warrants the purchase price of each Option or Warrant, respectively, shall
be equal to the purchase price attributable to the number of
-15-
<PAGE> 20
shares of Common Stock issuable upon exercise of such Option or Warrant less
the exercise price thereof) as FPC would receive in connection with such
transaction.
2.6.2 Sale Agreement. Each Stockholder selling shares of Common
Stock pursuant to a transaction contemplated by this Section 2.6 (a "Drag-Along
Seller") agrees to cooperate in consummating such a sale, including, without
limitation, by becoming a party to the sales agreement and all other
appropriate related agreements, delivering, at the consummation of such sale,
stock certificates and other instruments for such shares of Common Stock duly
endorsed for transfer, free and clear of all liens and encumbrances, and voting
or consenting in favor of such transaction (to the extent a vote or consent is
required) and taking any other necessary or appropriate action in furtherance
thereof, including the execution and delivery of any other appropriate
agreements, certificates, instruments and other documents. The foregoing
notwithstanding, in connection with such sale, a Drag-Along Seller, as such,
shall not be required to make any representations and warranties with respect
to the Company or the Company's business or with respect to any other seller.
In addition, each Drag-Along Seller shall be severally responsible for its
proportionate share of the third-party expenses of sale incurred by FPC in
connection with such sale. Such monetary obligations and liabilities shall
include (to the extent such obligations are incurred) monetary obligations and
liabilities for indemnification (including for (a) breaches of representations
and warranties made in connection with such sale by the Company or any other
seller with respect to the Company or the Company's business and (b) breaches
of covenants in effect prior to closing), and shall also include amounts paid
into escrow or subject to holdbacks, and amounts subject to post-closing
purchase price adjustments, provided that all such obligations are equally
applicable on a several and not joint basis to each Drag-Along Seller based on
the consideration received by such Drag-Along Seller. The foregoing
notwithstanding, (a) without the written consent of a Drag-Along Seller, the
amount of such obligations and liabilities for which such Drag-Along Seller
shall be responsible shall not exceed the gross proceeds received by such
Drag-Along Seller in such sale, (b) a Drag-Along Seller shall not be obligated
to enter into any non-compete or other post-closing covenant that restricts its
activities in any way and (c) a Drag-Along Seller shall not be responsible for
the fraud of any other seller or any indemnification obligations and
liabilities for breaches of representations and warranties made by any other
seller with respect to such other seller's (i) ownership of and title to shares
of capital stock of the Company, (ii) organization, (iii) authority and (iv)
conflicts and consents.
2.6.3 No Liability. Notwithstanding any other provision contained
in this Section 2.6, there shall be no liability on the part of the Company or
FPC in the event that the sale pursuant to this Section 2.6 is not consummated
for any reason whatsoever. The decision whether to effect a Transfer pursuant
to this Section 2.6 shall be in the sole and absolute discretion of FPC.
2.7 Additional Provisions Relating to Restrictions on Transfers.
2.7.1 Legends. Each of the Stockholders hereby agrees that each
outstanding certificate representing shares of Common Stock held or owned by
such Stockholder or its Transferee, including any certificate representing
shares of Common Stock acquired in accordance with the provisions of this
Agreement or the Employment Agreements, any certificates representing shares of
Common Stock issued upon exercise of the Options or
-16-
<PAGE> 21
Warrants and any Options or Warrants, in any case, subject to the provisions of
this Agreement and issued prior to the date when the applicable restrictions
are terminated pursuant to Section 2.7.3, shall bear endorsements reading
substantially as follows:
(a) The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under the
securities laws of any state and may not be transferred, sold or
otherwise disposed of except while such a registration is in effect or
pursuant to an exemption from registration under said Act and
applicable state securities laws.
(b) The securities represented by this certificate are subject to
the terms and conditions set forth in a Stockholders' Agreement, dated
as of November 12, 1999, as amended from time to time, copies of which
may be obtained from the issuer or from the holder of this security.
No transfer of such securities will be made on the books of the issuer
unless accompanied by evidence of compliance with the terms of such
agreement.
Each outstanding certificate representing shares of Common Stock
shall also bear any legend required by the terms of any subscription agreement,
the Employment Agreements, the Stock Incentive Plan, the Warrant Agreement, the
Mezzanine Warrant Agreement or as the Company may otherwise deem appropriate.
2.7.2 Copy of Agreement. A copy of this Agreement shall be filed
with the corporate secretary of the Company, and kept with the records of the
Company, and shall be made available for inspection by any Stockholder at the
principal executive offices of the Company.
2.7.3 Termination of Restrictions. The restriction referred to in
the endorsement required pursuant to Section 2.7.1(a) shall cease and terminate
as to any particular shares of Common Stock when, in the reasonable opinion of
counsel for the Company, such restriction is no longer required in order to
assure compliance with the Securities Act and the state securities or "blue
sky" laws. The Company or the Company's counsel, at their election, may request
from any Stockholder a certificate or an opinion of such Stockholder's counsel
with respect to any relevant matters in connection with the removal of the
endorsement set forth in Section 2.7.1(a) from such Stockholder's stock
certificates, any such certificate or opinion of counsel to be reasonably
satisfactory to the Company and its counsel. The restrictions referred to in
Section 2.7.1(b) shall cease and terminate as to any particular shares of
Common Stock when, in the reasonable opinion of counsel for the Company, the
provisions of this Agreement are no longer applicable to such shares or this
Agreement shall have terminated in accordance with its terms. Any other
restrictions referred to in any other legends required pursuant to Section
2.7.1 shall cease and terminate when, in the reasonable opinion of counsel for
the Company, such restrictions are no longer applicable. Whenever such
restrictions shall cease and terminate as to any shares of Common Stock,
Options or Warrants, the Stockholder holding such shares shall be entitled to
receive from the Company, without expense (other than applicable transfer
taxes, if any, if such unlegended shares are being delivered and transferred to
any Person other than the registered holder thereof), new certificates for a
like number of shares of Common Stock or like number of Options or Warrants not
bearing the relevant legend(s) set forth or referred to in Section 2.7.1.
-17-
<PAGE> 22
ARTICLE III
REGISTRATION RIGHTS
3.1 Piggyback and Demand Registrations.
3.1.1 Piggyback Registrations. If at any time following an IPO
(or, if FPC is selling shares in such IPO, beginning with an IPO), the Company
proposes to register for sale by the Company under the Securities Act any of
its equity securities (other than a registration on Form S4 or Form S8, or any
successor or similar forms), or any shares of Common Stock of an Initiating
Party pursuant to a Demand Registration under Section 3.1.2, in a manner that
would permit registration of Registrable Securities for sale to the public
under the Securities Act, the Company will each such time promptly give written
notice to all Stockholders who beneficially own any Registrable Securities of
its intention to do so, of the registration form of the SEC that has been
selected by the Company and of such holders' rights under this Section 3.1 (the
"Piggyback Notice"). The Company will use its reasonable best efforts to
include, and to cause the underwriter or underwriters, if applicable, to
include, in the proposed offering, on the same terms and conditions as the
securities of the Company included in such offering, all Registrable Securities
that the Company has been requested in writing, within 15 calendar days after
the Piggyback Notice is given, to register by the Stockholders thereof (each
such registration pursuant to this Section 3.1.1, a "Piggyback Registration");
provided, however, that (a) if, at any time after giving a Piggyback Notice and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register its equity securities (or, in the case of a Demand Registration, the
Initiating Party thereof so determines), the Company may, at its election (or,
in the case of a Demand Registration, where the Initiating Party thereof so
determines, the Company shall), give written notice of such determination to
all Stockholders who beneficially own any Registrable Securities and,
thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such abandoned registration, and (b) in case of a
determination by the Company to delay registration of its equity securities
(or, in the case of a Demand Registration, the Initiating Party thereof so
determines) the Company shall be permitted to (or, in the case of a Demand
Registration where the Initiating Party thereof so determines, the Company, for
a period not to exceed 60 days, shall) delay the registration of such
Registrable Securities for the same period as the delay in registering such
other equity securities (provided that clauses (a) and (b) above shall not
relieve the Company of its obligations under Section 3.1.2). In the case of any
registration of Registrable Securities in an underwritten offering pursuant to
this Section 3.1.1, all Stockholders proposing to distribute their securities
pursuant to this Section 3.1.1 shall, at the request of the Company (or, in the
case of a Demand Registration, the Initiating Party thereof), enter into an
agreement in customary form with the underwriter or underwriters selected by
the Company (or, in the case of a Demand Registration, selected in accordance
with Section 3.1.2). Notwithstanding the foregoing, following an IPO, the
Company shall not be obligated to effect registration of Registrable Securities
for which Piggyback Registration is requested by an Other Investor if, at the
time of such request, all such Registrable Securities are eligible for sale to
the public by the requesting Other Investor without registration under Rule
144, with such sale not being limited by the volume restrictions thereunder.
-18-
<PAGE> 23
3.1.2 Demand Registrations. The Company, following the
consummation of an IPO, upon the request of (a) FPC, (b) the Mezzanine Investor
(holding at least a majority of the shares of Common Stock issued or issuable
upon exercise of the Mezzanine Warrants), (c) the Discount Note Purchasers (by
the holders of at least 25% of the shares of Common Stock issued or issuable
upon exercise of the Note Purchaser Warrants or (d) the Rollover Investors (by
the holders of at least 25% of the total number of shares of Common Stock held
by all of the Rollover Investors) (each such party being an "Initiating
Party"), shall use its reasonable best efforts to register under the Securities
Act Registrable Securities held by the Initiating Party (including, at the
election of such Initiating Party, in an underwritten offering) and any other
Stockholders participating in such Demand Registration (provided, however that
the aggregate expected market value of all such Registrable Securities,
included in such registration is greater than or equal to $2 million) and bear
all expenses in connection with such offering in a manner consistent with
Section 3.1.3 and shall enter into such other agreements in furtherance thereof
(each such registration pursuant to this Section 3.1.2, a "Demand
Registration"), and the Company shall provide customary indemnifications in
such instances (in a manner consistent with the indemnification provision of
this Article III) to the Initiating Party, other Stockholders included in such
registration and any such underwriters. FPC shall have the right to initiate up
to five Demand Registrations pursuant to this Section 3.1.2. The Rollover
Investors, as a group, shall have the right to initiate two Demand
Registrations pursuant to this Section 3.1.2, the Discount Note Purchasers, as
a group, shall have the right to initiate one Demand Registration pursuant to
this Section 3.12 and the Mezzanine Investor shall have the right to initiate
one (1) Demand Registration pursuant to this Section 3.1.2; provided, however,
that the Company shall not be obligated to effect a Demand Registration on
behalf of any Other Investor or group thereof within nine months of the
effectiveness of another registration under this Section 3.1. A registration
shall not count as a Demand Registration unless and until the registration
statement relating thereto has been declared effective by the SEC and not
withdrawn. If any Demand Registration requested by FPC is in the form of an
underwritten offering, FPC shall designate the underwriter or underwriters to
be utilized in connection such offering. If the Demand Registration requested
by the Rollover Investors, the Discount Note Purchasers or the Mezzanine
Investor is in the form of an underwritten offering, the Company shall
designate an underwriter or underwriters to be utilized in connection such
offering, which selection shall be reasonably acceptable to the Initiating
Party.
3.1.3 Expenses. The Company shall pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 3.1; provided, however, that each Stockholder shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Stockholder's Registrable Securities pursuant
to a registration statement effected pursuant to this Section 3.1.
3.1.4 Priority in Piggyback and Demand Registrations. If the
managing underwriter for a registration pursuant to this Section 3.1 shall
advise the Company in writing that, in its opinion, the number of securities
requested to be included in such registration exceeds the number (the "Section
3.1 Sale Number") that can be sold in an orderly manner in such offering within
a price range acceptable to the Company (or, in the case of a Demand
Registration, to the Initiating Party thereof), the Company shall include in
such offering (a) first, all the securities the Company proposes to register
for its own sale, and (b) second, to the extent that the securities the Company
proposes to register are less than the Section 3.1 Sale Number,
-19-
<PAGE> 24
all Registrable Securities requested to be included by all Stockholders;
provided, however, that, if the number of such Registrable Securities exceeds
(i) the Section 3.1 Sale Number less (ii) the number of securities included
pursuant to clause (a) above, then the number of such Registrable Securities
included in such registration shall be allocated pro rata among all requesting
Stockholders, on the basis of the relative number of shares of such Registrable
Securities each such Stockholder then holds. If there is any reduction or
exclusion of Registrable Securities pursuant to this Section 3.1.4 in
connection with a Demand Registration, such registration shall not be deemed to
be a Demand Registration for purposes of determining the maximum number of
Demand Registrations the Company is obligated to effect for an Initiating Party
pursuant to Section 3.1.2.
3.1.5 Underwriting Requirements. In connection with any offering
involving any underwriting of securities in a Piggyback Registration, the
Company shall not be required to include any Stockholder's Registrable
Securities in such underwriting unless such Stockholder accepts the terms of
the underwriting as agreed upon between the Company and the underwriters in
such quantities and on such terms as set forth in Section 3.1.1, and such
Stockholder agrees to sell such Stockholder's securities on the basis provided
therein and completes and/or executes all questionnaires, indemnities,
lock-ups, underwriting agreements and other documents (including powers of
attorney and custody arrangements) customarily required generally of all
selling Stockholders, in each case, in customary form and substance, which are
requested to be executed in connection therewith.
3.2 Registration Procedures. If and whenever the Company is required
to use its reasonable best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Article
III, the Company will, as soon as practicable:
(a) prepare and file with the SEC the requisite registration
statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such registration statement to become
and remain effective;
(b) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for such period as the Company shall deem appropriate and to
comply with the provisions of the Securities Act with respect to the
sale or other disposition of all securities covered by such
registration statement during such period;
(c) furnish to each seller of such Registrable Securities and each
underwriter such number of copies of such registration statement and
of each amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and
summary prospectus), in conformity with the requirements of the
Securities Act, and such other documents as such seller may reasonably
request;
(d) promptly notify each Stockholder that holds Registrable
Securities covered by such registration statement, (i) when such
registration statement or any post-effective amendment or supplement
thereto becomes effective, (ii) of the issuance by the
-20-
<PAGE> 25
SEC or any state securities authority of any stop order, injunction or
other order or requirement suspending the effectiveness of such
registration statement (and take all reasonable action to prevent the
entry of such stop order or to remove it if entered, or the initiation
of any proceedings for that purpose), or (iii) of the happening of any
event as a result of which the registration statement, as then in
effect, the prospectus related thereto or any document included
therein by reference includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made and promptly file such
amendments and supplements which may be required on account of such
event and use its reasonable best efforts to cause each such amendment
and supplement to become effective;
(e) promptly furnish counsel for each underwriter, if any, and for
the selling Stockholders of Registrable Securities copies of any
written request by the SEC or any state securities authority for
amendments or supplements to a registration statement and prospectus
or for additional information;
(f) use reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of a registration statement at the
earliest possible time;
(g) use its best efforts to cause all such Registrable Securities
covered by such registration statement to be listed on the principal
securities exchange or authorized for quotation on Nasdaq, if any, on
which similar equity securities issued by the Company are then listed
or authorized for quotation, or eligible for listing or quotation, if
the listing or authorization for quotation of such securities is then
permitted under the rules of such exchange or the NASD;
(h) enter into an underwriting agreement with the underwriter of
such offering in the form customary for such underwriter for similar
offerings, including such representations and warranties by the
Company, provisions regarding the delivery of opinions of counsel for
the Company and accountants' letters, provisions regarding
indemnification and contribution, and such other terms and conditions
as are at the time customarily contained in such underwriter's
underwriting agreements for similar offerings (the sellers of
Registrable Securities that are to be distributed by such
underwriter(s) may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriter(s)
shall also be made to and for the benefit of such sellers of
Registrable Securities);
(i) make available for inspection by representatives of the
selling Stockholders who hold Registrable Securities and any
underwriters participating in any disposition pursuant hereto and any
counsel or accountant retained by such Stockholders or underwriters,
all relevant financial and other records, pertinent corporate
documents and properties of the Company and cause the respective
officers, directors and employees of the Company to supply all
information reasonably requested by any such representative,
underwriter, counsel or accountant in connection with a registration
pursuant hereto; provided, however, that, with respect to records,
documents or
-21-
<PAGE> 26
information which the Company determines, in good faith, to be
confidential and as to which the Company notifies such
representatives, underwriters, counsel or accountants in writing of
such confidentiality, such representatives, underwriters, counsel or
accountants shall not disclose such records, documents or information
unless (i) the release of such records, documents or information is
ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, (ii) such records, documents or information
have previously been generally made available to the public, or (iii)
the disclosure of such records, documents or information is necessary,
in the written opinion of outside legal counsel, to avoid or correct a
material misstatement or omission in the registration statement and
then only after reasonable request has been made to the Company to
make such disclosure and the Company has denied such request. Each
selling Stockholder of such Registrable Securities agrees 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 Company or its Affiliates
(or for such Stockholder's business purposes or for any reason other
than in connection with a registration hereunder) unless and until
such information is made generally available (other than by such
Stockholder or where such Stockholder knows that such information
became publicly available as a result of a breach of any
confidentiality arrangement) to the public. Each selling Stockholder
of such Registrable Securities further agrees that it will, upon
learning that disclosure of such records is sought, give notice to the
Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of the records deemed
confidential;
(j) permit any beneficial owner of Registrable Securities who, in
the sole judgment, exercised in good faith, of such holder, might be
deemed to be a controlling Person of the Company, to participate in
the preparation of such registration or comparable statement and to
require the insertion therein of material, furnished to the Company in
writing, that in the judgment of such holder, as aforesaid, should be
included; and
(k) make reasonably available its employees and personnel and
otherwise provide reasonable assistance to the underwriters (taking
into account the needs of the Company's businesses and the
requirements of the marketing process) in the marketing of Registrable
Securities in any underwritten offering.
The Company may require each seller of Registrable Securities as
to which any registration is being effected to furnish the Company such
information regarding such seller and the distribution of such securities as
the Company may from time to time reasonably request in writing. The Company
shall not be required to register or qualify any Registrable Securities covered
by such registration statement under any state securities or "blue sky" laws of
such jurisdictions other than as it deems necessary in connection with the
chosen method of distribution or to take any other actions or do any other
things other than those it reasonably deems necessary or advisable to
consummate such distribution, and the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not otherwise be obligated to be so qualified, to
subject itself to taxation in any such jurisdiction or to consent to general
service of process in any such jurisdiction.
-22-
<PAGE> 27
Each beneficial owner of Registrable Securities agrees that, upon
receipt of any notice from the Company of the happening of any event of the
kind described in clauses (d)(ii) and (d)(iii) above, such beneficial owner
will forthwith discontinue disposition of Registrable Securities pursuant to
the registration statement covering such Registrable Securities until such
beneficial owner's receipt of the copies of the supplemented or amended
prospectus contemplated by clause (d) above, and, if so directed by the
Company, such beneficial owner will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in such beneficial
owner's possession, of the prospectus covering such Registrable Securities that
was in effect prior to such amendment or supplement.
3.3 Indemnification. (a) In the event of any registration of any
Registrable Securities pursuant to this Article III, the Company will, and
hereby does, indemnify and hold harmless, to the fullest extent permitted by
law, the seller of any Registrable Securities covered by such registration
statement, its directors, officers, fiduciaries, employees and stockholders or
members or general and limited partners (and the directors, officers,
fiduciaries, employees and stockholders or members or general and limited
partners thereof), each other Person who participates as an underwriter or a
qualified independent underwriter, if any, in the offering or sale of such
securities, each director, officer, fiduciary, employee and stockholder or
general and limited partner of such underwriter or qualified independent
underwriter, and each other Person (including any such Person's directors,
officers, fiduciaries, employees and stockholders or members or general and
limited partners), if any, who controls such seller or any such underwriter or
qualified independent underwriter, within the meaning of the Securities Act,
against any and all Claims in respect thereof and expenses (including
reasonable fees and expenses of counsel and any amounts paid in any settlement
effected with the Company's consent, which consent shall not be unreasonably
withheld or delayed) to which each such indemnified party may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such Claims
or expenses arise out of or are based upon any of the following actual or
alleged statements, omissions or violations (each, a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained in
any registration statement under which such securities were registered pursuant
to this Agreement under the Securities Act or 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 under which they
were made, not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary, final or summary
prospectus or any amendment or supplement thereto, together with the documents
incorporated by reference therein, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading, or (iii) any violation by the Company of any
federal, state or common law rule or regulation applicable to the Company and
relating to action required of or inaction by the Company in connection with
any such registration, and the Company will reimburse any such indemnified
party for any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such Claim as such
expenses are incurred; provided, however, that the Company shall not be liable
to any such indemnified party in any such case to the extent such Claim or
expense arises out of or is based upon any Violation that occurs in reliance
upon and in conformity with written information furnished to the Company or its
representatives by or on behalf of such indemnified party expressly stating
that such information is for use therein.
-23-
<PAGE> 28
(b) Each holder of Registrable Securities that are included in the
securities as to which any Demand Registration or Piggyback Registration is
being effected (and, if the Company requires as a condition to including any
Registrable Securities in any registration statement filed in connection with
any Demand Registration or Piggyback Registration, any underwriter and
qualified independent underwriter, if any) shall, severally and not jointly,
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 3.3 (a)), to the fullest extent permitted by law, the Company,
its directors, officers, fiduciaries, employees and stockholders (and the
directors, officers, fiduciaries, employees and stockholders or members or
general and limited partners thereof) and each Person (including any such
Person's directors, officers, fiduciaries, employees and stockholders or
members or general and limited partners), if any, controlling the Company
within the meaning of the Securities Act and all other prospective sellers and
their directors, officers, fiduciaries, employees and stockholders or general
and limited partners and respective controlling Persons (including any such
Person's directors, officers, fiduciaries, employees and stockholders or
members or general and limited partners) against any and all Claims and
expenses (including reasonable fees and expenses of counsel and any amounts
paid in any settlement effected with the consent of the indemnifying party,
which consent shall not be unreasonably withheld or delayed) to which each such
indemnified party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such Claims or expenses arise out of or are based upon
any Violation which occurs in reliance upon and in conformity with written
information furnished to the Company or its representatives by or on behalf of
such holder or underwriter or qualified independent underwriter, if any,
expressly stating that such information is for use in connection with any
registration statement, preliminary, final or summary prospectus or amendment
or supplement or document incorporated by reference into any of the foregoing;
provided, however, that the aggregate amount that any such holder, underwriter
or qualified independent underwriter shall be required to pay pursuant to this
Section 3.3(b) and Sections 3.3(c) and 3.3(e) shall be limited to (i) in the
case of any such holder, the amount of the gross proceeds received by such
holder upon the sale of the Registrable Securities pursuant to the registration
statement giving rise to such claim and (ii) in the case of any such
underwriter or qualified independent underwriter, the amount of the total sales
price of the Registrable Securities sold through or by it pursuant to the
registration statement giving rise to such claim.
(c) Indemnification similar to that specified in Sections 3.3(a)
and 3.3(b) (with appropriate modifications) shall be given by the Company and
each seller of Registrable Securities (and, if the Company requires as a
condition to including any Registrable Securities in any registration statement
filed in connection with any Demand Registration or Piggyback Registration, any
underwriter and qualified independent underwriter, if any) with respect to any
required registration or other qualification of securities under any state
securities and "blue sky" laws.
(d) Any Person entitled to indemnification under this Agreement
shall notify promptly the indemnifying party in writing of the commencement of
any action or proceeding with respect to which a claim for indemnification may
be made pursuant to this Section 3.3, but the failure of any indemnified party
to provide such notice shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 3.3, except to the
extent the indemnifying party is prejudiced thereby and shall not relieve the
indemnifying party from any liability that it may have to any indemnified party
otherwise than under this Section 3.3. In
-24-
<PAGE> 29
case any action or proceeding is brought against an indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, unless in the
reasonable opinion of outside counsel to the indemnified party a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, to assume the defense thereof jointly with any other
indemnifying party similarly notified, to the extent that it chooses, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party that it so chooses, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation;
provided, however, that (i) if the indemnifying party fails to take reasonable
steps necessary to defend diligently the action or proceeding within 20 days
after receiving notice from such indemnified party that the indemnified party
believes it has failed to do so; or (ii) if such indemnified party who is a
defendant in any action or proceeding that is also brought against the
indemnifying party reasonably shall have concluded that there may be one or
more legal defenses available to such indemnified party that are not available
to the indemnifying party; or (iii) if representation of both parties by the
same counsel is otherwise inappropriate under applicable standards of
professional conduct, then, in any such case, the indemnified party shall have
the right to assume or continue its own defense as set forth above (but with no
more than one firm of counsel for all indemnified parties in each jurisdiction,
except to the extent any indemnified party or parties reasonably shall have
concluded that there may be legal defenses available to such party or parties
which are not available to the other indemnified parties or to the extent
representation of all indemnified parties by the same counsel is otherwise
inappropriate under applicable standards of professional conduct) and the
indemnifying party shall be liable for any expenses therefor. No indemnifying
party shall, without the written consent of the indemnified party, which
consent shall not be unreasonably withheld, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (A) includes an unconditional release of the indemnified party from
all liability arising out of such action or claim and (B) does not include a
statement as to or an admission of fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(e) If for any reason the foregoing indemnity is unavailable or is
insufficient to hold harmless an indemnified party under Sections 3.3(a),
3.3(b) or 3.3(c), then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of any Claim 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 from the
relevant offering of securities. If, however, the allocation provided in the
immediately preceding sentence is not permitted by applicable law, or if the
indemnified party failed to give the notice required by Section 3.3(d) above
and the indemnifying party is prejudiced thereby, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative fault of
but also the relative benefits received by the indemnifying party, on the one
hand, and the indemnified party, on the other hand, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the Violation relates to information
supplied by the indemnifying party or the indemnified party and the parties'
relative intent,
-25-
<PAGE> 30
knowledge, access to information and opportunity to correct or prevent such
Violation. The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 3.3(e) were to be determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the preceding sentences of this
Section 3.3(e). The amount paid or payable in respect of any Claim shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such Claim.
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. Notwithstanding
anything in this Section 3.3(e) to the contrary, no indemnifying party (other
than the Company) shall be required pursuant to this Section 3.3(e) to
contribute any amount in excess of (i) in the case of an indemnifying party
that is a holder of Registrable Securities, the gross proceeds received by such
indemnifying party from the sale of Registrable Securities in the offering to
which the losses, claims, damages or liabilities of the indemnified parties
relate, or (ii) in the case of an indemnifying party that is an underwriter or
a qualified independent underwriter, the amount of the total sales price of the
Registrable Securities sold through or by it in the offering to which the
losses, claims, damages or liabilities of the indemnified parties relate, less,
in any such case referred to in clauses (i) and (ii) above, the amount of all
indemnification and contribution payments made pursuant to Sections 3.3(b) and
(c) and this Section 3.3(e), as the case may be, in connection with such
offering.
(f) The indemnity agreements contained herein shall be in addition
to any other rights to indemnification or contribution that any indemnified
party may have pursuant to law or contract and shall remain operative and in
full force and effect regardless of any investigation made or omitted by or on
behalf of any indemnified party and shall survive the transfer of the
Registrable Securities by any such party.
(g) The indemnification and contribution required by this Section
3.3 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(h) In connection with underwritten offerings, the Company will
use reasonable best efforts to negotiate terms of indemnification that are
reasonably favorable to the various sellers pursuant thereto, as appropriate
under the circumstances.
3.4 Holdback Agreement. (a) If requested in writing by the Company or
the underwriter of any underwritten offering affording Stockholders
registration rights pursuant to Section 3.1 (whether or not some or all of such
Stockholder's Registrable Securities are subject to a cutback pursuant to
Section 3.1.4), including, without limitation, an IPO, each Stockholder agrees
not to effect any public sale or distribution, including any sale pursuant to
Rule 144, of any Registrable Securities or any other equity security of the
Company or of any security convertible into or exchangeable or exercisable for
any equity security of the Company (in each case, other than as part of such
underwritten public offering) within 14 days before or 180 days after the
effective date of a registration statement affording Stockholders registration
rights pursuant to Section 3.1 (including where subject to a cutback pursuant
to Section 3.1.4), or for such shorter period as the sole or lead managing
underwriter or the Company shall request, in any such case, unless consented to
by such underwriter or the Company, as applicable; the
-26-
<PAGE> 31
foregoing notwithstanding, to the extent a Discount Note Purchaser is a passive
institutional investor that does not hold Registrable Securities representing
in excess of 0.6% of the outstanding shares of Common Stock prior to an
offering, this Section 3.4(a) shall apply to such Discount Note Purchaser only
with respect to such Discount Note Purchaser's Registrable Securities.
(b) If requested in writing by the underwriter of any offering in
connection with an underwritten Demand Registration, the Company agrees not to
effect any public sale or distribution (other than public sales or
distributions solely by and for the account of the Company of securities issued
(i) pursuant to any employee or director benefit or similar plan or any
dividend reinvestment plan or (ii) in any acquisition by the Company) of any
Registrable Securities or any other equity security of the Company or of any
security convertible into or exchangeable or exercisable for any equity
security of the Company (in each case, other than as part of such underwritten
public offering), within 14 days before or 180 days after the effective date of
a registration statement filed in connection with a Demand Registration, or for
such shorter period as the sole or lead managing underwriter shall request, in
any such case, unless consented to by such underwriter.
3.5 Deferral. Notwithstanding anything to the contrary contained
herein, the Company shall not be obligated to prepare and file, or cause to
become effective, any registration statement pursuant to Section 3.1.2 at any
time when, in the good faith judgment of the Board of Directors of the Company,
the filing thereof at the time requested or the effectiveness thereof after
filing should be delayed to permit the Company to include in the registration
statement the Company's financial statements (and any required audit opinion
thereon) for the then immediately preceding fiscal year or fiscal quarter, as
the case may be. The filing of a registration statement by the Company cannot
be deferred pursuant to the provisions of the immediately preceding sentence
beyond the time that such financial statements (or any required audit opinion
thereon) would be required to be filed with the SEC as part of the Company's
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may
be, if the Company were then obligated to file such reports. Notwithstanding
anything to the contrary contained herein, the Company shall not be obligated
to file a registration statement, or cause a registration statement previously
filed pursuant to Section 3.1 to become effective, and may suspend sales by the
holders of Registrable Securities under any registration that has previously
become effective, at any time when, in the good faith judgment of the Board of
Directors of the Company, it reasonably believes that the effectiveness of such
registration statement or the offering of securities pursuant thereto would
materially adversely affect a pending or proposed acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction or
negotiations, discussions or pending proposals with respect thereto; provided,
however, that deferrals pursuant to this sentence shall not exceed, in the
aggregate, 180 days in any calendar year. The filing of a registration
statement, or any amendment or supplement thereto, by the Company cannot be
deferred, and the rights of holders of Registrable Securities to make sales
pursuant to an effective registration statement cannot be suspended, pursuant
to the provisions of the immediately preceding sentence for more than 30 days
after the abandonment or the consummation of any of the foregoing proposals or
transactions, unless invoked under new circumstances.
-27-
<PAGE> 32
ARTICLE IV
EXECUTIVE MANAGEMENT INVESTORS' PUT RIGHTS
4.1 Put Rights. If, prior to the consummation of an IPO, an Executive
Management Investor dies or the Executive Management Investor's employment by
Maxxim (or its successor under the Employment Agreement, if any) is terminated
by Maxxim (or its successor under the Employment Agreement, if any), without
Cause (as (a) defined in such Executive Management Investor's Employment
Agreement or in any analogous provision of any employment, compensation or
benefit agreement or arrangement, if any, and if not so defined, upon the good
faith determination of the Board of Directors of the Company), (b) by such
Executive Management Investor for Good Reason (as defined in such Executive
Management Investor's Employment Agreement or in any analogous provision of any
employment, compensation or benefit agreement or arrangement, if any, and, if
not so defined, upon the good faith determination of the Board of Directors of
the Company), or (c) due to a Disability (as defined in such Executive
Management Investor's Employment Agreement or, if such Executive Management
Investor does not have an Employment Agreement, in any analogous provision of
any employment, compensation or benefit agreement or arrangement, if any, and
if not so defined, upon the good faith determination of the Board of Directors
of the Company), the Executive Management Investor or the Executive Management
Investor's legal representative or trustee, as the case may be, shall have the
right, within six months after such termination is effective (or one year after
the date of death in the case of the Executive Management Investor's death), to
require the Company to purchase all (but not less than all) of the Executive
Management Investor's shares of Common Stock (including any shares held by its
Permitted Transferees) that (i) are Reinvestment Shares or (ii) were acquired
in excess of six months prior thereto (A) upon the exercise of Options (less
the number of shares used to exercise such Options) or upon the lapse of
restrictions on an award of Restricted Stock at a price equal to the aggregate
Fair Market Value of such shares of Common Stock determined as of the date of
the exercise of the Put Right (the "Put Right"). The Company shall pay the
purchase price in cash to the extent that subsidiaries of the Company are
permitted to dividend the funds for purchases to the Company (a "Subsidiary
Dividend") (under both applicable law and the indebtedness of the Company and
its subsidiaries and such funds are available and the Company is permitted to
purchase such shares for cash (under both applicable law and such
indebtedness). Any amount not permitted to be funded through a Subsidiary
Dividend or to be used to purchase such shares shall be a continuing obligation
of the Company and such amount shall be paid by the Company before the payment
of any dividends or distributions to Stockholders and shall accrue interest at
the Applicable Federal Rate. The Board of Directors of the Company may, in its
discretion, assign the rights and obligations of the Company under this Section
4 to any other Person, but no such assignment shall relieve the Company of its
obligations hereunder to the extent not satisfied by such assignee.
-28-
<PAGE> 33
ARTICLE V
MISCELLANEOUS
5.1 Effectiveness; Term.
5.1.1 This Agreement shall become effective (the "Effective Date")
simultaneously with the closing of the transactions under the Merger Agreement,
and shall terminate without liability or penalty on the part of any party or
its directors, officers, fiduciaries, employees and stockholders or members or
general and limited partners (and the directors, officers, fiduciaries,
employees and stockholders or members or general and limited partners thereof)
to any other party or such other party's Affiliates upon the termination of the
Merger Agreement pursuant to its terms.
5.1.2 Unless theretofore terminated pursuant to Section 5.1.1, the
rights and obligations of, and restrictions on, the Stockholders under Article
II shall terminate when FPC and its Affiliates no longer hold in the aggregate
at least 25% of the fully diluted shares of Common Stock then outstanding
(subject, however, to all obligations of the parties hereto which must be
fulfilled prior to such event). Notwithstanding the foregoing, in the event the
Company enters into any agreement to merge with or into any other Person or
adopts any other plan of recapitalization, consolidation, reorganization or
other restructuring transaction as a result of which the Stockholders and their
respective Permitted Transferees (including FPC and any Affiliates thereof)
shall own less than a majority of the outstanding voting power of the entity
surviving such transaction, this Agreement shall terminate.
5.1.3 Unless theretofore terminated pursuant to Section 5.1.1, and
notwithstanding anything in Section 5.1.2 to the contrary, the provisions
contained in Article III shall continue to remain in full force and effect
until the earlier to occur of the 20th anniversary of the date hereof and the
date on which there are no longer any Registrable Securities outstanding or
issuable or thereafter available for or subject to issuance to any Stockholder
upon exercise or conversion of any Options, Warrants, rights or other
convertible securities; provided, however, that the provisions of Section 3.3
shall survive termination pursuant to Section 5.1.2 or this Section 5.1.3.
5.2 No Voting or Conflicting Agreements. Prior to an IPO, no Other
Investor shall grant any proxy or enter into or agree to be bound by any voting
trust with respect to the Common Stock nor, at any time, shall any Stockholder
enter into any stockholder agreements or arrangements of any kind with any
Person with respect to the Common Stock inconsistent with the provisions of
this Agreement (whether or not such agreements and arrangements are with other
Investors or holders of Common Stock that are not parties to this Agreement).
The foregoing prohibition includes, but is not limited to, agreements or
arrangements with respect to the acquisition, disposition or voting of shares
of Common Stock inconsistent with the provisions of this Agreement. No
Stockholder shall act, at any time, for any reason, as a member of a group or
in concert with any other Persons in connection with the acquisition,
disposition or voting of shares of Common Stock in any manner that is
inconsistent with the provisions of this Agreement.
-29-
<PAGE> 34
5.3 Composition of the Board of Directors. Following the Effective
Date, the Board of Directors of the Company shall consist of seven members. The
Rollover Investors shall have the right to designate three members of the Board
of Directors of the Company, as described herein, which initially shall include
Kenneth W. Davidson (Chairman of the Board of Directors of the Company), Ernest
J. Henley, Ph.D., and one other member to be designated by the Rollover
Investors. The remaining four initial directors shall be designated by FPC.
While Mr. Davidson is Chief Executive Officer or Chairman of the Board of
Directors of the Company, all three members of the Board of Directors of the
Company that may be designated by the Rollover Investors shall be selected by
Mr. Davidson, and, thereafter, by a plurality vote of the total number of
shares of Common Stock held by the Rollover Investors. FPC shall have the right
to designate at least four members of the Board of Directors of the Company. So
long as the Mezzanine Investor own at least 25% of the original principal
amount of the Holdco Notes, GS Mezzanine Partners, L.P. shall, in accordance
with the purchase agreement relating to the Holdco Notes, have the right to
appoint one observer to the Board of Directors of the Company. The parties
recognize that, following the Effective Date, as owner of more than a majority
of the Common Stock, FPC has the power to alter the composition of the Board of
Directors of the Company in accordance with the Bylaws of the Company,
including, without limitation, to increase the size of the Board and to add
additional designees without prejudice to the rights of the Rollover Investors
and Mezzanine Investor hereunder. Each of the Stockholders entitled to vote in
the election of directors to the Board of Directors of the Company agrees that
it shall vote its Common Stock or execute consents, as the case may be, and
take all other necessary action (including causing the Company to call a
special meeting of Stockholders) in order to ensure that the designees that
each of the Rollover Investors and FPC are entitled to designate to the Board
of Directors of the Company as set forth in this Section 5.3 are so elected.
The rights pursuant to this Section 5.3 to designate members of the Board of
Directors of the Company, but not the observation right of GS Mezzanine
Partners, L.P., shall terminate upon an IPO (except that, as long as FPC owns
at least 1% of the fully diluted shares of Common Stock, FPC shall be entitled
to designate one director). In addition, if the Rollover Investors hold less
than: (a) 15% of the fully diluted shares of Common Stock, the number of
directors they are entitled to designate shall be reduced to two; (b) 7.5% of
the fully diluted shares of Common Stock, the number of directors they shall be
entitled to designate shall be reduced to one; and (c) 2.5% of the fully
diluted shares they shall not be entitled to designate any directors; provided,
however, that neither this Agreement, nor any provision hereunder shall, in any
way, limit, reduce or otherwise affect the rights of any Management Investor
under the terms of his or her Employment Agreement.
5.4 Approval of Stock Incentive Plan by Stockholders. The
Stockholders, by their execution of this Agreement, hereby approve the Stock
Incentive Plan, a copy of which is attached to this Agreement as Exhibit A.
5.5 Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and, accordingly, agree that each party, in addition to
any other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of any other party
under this Agreement in accordance with the terms and conditions of this
Agreement. Any remedy under this Section 5.5 is subject to certain equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought.
-30-
<PAGE> 35
5.6 Notices. All notices, statements, instructions or other documents
required to be given hereunder shall be in writing and shall be given either
personally or by mailing the same in a sealed envelope, by overnight courier or
by telecopy, addressed to the Company at its principal offices and to the other
parties at their addresses reflected on the signature pages hereto. Each party
hereto, by written notice given to the other parties hereto in accordance with
this Section 5.6, may change the address to which notices, statements,
instructions or other documents are to be sent to such party. All notices,
statements, instructions and other documents hereunder that are mailed or
telecopied shall be deemed to have been given on the date of mailing or, in the
case of telecopying, upon confirmation of receipt.
5.7 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties, and their respective permitted
successors and assigns. If any Stockholder or any Transferee of any Stockholder
shall acquire any shares of Common Stock in any manner, whether by operation of
law or otherwise, such shares shall be held subject to all of the terms of this
Agreement, and, by taking and holding such shares, such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement.
5.8 Recapitalizations and Exchanges Affecting Common Stock. The
provisions of this Agreement shall apply, to the full extent set forth herein
with respect to Common Stock, to any and all shares of capital stock or equity
securities of the Company or any successor or assign of the Company (whether by
merger, consolidation, sale of assets or otherwise) that may be issued in
respect of, in exchange for, or in substitution of, Common Stock, or that may
be issued by reason of any stock dividend, stock split, reverse stock split,
combination, recapitalization, reclassification or otherwise. Upon the
occurrence of any of such events, numbers of shares and amounts hereunder and
any other appropriate terms shall be appropriately adjusted, as determined in
good faith by the Board of Directors of the Company.
5.9 Governing Law. This Agreement shall be governed and construed and
enforced in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof.
5.10 Descriptive Headings, Etc. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires, references to "hereof," "herein," "hereby," "hereunder" and
similar terms shall refer to this entire Agreement.
5.11 Amendment. This Agreement may not be amended or supplemented,
except by an instrument in writing signed by the Company and by Stockholders
holding a majority of the then-outstanding shares of Common Stock held by all
Stockholders; provided, however, that any amendment, supplement or modification
of this Agreement that adversely affects the rights and obligations of the
Stockholders generally under Section 2.5 shall also require the approval of FPC
and a majority of the outstanding shares of Common Stock held by the Other
Investors; and provided, further, that any amendment, supplement or
modification of this Agreement that adversely affects the rights and
obligations of any Stockholder (an "Affected Holder") or group thereof, as a
class, differently than those of the other Stockholders shall also require the
approval of Affected Holders holding a majority of the outstanding shares of
Common Stock held by all
-31-
<PAGE> 36
such Affected Holders. The foregoing notwithstanding, the Company, without the
consent of any other party hereto, may amend Schedule I and the signature pages
hereto, in order to add any Executive Management Investor or Other Investor or
any other party that becomes a holder of Common Stock or securities convertible
into or exercisable for Common Stock.
5.12 Severability. If any term or provision of this Agreement shall to
any extent be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law. Upon the
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties shall negotiate in good faith to modify this
Agreement so as to effect their original intent as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the extent possible.
5.13 Further Assurances. The parties hereto shall from time to time
execute and deliver all such further documents and do all acts and things as
the other parties may reasonably require to effectively carry out or better
evidence or perfect the full intent and meaning of this Agreement, including,
to the extent necessary or appropriate, using all reasonable efforts to cause
the amendment of the Certificate or the Bylaws of the Company in order to
provide for the enforcement of this Agreement in accordance with its terms. In
furtherance and not in limitation of the foregoing, in the event of any
amendment, modification or termination of this Agreement in accordance with its
terms, the Stockholders shall cause the Board of Directors of the Company to
meet within 30 days following such amendment, modification or termination or as
soon thereafter as is practicable for the purpose of amending the Certificate
and Bylaws of the Company, as may be required as a result of such amendment,
modification or termination, and, to the extent required by law, proposing such
amendments to the Stockholders of the Company entitled to vote thereon, and
such action shall be the first action to be taken at such meeting.
5.14 Complete Agreement; Counterparts. This Agreement (together with
the Merger Agreement, the Voting Agreements, dated as of June 13, 1999, as
amended, by and between Fox Paine Medic and each of the Rollover Investors, the
Investor Participation Agreement, dated June 13, 1999, as amended, by and among
Fox Paine Medic and the Rollover Investors, the Stock Incentive Plan, the
Employment Agreements and the other agreements referred to herein and therein)
constitutes the entire agreement and supersedes all other agreements and
understandings, both written and oral, among the parties or any of them, with
respect to the subject matter hereof. This Agreement may be executed by any one
or more of the parties hereto in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
5.15 Certain Transactions. The parties hereto agree that Fox Paine &
Company, LLC shall have the exclusive right to perform all consulting,
financing, investment banking and similar services for the Company and its
subsidiaries, for customary compensation and on other terms that are customary
for similar engagements with unaffiliated third parties, and neither the
Company nor its subsidiaries shall engage any other Person to perform such
services during the term of this Agreement, except to the extent Fox Paine &
Company, LLC shall consent thereto or shall decline, at its sole election, to
perform such services; in any such case, so long as FPC holds at least 10% of
the outstanding shares of Common Stock.
-32-
<PAGE> 37
5.16 No Third-Party Beneficiaries. The provisions of this Agreement
shall be only for the benefit of the parties to this Agreement, and no other
Person (other than any indemnified party with respect to Section 3.3) shall
have any third party beneficiary or other right hereunder.
-33-
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed on the date first written above.
MAXXIM MEDICAL, INC.
By: /s/ Kenneth W. Davidson
-----------------------------------------
Name: Kenneth W. Davidson
Title: Chairman, President and Chief
Financial Officer
FOX PAINE CAPITAL FUND, L.P.
By: /s/ Jason B. Hurwitz
-----------------------------------------
Name: Jason B. Hurwitz
Title: Director
Address: 950 Tower Lane, Suite 1150
Foster City, CA 94404
FPC INVESTORS, L.P.
By: /s/ Jason B. Hurwitz
-----------------------------------------
Name: Jason B. Hurwitz
Title: Director
Address: 950 Tower Lane, Suite 1150
Foster City, CA 94404
MAXXIM COINVESTMENT FUND I, LLC
By: Fox Paine Capital Fund, LLC, its Manager
By: /s/ Jason B. Hurwitz
-----------------------------------------
Name: Jason B. Hurwitz
Title: Authorized Signatory
Address: 950 Tower Lane, Suite 1150
Foster City, CA 94404
MAXXIM COINVESTMENT FUND II, LLC
By: Fox Paine Capital Fund, LLC, its Manager
By: /s/ Jason B. Hurwitz
----------------------------------------
Name: Jason B. Hurwitz
Title: Director
Address: 950 Tower Lane, Suite 1150
Foster City, CA 94404
[SIGNATURE PAGE TO MAXXIM STOCKHOLDERS' AGREEMENT]
<PAGE> 39
MAXXIM COINVESTMENT FUND III, LLC
By: Fox Paine Capital Fund, LLC, its Manager
By: /s/ W. Dexter Paine
----------------------------------------
Name: W. Dexter Paine
Title: Director
Address: 950 Tower Lane, Suite 1150
Foster City, CA 94404
[SIGNATURE PAGE TO MAXXIM STOCKHOLDERS' AGREEMENT]
<PAGE> 40
MAXXIM COINVESTMENT FUND IV, LLC
By: Fox Paine Capital Fund, LLC, its Manager
By: /s/ Jason B. Hurwitz
-----------------------------------------
Name: Jason B. Hurwitz
Title: Director
Address: 950 Tower Lane, Suite 1150
Foster City, CA 94404
MAXXIM COINVESTMENT FUND V, LLC
By: Fox Paine Capital Fund, LLC, its Manager
By: /s/ Jason B. Hurwitz
-----------------------------------------
Name: Jason B. Hurwitz
Title: Director
Address: 950 Tower Lane, Suite 1150
Foster City, CA 94404
GS MEZZANINE PARTNERS, L.P.
By: GS Mezzanine Advisors, L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Melina Higgins
-----------------------------------------
Name: Melina Higgins
Title: Attorney-in-fact
GS MEZZANINE PARTNERS OFFSHORE, L.P.
By: GS Mezzanine Advisors (Cayman), L.P.,
its general partner
By: GS Mezzanine Advisors, Inc.,
its general partner
By: /s/ Melina Higgins
-----------------------------------------
Name: Melina Higgins
Title: Attorney-in-fact
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners,
its general partners
By: /s/ John O'Connor
-----------------------------------------
Name: John O' Connor
Title: General Partner
Address: 380 Madison Avenue, 12th Floor
New York, New York 10017
[SIGNATURE PAGE TO MAXXIM STOCKHOLDERS' AGREEMENT]
<PAGE> 41
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Jerry D. Cohen
-----------------------------------------
Name: Jerry D. Cohen
Title: Authorized Signatory
Address: One Nationwide Plaza (1-33-07)
Columbus, OH 43215-2220
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /s/ Stephen J. Blewitt
-----------------------------------------
Name: Stephen J. Blewitt
Title: Senior Investment Officer
Address: 200 Clarendon Street
Boston, MA 02117
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By: /s/ Stephen J. Blewitt
-----------------------------------------
Name: Stephen J. Blewitt
Title: Senior Investment Officer
Address: 200 Clarendon Street
Boston, MA 02117
SIGNATURE 3 LIMITED
by JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY, as Portfolio Advisor
By: /s/ Stephen J. Blewitt
-----------------------------------------
Name: Stephen J. Blewitt
Title: Senior Investment Officer
Address: 200 Clarendon Street
Boston, MA 02117
MERRILL LYNCH INTERNATIONAL
by JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY, as Manager
under that certain Bond Purchase
and Asset Management Agreement
dated as of June 22, 1999
By: /s/ Stephen J. Blewitt
-----------------------------------------
Name: Stephen J. Blewitt
Title: Senior Investment Officer
Address: 200 Clarendon Street
Boston, MA 02117
[SIGNATURE PAGE TO MAXXIM STOCKHOLDERS' AGREEMENT]
<PAGE> 42
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: /s/ Gary A. Poliner
-----------------------------------------
Name: Gary A. Poliner
Title: Its Authorized Representative
Address: 720 East Wisconsin Avenue
Milwaukee, WI 53202
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By: /s/ Christopher K. Stunt
-----------------------------------------
Name: Christopher K. Stunt
Title: Director
Address: World Financial Center -
North Tower
New York, NY 10281-1329
DEUTSCHE BANK AG, NEW YORK BRANCH
By: /s/ William W. Archer
-----------------------------------------
Name: William W. Archer
Title: Managing Director
Address: 130 Liberty Street, 29th Floor
New York, New York 10006
CIBC WMC, INC.
By: /s/ Ken Kilgour
-----------------------------------------
Name: Ken Kilgour
Title: Managing Director
Address: 161 Bay Street, 8th Floor
Toronto, Ontario M5J 2S8 CANADA
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Richard Gallant
-----------------------------------------
Name: Richard Gallant
Title: Director
Address: 11 Madison Avenue
New York, New York 10010
[SIGNATURE PAGE TO MAXXIM STOCKHOLDERS' AGREEMENT]
<PAGE> 43
DAVIDSON MANAGEMENT
INTERNATIONAL LIMITED PARTNERSHIP
By: Davidson Management, Inc.,
its general partner
By: /s/ Kenneth W. Davidson
-----------------------------------------
Name: Kenneth W. Davidson
Title: President
Address:
By: /s/ Kenneth W. Davidson
-----------------------------------------
Name: Kenneth W. Davidson
Address:
/s/ Peter M. Graham
---------------------------------------------
Name: Peter M. Graham
Address:
/s/ David L. Lamont
---------------------------------------------
Name: David L. Lamont
Address:
/s/ Henry T. DeHart
---------------------------------------------
Name: Henry T. DeHart
Address:
/s/ Jack F. Cahill
---------------------------------------------
Name: Jack F. Cahill
Address:
/s/ Alan S. Blazei
---------------------------------------------
Name: Alan S. Blazei
Address:
/s/ Joseph D. Dailey
---------------------------------------------
Name: Joseph D. Dailey
Address:
/s/ Suzanne R. Garon
---------------------------------------------
Name: Suzanne R. Garon
Address:
/s/ Ernest J. Henley, Ph.D.
---------------------------------------------
Name: Ernest J. Henley, Ph.D.
Address: 49 Briar Hollow
Houston, TX 77027
/s/ Davis C. Henley
---------------------------------------------
Name: Davis C. Henley
Address:
[SIGNATURE PAGE TO MAXXIM STOCKHOLDERS' AGREEMENT]
<PAGE> 44
Schedule I
The individual holdings of Common Stock of each Stockholder
immediately after the closing of the transactions contemplated in the Merger
Agreement (not assuming the exercise of any Options) will be as follows:
<TABLE>
<CAPTION>
Number of Shares
of Common Stock
Name Held After Closing
---- ------------------
<S> <C>
Davidson Management International Limited Partnership 184,514
Peter M. Graham 75,365
David L. Lamont 59,917
Henry T. DeHart 36,736
Jack F. Cahill 39,661
Alan S. Blazei 46,520
Joseph D. Dailey 24,320
Suzanne R. Garon 5,024
Ernest J. Henley, Ph.D. 143,385
David C. Henley 86,031
Fox Paine Capital Fund, L.P. 3,930,217
FPC Investors, L.P. 58,317
GS Mezzanine Partners, L.P. 142,101
GS Mezzanine Partners Offshore, L.P. 76,306
MAXXIM COINVESTMENT FUND I 97,864
MAXXIM COINVESTMENT FUND II 109,204
MAXXIM COINVESTMENT FUND III 109,204
MAXXIM COINVESTMENT FUND IV 218,407
MAXXIM COINVESTMENT FUND V 327,611
---------
Total 5,770,704
</TABLE>
The individual holdings of Options to purchase shares of Common Stock
of each Stockholder immediately after the closing of the transactions
contemplated in the Merger Agreement are as set forth as follows:
<PAGE> 45
<TABLE>
<CAPTION>
Name Number of Shares of Common
---- Stock Subject to Options
Held After Closing
--------------------------
<S> <C>
Kenneth W. Davidson 386,892
Peter M. Graham 209,747
David L. Lamont 161,812
Henry T. DeHart 100,007
Jack F. Cahill 101,385
Alan S. Blazei 141,725
Joseph D. Dailey 59,489
Suzanne R. Garon 11,818
---------
Total 1,172,875
</TABLE>
<TABLE>
<CAPTION>
Number of Shares of Common
Stock Subject to Warrants
Name Held After Closing
---- --------------------------
<S> <C>
GS Mezzanine Partners, L.P. 114,875
GS Mezzanine Partners Offshore, L.P. 61,686
Chase Equity Associates, L.P. 10,809
Nationwide Life Insurance Company 5,405
John Hancock Mutual Life Insurance Company 17,836
John Hancock Variable Life Insurance Company 1,081
Signature 3 Limited 540
Merrill Lynch International 7,567
The Northwestern Mutual Life Insurance Company 27,024
Merrill, Lynch, Pierce, Fenner & Smith Incorporated 5,405
Deutsche Bank AG, New York Branch 2,703
CIBC WMC, Inc. 5,406
Credit Suisse First Boston Corporation 2,703
-------
Total 263,040
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
Schedule II
REINVESTMENT SHARES
NAME NUMBER OF SHARES
---- OF COMMON STOCK
----------------
<S> <C>
Davidson Management 46,080
International Limited
Partnership
Peter M. Graham 34,930
David L. Lamont 27,082
Henry T. DeHart 13,852
Jack F. Cahill 14,425
Alan S. Blazei 24,152
Joseph Dailey 8,089
Suzanne Garon 1,009
-------
TOTAL 169,619
</TABLE>
<PAGE> 47
Schedule 2.3.7(a)
Merrill Lynch International, which is acquiring the securities at the
direction of John Hancock Mutual Life Insurance Company ("Hancock") under that
certain Bond Purchase and Asset Management Agreement, dated as of June 22,
1999, may transfer the securities that it acquires to Signature 4 Limited, a
Cayman islands corporation for which Hancock will act as portfolio advisor,
with the reasonable consent of the Board of Directors of the Company.
<PAGE> 1
Exhibit 10.7
MAXXIM MEDICAL, INC.
1999 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Plan is to give Maxxim Medical, Inc., a Texas
corporation (the "Company"), and its Affiliates (as defined below) a
competitive advantage in attracting, retaining and motivating officers,
employees, consultants and non-employee directors, and to provide the Company
and its subsidiaries and Affiliates with a stock plan providing incentives
linked to the financial results of the Company's businesses and increases in
shareholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
"Affiliate" of a Person means a Person, directly or indirectly,
controlled by, controlling or under common control with such Person.
"Award" means a Stock Appreciation Right, Stock Option or Restricted
Stock.
"Award Agreement" means a Restricted Stock Agreement or an Option
Agreement. An Award Agreement may include provisions included in an employment
or consulting agreement.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
"Committee" means (a) before an IPO, the Executive Committee of the Board
or such other committee of the Board as the Board may designate for such
purpose under the Plan, and (b) after an IPO, such committee of the Board as
the Board may designate, which shall be composed of not less than two
Non-Employee Directors, each of whom shall be appointed by and serve at the
pleasure of the Board.
"Common Stock" means the Common Stock, par value $0.001 per share, of the
Company.
"Company" means Maxxim Medical, Inc., a Texas corporation.
"Effective Date" has the meaning set forth in Section 12.
"Employment" means, unless otherwise defined in an applicable Restricted
Stock Agreement, Award Agreement or employment agreement, employment with, or
service as a director of, or as a consultant to, the Company or any of
its Affiliates.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor thereto.
<PAGE> 2
"Exercise Price" has the meaning set forth in Section 5(a).
"Fair Market Value" of the Common Stock, unless otherwise provided in the
applicable Award Agreement, means, as of any given date, the mean between the
highest and lowest reported sales prices of the Common Stock on the New York
Stock Exchange, Inc. or, if not listed on such exchange, on any other national
securities exchange on which the Common Stock is listed or, if not so listed,
on the Nasdaq National Market. If such sales prices are not so available, the
Fair Market Value of the Common Stock shall be determined by the Committee in
good faith.
"IPO" means the consummation of a registered underwritten public offering
or offerings of Common Stock after the date hereof with gross proceeds to the
Company in the aggregate of at least $50 million.
"Incentive Stock Option" means any Stock Option designated as, and
qualified as, an "incentive stock option" within the meaning of Section 422 of
the Code.
"Non-Employee Director" means a member of the Board who qualifies as a
Non-Employee Director (as defined in Rule 16b-3(b)(3) as promulgated by the SEC
under the Exchange Act, or any successor definition adopted by the SEC).
"Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option Agreement" means an agreement setting forth the terms and
conditions of an Award of Stock Options and, if applicable, Stock Appreciation
Rights.
"Participant" has the meaning set forth in Section 4.
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, trust, unincorporated organization, government (or any
department or agency thereof) or other entity.
"Plan" means the Maxxim Medical, Inc. 1999 Stock Incentive Plan, as set
forth herein and as hereinafter amended from time to time.
"Plan Shares" has the meaning set forth in Section 11(b).
"Recapitalization Price" means $26.00 per share of Common Stock.
"Restricted Stock" means an Award granted under Section 7.
"Restricted Stock Agreement" means an agreement setting forth the terms
and conditions of an Award of Restricted Stock.
"Rule 13d-3" means Rule 13d-3, as promulgated by the SEC under the
Exchange Act, as amended from time to time.
2
<PAGE> 3
"SEC" means the Securities and Exchange Commission or any successor
agency.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, and any successor thereto.
"Stock Appreciation Right" means a right granted under Section 6.
"Stock Option" means an option granted under Section 5.
"Stockholders' Agreement" has the meaning set forth in Section 11(a).
In addition, certain other terms used herein have definitions otherwise
ascribed to them herein.
SECTION 2. ADMINISTRATION
This Plan shall be administered by the Committee, or, if no Committee has
been designated or appointed, by the Board (in which case all references herein
to the Committee shall include the Board).
Among other things, the Committee shall have the authority, subject to
the terms of the Plan, to:
(a) select the Participants to whom Awards may from time to time be
granted and designate the Affiliates of the Company for purposes of the Plan;
(b) determine whether and to what extent Awards of Incentive Stock
Options, Nonqualified Stock Options, Stock Appreciation Rights and Restricted
Stock or any combination thereof are to be granted hereunder;
(c) determine the number of shares of Common Stock to be covered by each
Award granted hereunder;
(d) determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the option price (subject to Section 5(a)), any
vesting conditions, restrictions or limitations (which may be related to the
performance of the Participant, the Company or any of its Affiliates)) and any
acceleration of vesting or waiver or forfeiture regarding any Award and the
shares of Common Stock relating thereto, based on such factors as the Committee
shall determine;
(e) modify, amend or adjust the terms and conditions of any Award, at any
time or from time to time;
(f) determine to what extent and under what circumstances Common Stock
and other amounts payable with respect to an Award shall be deferred;
(g) determine under what circumstances an Award may be settled in cash or
Common Stock under Sections 5(g) and 6(b)(ii);
3
<PAGE> 4
(h) adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it shall from time to time deem advisable;
(i) interpret the terms and provisions of the Plan and any Award issued
under the Plan (and any agreement relating thereto); and
(j) otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may authorize any one or more of their number
or any officer of the Company to execute and deliver documents on behalf of the
Committee.
Any dispute or disagreement which may arise under, or as a result of, or
in any way relate to, the interpretation, construction or application of the
Plan or an Award (or related Award Agreement) granted hereunder shall be
determined by the Committee. Any determination made by the Committee pursuant
to the provisions of the Plan with respect to the Plan, any Award or Award
Agreement shall be made in the sole discretion of the Committee and, with
respect to an Award, at the time of the grant of the Award or, unless in
contravention of any express term of the Plan or the Award Agreement, at any
time thereafter. Except as otherwise set forth herein or in any Award
Agreement, all decisions made by the Committee in accordance with the terms of
this Plan or the Award Agreements shall be final and binding on all Persons,
including the Company and the Participants.
SECTION 3. COMMON STOCK SUBJECT TO PLAN
The total number of shares of Common Stock reserved and available for
grant under the Plan shall be 1,172,875. Shares subject to an Award under the
Plan may be authorized and unissued shares or may be treasury shares.
If any shares of Restricted Stock are forfeited or if any Stock Option
(and related Stock Appreciation Right, if any) terminates without being
exercised, or if any Stock Appreciation Right is exercised for or settled in
cash, the shares subject to such Awards shall again be available for
distribution in connection with Awards under the Plan.
In the event any merger, reorganization, consolidation, recapitalization,
spinoff, stock dividend, stock split, reverse stock split, extraordinary
distribution with respect to the Common Stock or other change in corporate
structure affecting the Common Stock occurs or is proposed, the Committee or
the Board may make such substitution or adjustment in the aggregate number and
kind of shares or other property reserved for issuance under the Plan, in the
number, kind and Exercise Price (as defined herein) of shares or other property
subject to outstanding Stock Options and Stock Appreciation Rights, in the
number and kind of shares or other property subject to Restricted Stock Awards,
and/or such other substitution or adjustments as the Committee or the Board may
determine to be fair and appropriate in its sole discretion, provided that, in
no case shall such determination adversely affect in any material respect the
rights of a Participant hereunder or under any Award Agreement or the value of
the Awards then held thereunder. Any such adjusted Exercise Price shall also be
used to determine the amount payable by the Company upon the exercise of any
Stock Appreciation Right associated with any Stock Option.
4
<PAGE> 5
SECTION 4. PARTICIPANTS
Officers, employees, consultants and non-employee directors of the
Company and its Affiliates who are responsible for or contribute to the
management, growth and profitability of the business of the Company and its
Affiliates shall be "Participants" eligible to be granted Awards under the
Plan.
SECTION 5. STOCK OPTIONS
The Committee shall have the authority to grant any Participant Incentive
Stock Options, Nonqualified Stock Options or both types of Stock Options (in
each case, with or without Stock Appreciation Rights). Incentive Stock Options
may be granted only to employees of the Company and its subsidiaries (within
the meaning of Section 424(f) of the Code). To the extent that any Stock Option
is not designated as an Incentive Stock Option or even if so designated does
not qualify as an Incentive Stock Option, it shall constitute a Nonqualified
Stock Option.
Stock Options shall be evidenced by Option Agreements, which shall
include such terms and provisions as the Committee may determine from time to
time. An Option Agreement shall expressly indicate whether it is intended to be
an agreement for an Incentive Stock Option or a Nonqualified Stock Option. The
grant of a Stock Option shall occur on the date the Committee, by resolution
selects an individual to receive a grant of a Stock Option, determines the
number of shares of Common Stock to be subject to such Stock Option to be
granted to such individual and specifies the terms and provisions of the Stock
Option, or on such other date as the Committee may determine. The Company shall
notify a Participant of any grant of a Stock Option, and a written Option
Agreement shall be duly executed and delivered by the Company to the
Participant. Subject to Section 11(a), such Option Agreement shall become
effective upon execution by the Company and the Participant.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be exercised, so
as to disqualify the Plan under Section 422 of the Code or, without the consent
of the Participant affected, to disqualify any Incentive Stock Option under
such Section 422 of the Code.
Stock Options shall be subject to the following terms and conditions, and
shall contain such additional terms and conditions as the Committee shall deem
desirable:
(a) Exercise Price. The price per share of Common Stock purchasable under
a Stock Option shall be (i) with respect to Stock Options granted as of the
Effective Date, the Recapitalization Price, and (ii) with respect to all
subsequent grants of Stock Options, as such price may be determined by the
Committee and set forth in the Option Agreement (the "Exercise Price").
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee. Absent any such term being fixed by the Committee, pursuant to an
Option Agreement or otherwise, such term shall be 10 years.
5
<PAGE> 6
(c) Exercisability. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the Committee provides
that any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part, based
on such factors as the Committee may determine. In addition, the Committee may
at any time accelerate the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section 5,
vested Stock Options may be exercised, in whole or in part, at any time during
the option term by giving written notice of exercise to the Company specifying
the number of shares of Common Stock subject to the Stock Option to be
purchased.
Such notice shall be accompanied by payment in full of the Exercise Price
per share by certified or bank check or such other instrument as the Company
may accept. Unless determined otherwise by the Committee at the time of grant
and set forth in the Option Agreement, payment, in full or in part, may also be
made in the form of fully vested Common Stock already owned by the Participant
(for at least six months if acquired upon exercise of a stock option or
received upon the lapse of restrictions on an Award of Restricted Stock) of the
same class as the Common Stock subject to the Stock Option (based on the Fair
Market Value of the Common Stock on the date the Stock Option is exercised);
provided, however, that, in the case of an Incentive Stock Option, the right to
make a payment in the form of already-owned shares of Common Stock of the same
class as the Common Stock subject to the Stock Option may be authorized only at
the time the Stock Option is granted.
In the discretion of the Committee, after an IPO, payment for any shares
subject to a Stock Option may also be made by delivering a properly executed
exercise notice to the Company, together with a copy of irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds to pay the aggregate Exercise Price, and, if requested by the
Company, the amount of any United States federal, state or local or foreign
withholding taxes. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
In addition, in the discretion of the Committee, payment of the Exercise
Price for any shares subject to a Stock Option may also be made by instructing
the Committee to withhold a number of such shares having a Fair Market Value on
the date of exercise equal to the aggregate Exercise Price of such Stock Option
or in accordance with such other payment methods as may be permitted by the
Committee in its sole discretion.
No shares of Common Stock shall be issued until full payment therefor has
been made. Except as otherwise provided in the Stockholders' Agreement or the
applicable Option Agreement, subject to a Participant's compliance with Section
11(a), a Participant shall have all of the rights of a stockholder of the
Company holding the class or series of Common Stock that is subject to such
Stock Option (including, if applicable, the right to vote the shares and the
right to receive dividends and distributions), when the Participant has given
written notice of exercise, has paid in full for such shares and, if requested,
has given the representations referred to in Section 11(c).
6
<PAGE> 7
(e) Nontransferability of Stock Options. No Stock Option shall be
transferable by the Participant other than (i) by will or by the laws of
descent and distribution, or (ii) in the case of a Nonqualified Stock Option,
as otherwise expressly permitted under the applicable Option Agreement,
including, if so permitted pursuant to a gift to such Participant's spouse,
children, grandchildren or other living descendants, whether directly or
indirectly or by means of a trust, partnership, limited liability company or
otherwise, in each case, subject to the restrictions in the Stockholders'
Agreement. All Stock Options shall be exercisable, subject to the terms of the
Plan, during the Participant's lifetime, only by the Participant or any person
to whom such Stock Option is transferred pursuant to the preceding sentence,
including such Participant's guardian, legal representative and other
transferee. The term "Participant" includes the estate of the Participant or
the legal representative of the Participant named in the Option Agreement and
any person to whom an Option is otherwise transferred in accordance with this
Section 5(e), by will or the laws of descent and distribution; provided,
however, that references herein to Employment of a Participant or termination
of Employment of a Participant shall continue to refer to the Employment or
termination of Employment of the applicable grantee of an Award hereunder.
(f) Termination of Employment. Except as otherwise provided hereunder or
in the applicable Option Agreement, upon the Participant's death or when the
Participant's Employment is terminated for any reason, the Participant:
(i) shall forfeit all Stock Options that have not previously vested;
and
(ii) shall have twelve months to exercise the Participant's vested
Stock Options that are vested on the date of the Participant's termination
of Employment.
Any vested Stock Options not exercised within the permissible period of
time shall be forfeited by the Participant. Notwithstanding any of the
foregoing, the Participant shall not be permitted to exercise any Stock Option
at a time beyond the initial option term.
(g) Cashing Out of Stock Option. Upon receipt of written notice of
exercise, the Committee may elect to cash out all or any portion of the shares
of Common Stock for which a Stock Option is being exercised by paying the
Participant an amount, in cash or Common Stock, equal to the excess of the Fair
Market Value of one share of Common Stock over the Exercise Price per share
times the number of shares of Common Stock having such Exercise Price for which
the Stock Option is being exercised on the effective date of such cash-out.
SECTION 6. STOCK APPRECIATION RIGHTS
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Nonqualified Stock Option, such rights may be granted either at or
after the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option. In either case,
the terms and conditions of a Stock Appreciation Right shall be set forth in
the Option Agreement for the related Stock Option or an amendment thereto.
7
<PAGE> 8
A Stock Appreciation Right may be exercised by a Participant in
accordance with Section 6(b) by surrendering the applicable portion of the
related Stock Option in accordance with procedures established by the
Committee. Upon such exercise and surrender, the Participant shall be entitled
to receive an amount determined in the manner prescribed in Section 6(b). Stock
Options that have been so surrendered shall no longer be exercisable to the
extent the related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including
the following:
(i) Stock Appreciation Rights shall be exercisable only at such time
or times and to the extent that the Stock Options to which they relate
are exercisable in accordance with the provisions of Section 5 and this
Section 6;
(ii) upon the exercise of a Stock Appreciation Right, a Participant
shall be entitled to receive an amount equal to the product of (A) the
excess of the Fair Market Value of one share of Common Stock over the
Exercise Price per share specified in the related Stock Option times (B)
the number of shares in respect of which the Stock Appreciation Right
shall have been exercised, in cash, shares of Common Stock or both, with
the Committee having the right to determine the form of payment;
(iii) Stock Appreciation Rights shall be transferable only with the
related Stock Option in accordance with Section 5(e); and
(iv) upon the exercise of a Stock Appreciation Right (other than an
exercise for cash), the Stock Option or part thereof to which such Stock
Appreciation Right is related shall be deemed to have been exercised for
the purpose of the limitation set forth in Section 3 on the number of
shares of Common Stock to be issued under the Plan, but only to the
extent of the number of shares covered by the Stock Appreciation Right at
the time of exercise.
SECTION 7. RESTRICTED STOCK
The Committee shall determine the Participants to whom and the time or
times at which grants of Restricted Stock will be awarded, the number of shares
to be awarded to any Participant, the conditions for vesting, the time or times
within which such Awards may be subject to forfeiture and restrictions on
transfer and any other terms and conditions of the Awards (including provisions
(i) relating to placing legends on certificates representing shares of
Restricted Stock, (ii) permitting the Company to require that shares of
Restricted Stock be held in custody by the Company with a stock power from the
owner thereof until restrictions lapse and (iii) relating to any rights to
purchase Restricted Stock on the part of the Company and its Affiliates), in
addition to those contained in the Stockholders' Agreement. The terms and
conditions of Restricted Stock Awards shall be set forth in a Restricted Stock
Agreement, which shall include such terms and provisions as the Committee may
determine from time to time. Except as provided in this Section 7, the
Restricted Stock Agreement, the Stockholders' Agreement and any other relevant
agreements, the Participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a stockholder of the Company holding the
class or
8
<PAGE> 9
series of Common Stock that is the subject of the Restricted Stock Award,
including, if applicable, the right to vote the shares and, subject to the
following sentence, the right to receive any cash dividends or distributions
(but, subject to the third paragraph of Section 3, not the right to receive
non-cash dividends or distributions). If so determined by the Committee in the
applicable Restricted Stock Agreement, cash dividends and distributions on the
class or series of Common Stock that is the subject of the Restricted Stock
Award shall be automatically deferred and reinvested in additional Restricted
Stock, held subject to the vesting of the underlying Restricted Stock, or held
subject to meeting conditions applicable only to dividends and distributions.
SECTION 8. TAX OFFSET BONUSES
At the time an Award is made hereunder or at any time thereafter, the
Committee may grant to the Participant receiving such Award the right to
receive a cash payment in an amount specified by the Committee, to be paid at
such time or times (if ever) as the Award results in compensation income to the
Participant, for the purpose of assisting the Participant to pay the resulting
taxes, all as determined by the Committee, and on such other terms and
conditions as the Committee shall determine.
SECTION 9. TERM, AMENDMENT AND TERMINATION
This Plan will terminate 10 years after the Effective Date. Awards
outstanding as of such date shall not be affected or impaired by the
termination of the Plan.
The Board may amend, alter, or discontinue the Plan, prospectively or
retroactively, but no amendment, alteration or discontinuation shall be made
that would impair the rights of any Participant under an Award theretofore
granted without the Participant's consent.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but no such amendment shall be made which would
impair the rights of any Participant thereunder without the Participant's
consent.
SECTION 10. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation
of trusts or other arrangements to meet the obligations created under the Plan
to deliver Common Stock or make payments; provided, however, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 11. GENERAL PROVISIONS
(a) Stockholders' Agreement. Notwithstanding anything in the Plan to the
contrary, unless the Committee determines otherwise, it shall be a condition to
receiving any Award under the Plan or transferring any Stock Option in
accordance with Section 5(e) or any other transfer permitted under the terms of
an Award Agreement or otherwise, that a Participant (or transferee in the case
of such transfer) shall become a party to the Stockholders' Agreement, dated as
of November 12, 1999, among the Company and certain stockholders of the
Company, as amended
9
<PAGE> 10
from time to time (the "Stockholders' Agreement"), and such Participant (or
transferee in the case of such transfer) shall become a "Executive Management
Investor" thereunder (or such transferee shall become a "Permitted Transferee"
of a "Executive Management Investor" thereunder).
(b) Awards and Certificates. Shares of Restricted Stock and shares of
Common Stock issuable upon the exercise of a Stock Option or Stock Appreciation
Right (together, "Plan Shares") shall be evidenced in such manner as the
Committee may deem appropriate, including book entry registration or issuance
of one or more stock certificates. Any certificate issued in respect of Plan
Shares shall be registered in the name of such Participant and shall bear
appropriate legends referring to the terms, conditions, and restrictions
applicable to such Award, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms, conditions and
restrictions (including forfeiture) of the Maxxim Medical, Inc. 1999
Stock Incentive Plan and a Restricted Stock Agreement and/or an
Award Agreement, as the case may be, between the issuer and the
registered holder hereof. Copies of such Plan and Agreement are on
file at the offices of Maxxim Medical, Inc., 10300 49th Street
North, Clearwater, Florida 33762."
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
the securities laws of any state, and may not be sold or otherwise
disposed of except pursuant to an effective registration statement
under said Act and applicable state securities laws or an applicable
exemption to the registration requirements of such Act and laws."
Such Plan Shares may bear other legends to the extent the Committee or the
Board determines it to be necessary or appropriate, including any required by
the Stockholders' Agreement or pursuant to any applicable Restricted Stock
Agreement or Award Agreement. If and when all restrictions expire without a
prior forfeiture of the Plan Shares theretofore subject to such restrictions,
upon surrender of legended certificates representing such shares new
certificates for such shares shall be delivered to the Participant without the
first legend listed above.
(c) Representations and Warranties. The Committee may require each person
purchasing or receiving Plan Shares to (i) represent to and agree with the
Company in writing that such person is acquiring the shares without a view to
the distribution thereof and (ii) make any other representations and warranties
that the Committee deems appropriate.
(d) Additional Compensation. Nothing contained in the Plan shall prevent
the Company or any of its Affiliates from adopting other or additional
compensation arrangements for its employees.
(e) No Right of Employment. Adoption of the Plan or grant of any Award
shall not confer upon any employee any right to continued Employment, nor shall
it interfere in any way with the right of the Company or any of its Affiliate
to terminate the Employment of any eligible Participant at any time.
10
<PAGE> 11
(f) Withholding Taxes. No later than the date as of which an amount first
becomes includible in the gross income of a Participant for income tax purposes
with respect to any Award under the Plan, such Participant shall pay to the
Company or, if appropriate, any of its Affiliates, or make arrangements
satisfactory to the Committee regarding the payment of, any United States
federal, state or local or foreign taxes of any kind required by law to be
withheld with respect to such amount. If approved by the Committee, withholding
obligations may be settled with Common Stock, including Common Stock that is
part of the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the Participant. The Committee may establish such procedures
as it deems appropriate, including making irrevocable elections, for the
settlement of withholding obligations with Common Stock.
(g) Beneficiaries. The Committee shall establish such procedures as it
deems appropriate for a Participant to designate a beneficiary to whom any
amounts payable in the event of the Participant's death are to be paid or by
whom any rights of the Participant, after the Participant's death, may be
exercised.
(h) Pooling of Interests. Notwithstanding any other provision of the Plan
or an Award Agreement, if any right (or the exercise of such right) granted
pursuant to the Plan would make any transaction involving the Company
ineligible for pooling of interests accounting under APB No. 16, which
transaction, but for the nature of such grant or grants, would otherwise be
eligible for such accounting treatment, the Committee shall have the ability to
substitute for the cash payable pursuant to such grant or grants Common Stock
with a Fair Market Value equal to the cash that would otherwise be payable
hereunder, or make any other appropriate adjustment or amendment to the Plan or
an Award Agreement, including elimination or suspension of such rights.
(i) Governing Law. The Plan and all Awards made and actions taken
thereunder shall be governed by and construed and enforced in accordance with
the laws of the State of New York without regard to the principles of conflicts
of law thereof.
(j) Compliance with Laws. If any law or any regulation of any commission
or agency having jurisdiction shall require the Company or a Participant
seeking to exercise Stock Options or Stock Appreciation Rights to take any
action with respect to the Plan Shares to be issued upon the exercise of Stock
Options or Stock Appreciation Rights then the date upon which the Company shall
issue or cause to be issued the certificate or certificates for the Plan Shares
shall be postponed until full compliance has been made with all such
requirements of law or regulation; provided, that the Company shall use its
reasonable efforts to take all necessary action to comply with such
requirements of law or regulation. Moreover, in the event that the Company
shall determine that, in compliance with the Securities Act or other applicable
statutes or regulations, it is necessary to register any of the Plan Shares
with respect to which an exercise of a Stock Option or Stock Appreciation Right
has been made, or to qualify any such Plan Shares for exemption from any of the
requirements of the Securities Act or any other applicable statute or
regulation, no Stock Options or Stock Appreciation Rights may be exercised and
no Plan Shares shall be issued to the exercising Participant until the required
action has been completed;
11
<PAGE> 12
provided, that the Company shall use its reasonable efforts to take all
necessary action to comply with such requirements of law or regulation.
Notwithstanding anything to the contrary contained herein, neither the Board
nor the members of the Committee owes a fiduciary duty to any Participant in
his or her capacity as such.
SECTION 12. EFFECTIVE DATE OF PLAN
This Plan shall be effective as of the date it is approved by the holders
of a majority of the outstanding shares of Common Stock, which approval is
evidenced by Section 5.4 of the Stockholders' Agreement (the "Effective Date").
12
<PAGE> 1
Exhibit 10.8
VESTED STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement") dated as of __________ 1999,
by and between Maxxim Medical, Inc., a Texas corporation (the "Company"), and
_________________ (the "Executive"), who is presently a ________________ of the
Company.
WHEREAS, pursuant to the Maxxim Medical, Inc. 1999 Stock Incentive
Plan (the "Plan"), the Committee (as defined in the Plan) has decided to award
Options (as defined below) on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the meanings ascribed to them below. Any capitalized term used in this
Agreement and not defined herein shall have the meaning ascribed to it in the
Plan.
"Acquisition" shall have the meaning set forth in Section 5.3.
"Agreement" shall have the meaning set forth in the preamble hereto.
"Common Stock" shall mean the Common Stock, par value $0.001 per
share, of the Company, subject to adjustment pursuant to the third paragraph of
Section 3 of the Plan, under certain circumstances.
"Company" shall have the meaning set forth in the preamble hereto.
"Executive" shall have the meaning set forth in the preamble hereto.
"Exercise Price" shall have the meaning set forth in Section 2.2.
"Grant Date" shall have the meaning set forth in Section 2.1.
"Options" shall have the meaning set forth in Section 2.1.
"Plan" shall have the meaning set forth in the recitals hereof.
In addition, certain other terms used herein have definitions
otherwise ascribed to them herein.
2. Grant and Terms of Options.
2.1. Grant of Options. The Company hereby grants to the Executive as
of ____________ (the "Grant Date") ______ Nonqualified Stock Options (the
"Options") each to purchase one share of Common Stock per Option on the terms
and conditions set forth below,
<PAGE> 2
and in reliance upon the representations and covenants of the Executive set
forth below. Unless sooner exercised or forfeited as provided for in the Plan
or this Agreement, the Options shall expire on the tenth anniversary of the
date of this Agreement.
2.2. Exercise Price. The exercise price of the Options is $26.00 per
share of Common Stock subject thereto (the "Exercise Price").
2.3. Exercisability. The Options shall be immediately exercisable on
the Grant Date and shall remain exercisable until they terminate as set forth
in this Agreement or the Plan.
3. Plan Shares. The Executive shall not be permitted to sell,
assign, transfer, pledge or otherwise encumber any Plan Shares or Options,
except as provided in the Plan or, in the case of Plan Shares, as provided in
Sections 2.3, 2.4 and 2.5 of the Stockholders' Agreement. Any transfer of Plan
Shares otherwise permitted pursuant to this Agreement shall remain subject to
the terms of the Stockholders' Agreement, and shall not be permitted other than
in accordance with the terms thereof, notwithstanding any provision of this
Agreement that would otherwise permit such transfer.
4. Executive's Representations, Warranties and Agreements. In
connection with the exercise of any Options, the Executive shall make to the
Company (i) representations, warranties and agreements in writing that such
Executive is acquiring the shares of Common Stock without a view to the
distribution thereof and (ii) any other representations that the Committee may
reasonably deem appropriate.
5. Successors.
5.1. This Agreement is personal to the Executive and, without the
prior written consent of the Company, shall not be assignable by the Executive
otherwise than (a) by will or the laws of descent and distribution or (b)
pursuant to a gift to the Executive's spouse, children, grandchildren or other
living descendants, whether directly or indirectly or by means of a trust,
partnership, limited liability company or otherwise, in each case, subject to
the restrictions of the Stockholders' Agreement. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
5.2. This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
5.3. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise (an "Acquisition"))
to all or substantially all of the business and/or assets of the Company
expressly to assume and to agree to perform this Agreement in the same manner
and to the same extent that the Company would have been required to perform
this Agreement if no such succession had taken place (or by substituting for
such Options new options, based upon the stock of such successor, having an
aggregate spread between the Fair Market Value of the underlying stock and the
Exercise Price thereof, and the same term, immediately after such substitution,
equal to the spread on, the term of and such other terms equivalent to such
Options immediately before such substitution); provided, however, that the
Company or such successor may, at its option, at the time of or promptly after
such Acquisition, terminate all of its obligations hereunder with respect to
the Options by paying to
-2-
<PAGE> 3
the Executive or the Executive's successors or assigns an amount equal to the
product of (i) the number of Options and (ii) the Fair Market Value per share
of the shares underlying such Options at the time of such Acquisition less the
amount of such Options' Exercise Price (but not in excess of such Fair Market
Value per share), in either case, in exchange for the Executive's Options. As
used in this Agreement, the "Company" shall mean both the Company as defined
above and any such successor that assumes and agrees to perform this Agreement,
by operation of law or otherwise.
6. Miscellaneous.
6.1. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without regard to the
principles of conflicts of law thereof. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. Except as
otherwise provided in the Plan, this Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
6.2. All notices and other communications under this Agreement shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed if to the Executive, at the address set forth on the signature page
hereto, and if to the Company: 10300 49th Street North, Clearwater, Florida
33762, Attn: Corporate Secretary, or to such other addresses as either party
furnishes to the other in writing in accordance with this Section 6.2. Notices
and communications shall be effective when actually received by the addressee.
6.3. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
6.4. No later than the date as of which an amount first becomes
includible in the gross income of the Executive for federal income tax purposes
with respect to any Options, the Executive shall pay to the Company, or if
appropriate, any of its Affiliates, or make arrangements satisfactory to the
Committee regarding the payment of, any United States federal, state or local
or foreign taxes of any kind required by law to be withheld with respect to
such amount. If approved by the Committee, withholding obligations may be
settled with Common Stock, including Common Stock that is part of the Award
that gives rise to the withholding requirement. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements, and the
Company and its Affiliates shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to the Executive.
The Committee may establish such procedures as it deems appropriate, including
making irrevocable elections, for the settlement of withholding obligations
with Common Stock.
6.5. The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
6.6. The Options are granted pursuant to the Plan which is
incorporated herein by reference and the Options shall, except as otherwise
expressly provided herein, be governed
-3-
<PAGE> 4
by the terms thereof. The Executive hereby acknowledges receipt of a copy of
the Plan and agrees to be bound by all the terms and provisions thereof. The
Executive and the Company each acknowledges that this Agreement (together with
the Stockholders' Agreement, the Plan and the other agreements referred to
herein and therein) constitutes the entire agreement and supersedes all other
agreements and understandings, both written and oral, among the parties or
either of them, with respect to the subject matter hereof, including the
Investor Participation Agreement, by and among Fox Paine Medic Acquisition
Corporation, a Texas corporation, the Executive and certain other stockholders
of the Company, dated June 13, 1999, as amended.
6.7. In connection with (a) the cash out of a Stock Option pursuant to
Section 5(g) of the Plan, or (b) the payment of the Exercise Price of a Stock
Option with fully vested Common Stock pursuant to Section 5(d) of the Plan at
any time following the date on which the Participant first becomes entitled to
exercise such Participant's Put Right (as defined in the Stockholders'
Agreement), but provided that the Participant does not actually exercise the
Put Right, the procedural protection with respect to the determination of Fair
Market Value that is set forth in the definition of "Fair Market Value" in the
Stockholders' Agreement shall be deemed to apply to the definition of "Fair
Market Value" as set forth in the Plan. If the Executive shall exercise his or
her right to pay the Exercise Price in full or in part in the form of fully
vested Common Stock pursuant to Section 5(d) of the Plan in connection with an
exercise of such Participant's Put Right, Fair Market Value for purposes of
this Agreement shall be equal to the Fair Market Value as determined under the
Stockholders' Agreement in connection with such Put Right.
6.8. The Company and the Participant shall from time to time execute
and deliver all such further documents and do all such acts and things as may
be reasonably required to carry out effectively or better evidence or perfect
the full intent and meaning of this Agreement, including without limitation
obtaining the ratification and approval of the Committee of this Award.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MAXXIM MEDICAL, INC.
By:
-------------------------------
Name:
Title:
-------------------------------
Executive:
Title:
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MAXXIM MEDICAL, INC.
By:
-------------------------------
Name:
Title:
-------------------------------
Executive:
Title:
-6-
<PAGE> 1
Exhibit 10.9
TIME ACCELERATED STOCK OPTION AGREEMENT
TIME ACCELERATED OPTION AGREEMENT (this "Agreement"), dated as of
_____________, by and between Maxxim Medical, Inc., a Texas corporation (the
"Company"), and ________________ (the "Executive"), who is presently a
_________________ of the Company.
WHEREAS, pursuant to the Maxxim Medical, Inc. 1999 Stock Incentive
Plan (the "Plan"), the Committee (as defined in the Plan) has decided to award
Options (as defined below) on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the meanings ascribed to them below. Any capitalized term used in this
Agreement and not defined herein shall have the meaning ascribed to it in the
Plan.
"Acquisition" shall have the meaning set forth in Section 5.3.
"Agreement" shall have the meaning set forth in the preamble hereto.
"Common Stock" shall mean the Common Stock, par value $0.001 per
share, of the Company, subject to adjustment pursuant to the third paragraph of
Section 3 of the Plan, under certain circumstances.
"Company" shall have the meaning set forth in the preamble hereto.
"Executive" shall have the meaning set forth in the preamble hereto.
"Exercise Price" shall have the meaning set forth in Section 2.2.
"Grant Date" shall have the meaning set forth in Section 2.1.
"IRR Vesting" shall have the meaning set forth in Section 2.3.
"MYVS" shall have the meaning set forth in Section 2.3.
"Options" shall have the meaning set forth in Section 2.1.
"Plan" shall have the meaning set forth in the recitals hereof.
In addition, certain other terms used herein have definitions
otherwise ascribed to them herein.
<PAGE> 2
2. Grant and Terms of Options.
2.1. Grant of Options. The Company hereby grants to the Executive as
of _________ (the "Grant Date") _______ Nonqualified Stock Options (the
"Options") each to purchase one share of Common Stock per Option on the terms
and conditions set forth below, and in reliance upon the representations and
covenants of the Executive set forth below. Unless sooner exercised or
forfeited as provided for in the Plan or this Agreement, the Options shall
expire on the tenth anniversary of the date of this Agreement.
2.2. Exercise Price. The exercise price of the Options is $26.00 per
share of Common Stock subject thereto (the "Exercise Price").
2.3. Exercisability. Subject to the Maximum Yearly Vesting Schedule
set forth in Schedule I attached hereto (the "MYVS"), the Options shall vest
and become exercisable in specified increments as of the end of each fiscal
year of the Company commencing with fiscal year 1999 and continuing through and
including fiscal year 2003, and shall vest only if and to the extent the
Company attains certain operating performance objectives, all in accordance
with the provisions set forth in the MYVS. The MYVS shall be interpreted as
setting forth the maximum amount of Options that may vest as of the end of each
fiscal year of the Company commencing with fiscal year 1999 and continuing
through and including fiscal year 2003. Notwithstanding anything to the
contrary contained herein or in the MYVS, any Options that have not previously
vested or been terminated shall become vested on the earlier of (a) the ninth
anniversary of the date hereof and (b) FPC (as defined in the Stockholders'
Agreement) having received cash proceeds from the sale or other disposition of
its common equity in the Company (which cash proceeds shall be deemed to
include the fair market value of freely tradeable marketable securities to the
extent the FPC entities actually distribute such freely tradeable marketable
securities to their equity holders as a distribution of capital, such fair
market value to be determined as of the date of such distribution),as well as
cash dividends, cash returns on capital or other cash distributions as a
stockholder such that it has received a return of the full amount of its
investment in the common equity of the Company, plus a 30% annualized internal
rate of return on its aggregate investment in the common equity of the Company
calculated from the date each such investment was made through the date of each
such sale, disposition or distribution (the "IRR Vesting"). Options that have
become exercisable shall remain exercisable until they terminate as set forth
in this Agreement or the Plan.
3. Plan Shares. The Executive shall not be permitted to sell,
assign, transfer, pledge or otherwise encumber any Plan Shares or Options,
except as provided in the Plan or, in the case of Plan Shares, as provided in
Sections 2.3, 2.4 and 2.5 of the Stockholders' Agreement. Any transfer of Plan
Shares otherwise permitted pursuant to this Agreement shall remain subject to
the terms of the Stockholders' Agreement, and shall not be permitted other than
in accordance with the terms thereof, notwithstanding any provision of this
Agreement that would otherwise permit such transfer.
4. Executive's Representations, Warranties and Agreements. In
connection with the exercise of any Options, the Executive shall make to the
Company (i) representations, warranties and agreements in writing that such
Executive is acquiring the shares of Common
-2-
<PAGE> 3
Stock without a view to the distribution thereof and (ii) any other
representations that the Committee may reasonably deem appropriate.
5. Successors.
5.1. This Agreement is personal to the Executive, and, without the
prior written consent of the Company, shall not be assignable by the Executive
otherwise than (a) by will or the laws of descent and distribution, or (b)
pursuant to a gift to the Executive's spouse, children, grandchildren or other
living descendants, whether directly or indirectly or by means of a trust,
partnership, limited liability company or otherwise, in each case, subject to
the restrictions of the Stockholders' Agreement. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
5.2. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
5.3. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise (an "Acquisition"))
to all or substantially all of the business and/or assets of the Company
expressly to assume and to agree to perform this Agreement in the same manner
and to the same extent that the Company would have been required to perform
this Agreement if no such succession had taken place (or by substituting for
such Options new options, based upon the stock of such successor, having an
aggregate spread between the Fair Market Value of the underlying stock and the
Exercise Price thereof, and the same term, immediately after such substitution,
equal to the spread on, the term of, and such other terms equivalent to such
Options immediately before such substitution); provided, however, that the
Company or such successor may, at its option, at the time of or promptly after
such Acquisition, terminate all of its obligations hereunder with respect to
the Options by paying to the Executive or the Executive's successors or assigns
an amount equal to the product of (a) the number of Options and (b) the Fair
Market Value per share of the shares underlying such Options at the time of
such Acquisition less the amount of such Options' Exercise Price (but not in
excess of such Fair Market Value per share), in either case, in exchange for
the Executive's Options. As used in this Agreement, the "Company" shall mean
both the Company as defined above and any such successor that assumes and
agrees to perform this Agreement, by operation of law or otherwise.
6. Miscellaneous.
6.1. This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York, without regard to the
principles of conflicts of law thereof. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. Except as
otherwise provided in the Plan, this Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
6.2. All notices and other communications under this Agreement shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed if to the Executive, at the address set forth
-3-
<PAGE> 4
on the signature page hereto, and if to the Company: 10300 49th Street North,
Clearwater, Florida 33762, Attn: Corporate Secretary, or at such other
addresses as either party furnishes to the other in writing in accordance with
this Section 6.2. Notices and communications shall be effective when actually
received by the addressee.
6.3. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
6.4. No later than the date as of which an amount first becomes
includible in the gross income of the Executive for federal income tax purposes
with respect to any Options, the Executive shall pay to the Company, or if
appropriate, any of its Affiliates, or make arrangements satisfactory to the
Committee regarding the payment of, any United States federal, state or local
or foreign taxes of any kind required by law to be withheld with respect to
such amount. If approved by the Committee, withholding obligations may be
settled with Common Stock, including Common Stock that is part of the Award
that gives rise to the withholding requirement. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements, and the
Company and its Affiliates shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to the Executive.
The Committee may establish such procedures as it deems appropriate, including
making irrevocable elections, for the settlement of withholding obligations
with Common Stock.
6.5. The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
6.6. The Options are granted pursuant to the Plan, which is
incorporated herein by reference, and the Options shall, except as otherwise
expressly provided herein, be governed by the terms thereof. The Executive
hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all
the terms and provisions thereof. The Executive and the Company each
acknowledges that this Agreement (together with the Stockholders' Agreement,
the Plan and the other agreements referred to herein and therein) constitutes
the entire agreement and supersedes all other agreements and understandings,
both written and oral, among the parties or either of them, with respect to the
subject matter hereof, including the Investor Participation Agreement, by and
among Fox Paine Medic Acquisition Corporation, a Texas corporation ("Fox Paine
Medic"), the Executive and certain other Stockholders of the Company, dated as
of June 13, 1999, as amended.
6.7. In connection with (a) the cash out of a Stock Option pursuant
to Section 5(g) of the Plan, or (b) the payment of the Exercise Price of a
Stock Option with fully vested Common Stock pursuant to Section 5(d) of the
Plan at any time following the date on which the Participant first becomes
entitled to exercise such Participant's Put Right (as defined in the
Stockholders' Agreement), but provided that the Participant does not actually
exercise the Put Right, the procedural protection with respect to the
determination of Fair Market Value that is set forth in the definition of "Fair
Market Value" in the Stockholders' Agreement shall be deemed to apply to the
definition of "Fair Market Value" as set forth in the Plan. If the Executive
exercises his or her right to pay the Exercise Price in full or in part in the
form of fully vested Common Stock pursuant to Section 5(d) of the Plan in
connection with an exercise of
-4-
<PAGE> 5
such Executive's Put Right, Fair Market Value for purposes of this Agreement
shall be equal to the Fair Market Value as determined under the Stockholders'
Agreement in connection with such Put Right.1
6.8. The Company and the Participant shall from time to time execute
and deliver all such further documents and do all such acts and things as may
be reasonably required to carry out effectively or better evidence or perfect
the full intent and meaning of this Agreement, including without limitation
obtaining the ratification and approval of the Committee of this Award.
- --------
1 Only in initial grants.
-5-
<PAGE> 6
SCHEDULE I TO TIME ACCELERATED VESTING OPTION AGREEMENT
MAXIMUM YEARLY VESTING SCHEDULE
Vesting Schedule: Options shall vest according to the Company's
financial performance for each of the five fiscal
years from and including 1999 through 2003 pursuant
to the Time Accelerated Stock Option Agreement to
which this Schedule is attached (the "Option
Agreement"). At the end of each of such five full
fiscal years, 20% of the Options originally granted
to the Executive pursuant to the Option Agreement
shall be eligible for vesting, based upon the
achievement of the Target EBITDA Level (as set forth
on the chart below) for vesting in any such
then-current year in which they are eligible for
vesting. Options that do not so vest in any year due
to a failure to achieve the Target EBITDA Level in
any fiscal year shall again be eligible for vesting
at the end of any subsequent fiscal year for which
the Target EBITDA Level for such subsequent year (as
set forth on the chart below) is achieved. No Options
shall vest unless the participant is employed by, a
director of or a consultant (provided that expiration
of a consulting arrangement without the prior
termination thereof shall not be deemed a termination
of such arrangement (or cessation of being a
consultant) for purposes of the Plan unless the
consulting arrangement or the Time Accelerated Stock
Option Agreement expressly contemplates otherwise) to
the Company or one of its subsidiaries on the date
such Option would vest.
Options shall vest for each year as follows:
(i) If the calculated EBITDA (as defined below) for
any year meets or exceeds the Target EBITDA Level
(as set forth on the chart below) for such year,
100% of the Options that are eligible for vesting
in that year set forth in the chart below will be
vested.
(ii) If the calculated EBITDA for any year is less
than the Target EBITDA Level (as set forth on the
chart below) for such year, the Options eligible
for vesting in such year shall not vest in such
year but will be eligible to vest in any
subsequent year for which the Target EBITDA Level
for such subsequent year is achieved.
I-1
<PAGE> 7
"EBITDA" shall have the meaning set forth for
"Consolidated EBITDA" in the Credit Agreement, dated
as of the closing date of the merger by and between
the Company and Fox Paine Medic, as in effect on such
date, plus any fees or expenses paid or reimbursed to
Fox Paine & Company LLC ("FPC"), or its affiliates,
whether pursuant to the Management Agreement to and
among the Company, Maxxim Medical Group and FPC,
dated as of November 12, 1999, or otherwise to the
extent such fees reduced Consolidated EBITDA. EBITDA
shall be adjusted equitably by the Committee to
reflect any acquisitions or dispositions by the
Company and its subsidiaries or other events
described in Section 5.3 hereof.
The extent of vesting for any fiscal year shall be
determined based upon the audited financial
statements of the Company and its subsidiaries (on a
consolidated basis), and, once determined, shall be
deemed effective as of the last day of each such
fiscal year. The calculation of EBITDA for any year
and the determination of applicable vesting levels
shall be made by the Committee acting in good faith
and any such calculation or determination shall be
binding and conclusive. The Target EBITDA Levels for
each year are as follows:
<TABLE>
<CAPTION>
% OF OPTION POOL
VESTING
"TARGET EBITDA THROUGH
FISCAL LEVEL" ACHIEVEMENT OF
YEAR (IN MILLIONS) EBITDA TARGET
------ -------------- ----------------
<S> <C> <C>
1999 $ 80.9 20%
2000 84.3 20%
2001 88.5 20%
2002 92.9 20%
2003 97.6 20%
</TABLE>
I-2
<PAGE> 1
Exhibit 10.10
TIME VESTING STOCK OPTION AGREEMENT
TIME VESTING STOCK OPTION AGREEMENT (this "Agreement"), dated as of
___________ by and between Maxxim Medical, Inc., a Texas corporation (the
"Company"), and _________________ (the "Executive"), who is presently a
________________ of the Company.
WHEREAS, pursuant to the Maxxim Medical, Inc. 1999 Stock Incentive
Plan (the "Plan"), the Committee (as defined in the Plan) has decided to award
Options (as defined below) on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the meanings ascribed to them below. Any capitalized term used in this
Agreement and not defined herein shall have the meaning ascribed to it in the
Plan.
"Acquisition" shall have the meaning set forth in Section 5.3.
"Agreement" shall have the meaning set forth in the preamble hereto.
"Common Stock" shall mean the Common Stock, par value $0.001 per
share, of the Company, subject to adjustment pursuant to the third paragraph of
Section 3 of the Plan, under certain circumstances.
"Company" shall have the meaning set forth in the preamble hereto.
"Executive" shall have the meaning set forth in the preamble hereto.
"Exercise Price" shall have the meaning set forth in Section 2.2.
"Grant Date" shall have the meaning set forth in Section 2.1.
"IRR Vesting" shall have the meaning set forth in Section 2.3.
"Options" shall have the meaning set forth in Section 2.1.
"Plan" shall have the meaning set forth in the recitals hereof.
In addition, certain other terms used herein have definitions
otherwise ascribed to them herein.
<PAGE> 2
2. Grant and Terms of Options.
2.1. Grant of Options. The Company hereby grants to the Executive as
of ____________ (the "Grant Date") ______ Nonqualified Stock Options (the
"Options") each to purchase one share of Common Stock per Option on the terms
and conditions set forth below, and in reliance upon the representations and
covenants of the Executive set forth below. Unless sooner exercised or
forfeited as provided for in the Plan or this Agreement, the Options shall
expire on the tenth anniversary of the date of this Agreement.
2.2. Exercise Price. The exercise price of the Options is $26.00 per
share of Common Stock subject thereto (the "Exercise Price").
2.3. Exercisability. The Options shall vest and become exercisable
according to the following schedule:
<TABLE>
<CAPTION>
Years of Employment
Since the Grant Date Vested Percentage
-------------------- -----------------
<S> <C>
Less than 1 year 0%
At least 1 year, but less than 2 years 20%
At least 2 years, but less than 3 years 40%
At least 3 years, but less than 4 years 60%
At least 4 years, but less than 5 years 80%
5 years or more 100%
</TABLE>
; provided, however, that the Options shall vest and become exercisable prior
thereto upon FPC (as defined in the Stockholders' Agreement) having received
cash proceeds from the sale or other disposition of its common equity in the
Company (which cash proceeds shall be deemed to include the fair market value
of freely tradeable marketable securities to the extent the FPC entities
actually distribute such freely tradeable marketable securities to their equity
holders as a distribution of capital, such fair market value to be determined
as of the date of such distribution), as well as cash dividends, cash returns
on capital or other cash distributions as a stockholder such that it has
received a return of the full amount of its aggregate investment in the common
equity of the Company, plus a 30% annualized internal rate of return on its
aggregate investment in the common equity of the Company (calculated in the
good faith judgment of the Committee) calculated from the date each such
investment was made through the date of each such sale, disposition or
distribution (the "IRR Vesting").
Options that have become exercisable shall remain exercisable until
they terminate as set forth in this Agreement or the Plan.
-2-
<PAGE> 3
3. Plan Shares. The Executive shall not be permitted to sell,
assign, transfer, pledge or otherwise encumber any Plan Shares or Options,
except as provided in the Plan or, in the case of Plan Shares, as provided in
Sections 2.3, 2.4 and 2.5 of the Stockholders' Agreement. Any transfer of Plan
Shares otherwise permitted pursuant to this Agreement shall remain subject to
the terms of the Stockholders' Agreement, and shall not be permitted other than
in accordance with the terms thereof, notwithstanding any provision of this
Agreement that would otherwise permit such transfer.
4. Executive's Representations, Warranties and Agreements. In
connection with the exercise of any Options, the Executive shall make to the
Company (i) representations, warranties and agreements in writing that such
Executive is acquiring the shares of Common Stock without a view to the
distribution thereof and (ii) any other representations that the Committee may
reasonably deem appropriate.
5. Successors.
5.1. This Agreement is personal to the Executive and, without the
prior written consent of the Company, shall not be assignable by the Executive
otherwise than (a) by will or the laws of descent and distribution, or (b)
pursuant to a gift to the Executive's spouse, children, grandchildren or other
living descendants, whether directly or indirectly or by means of a trust,
partnership, limited liability company or otherwise, in each case, subject to
the restrictions of the Stockholders' Agreement. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
5.2. This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
5.3. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise (an "Acquisition"))
to all or substantially all of the business and/or assets of the Company
expressly to assume and to agree to perform this Agreement in the same manner
and to the same extent that the Company would have been required to perform
this Agreement if no such succession had taken place (or by substituting for
such Options new options, based upon the stock of such successor, having an
aggregate spread between the Fair Market Value of the underlying stock and the
Exercise Price thereof, and the same term, immediately after such substitution,
equal to the spread on, the term of, and such other terms equivalent to such
Options immediately before such substitution); provided, however, that the
Company or such successor may, at its option, at the time of or promptly after
such Acquisition, terminate all of its obligations hereunder with respect to
the Options by paying to the Executive or the Executive's successors or assigns
an amount equal to the product of (i) the number of Options and (ii) the Fair
Market Value per share of the shares underlying such Options at the time of
such Acquisition less the amount of such Options' Exercise Price (but not in
excess of such Fair Market Value per share), in either case, in exchange for
the Executive's Options. As used in this Agreement, the "Company" shall mean
both the Company as defined above and any such successor that assumes and
agrees to perform this Agreement, by operation of law or otherwise.
-3-
<PAGE> 4
6. Miscellaneous.
6.1. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without regard to the
principles of conflicts of law thereof. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. Except as
otherwise provided in the Plan, this Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
6.2. All notices and other communications under this Agreement shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed if to the Executive, at the address set forth on the signature page
hereto, and if to the Company: 10300 49th Street North, Clearwater, Florida
33762, Attn: Corporate Secretary, or to such other addresses as either party
furnishes to the other in writing in accordance with this Section 6.2. Notices
and communications shall be effective when actually received by the addressee.
6.3. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
6.4. No later than the date as of which an amount first becomes
includible in the gross income of the Executive for federal income tax purposes
with respect to any Options, the Executive shall pay to the Company, or if
appropriate, any of its Affiliates, or make arrangements satisfactory to the
Committee regarding the payment of, any United States federal, state or local
or foreign taxes of any kind required by law to be withheld with respect to
such amount. If approved by the Committee, withholding obligations may be
settled with Common Stock, including Common Stock that is part of the Award
that gives rise to the withholding requirement. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements, and the
Company and its Affiliates shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to the Executive.
The Committee may establish such procedures as it deems appropriate, including
making irrevocable elections, for the settlement of withholding obligations
with Common Stock.
6.5. The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
6.6. The Options are granted pursuant to the Plan, which is
incorporated herein by reference, and the Options shall, except as otherwise
expressly provided herein, be governed by the terms thereof. The Executive
hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all
the terms and provisions thereof. The Executive and the Company each
acknowledges that this Agreement (together with the Stockholders' Agreement,
the Plan and the other agreements referred to herein and therein) constitutes
the entire agreement and supersedes all other agreements and understandings,
both written and oral, among the parties or either of them, with respect to the
subject matter hereof, including the Investor Participation Agreement, by and
among Fox Paine Medic Acquisition Corporation, a Texas corporation, the
Executive and certain other Stockholders of the Company, dated June 13, 1999,
as amended.
-4-
<PAGE> 5
6.7. In connection with (a) the cash out of a Stock Option pursuant to
Section 5(g) of the Plan, or (b) the payment of the Exercise Price of a Stock
Option with fully vested Common Stock pursuant to Section 5(d) of the Plan at
any time following the date on which the Participant first becomes entitled to
exercise such Participant's Put Right (as defined in the Stockholders'
Agreement), but provided that the Participant does not actually exercise the
Put Right, the procedural protection with respect to the determination of Fair
Market Value that is set forth in the definition of "Fair Market Value" in the
Stockholders' Agreement shall be deemed to apply to the definition of "Fair
Market Value" as set forth in the Plan. If the Executive exercises his or her
right to pay the Exercise Price in full or in part in the form of fully vested
Common Stock pursuant to Section 5(d) of the Plan in connection with an
exercise of such Executive's Put Right, Fair Market Value for purposes of this
Agreement shall be equal to the Fair Market Value as determined under the
Stockholders' Agreement in connection with such Put Right.1
6.8. The Company and the Participant shall from time to time execute
and deliver all such further documents and do all such acts and things as may
be reasonably required to carry out effectively or better evidence or perfect
the full intent and meaning of this Agreement, including without limitation
obtaining the ratification and approval of the Committee of this Award.
- ---------------
1 Only in initial grants.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MAXXIM MEDICAL, INC.
By:
-------------------------------
Name:
Title:
-------------------------------
Executive:
Address:
-6-
<PAGE> 1
Exhibit 12
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------- Nine months ended
----------------------
November November November 3, November 2, November 1, August 2, August 1,
__, 1994 __, 1995 1996 1997 1998 1998 1999
-------- -------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Earning Before Tax 12,203 4,983 15,132 22,366 34,090 24,134 28,081
Fixed Charges 2,358 4,437 14,469 23,417 14,679 11,338 20,937
Capitalized Interest -- -- -- -- -- -- --
------- ------ ------ ------ ------ ------ ------
Earnings Available for fixed Charges 14,581 9,420 29,601 45,783 48,769 35,472 49,018
Fixed Charges 2,358 4,437 14,469 23,417 14,679 11,338 20,937
Ratio of Earnings to Fixed Charges 6.2 2.2 2.1 2.0 3.3 3.2 2.3
Fixed Charge Calculation
Rents 4,420 4,240 3,890 2,881 3,322
Pro Forma Winfield Rent 998 1,164 306 306
------- ------ ------ ------ ------ ------ ------
Total Rents 998 1,164 4,420 4,240 4,196 3,187 3,322
Interest Portion of Rents (30%) 299 349 1,326 1,272 1,259 956 997
Interest Expense 2,059 4,088 13,143 22,145 13,420 10,382 19,940
------- ------ ------ ------ ------ ------ ------
Fixed Charges 2,358 4,437 14,469 23,417 14,679 11,338 20,937
======= ====== ====== ====== ====== ====== ======
</TABLE>
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF MAXXIM MEDICAL GROUP, INC.
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
- ---- ----------------------
<S> <C>
Maxxim Medical, Inc. Delaware
Maxxim Medical Holdings Europe B.V. Netherlands
Maxxim Medical FSC, Inc. Barbados
Fabritek La Romana, Inc. Mississippi
Maxxim Investment Management, Inc. Nevada
Maxxim Medical Europe B.V. Netherlands
Maxxim Medical Belgium, N.V. Belgium
Maxxim Medical Canada Limited Canada
</TABLE>
<PAGE> 1
Exhibit 23
The Board of Directors
Maxxim Medical, Inc. and Subsidiaries:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG LLP
Houston, Texas
December 15, 1999
<PAGE> 1
Exhibit 25
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
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) [ ]
----------------------
THE BANK OF NEW YORK
---------------------------------------------------
(Exact name of trustee as specified in its charter)
New York 13-5160382
------------------------------ -------------------
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, New York 10286
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
MAXXIM MEDICAL GROUP, INC.
---------------------------------------------------
(Exact name of obligor as specified in its charter)
Delaware 59-3597135
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
10300 49th St. North
Clearwater, Florida 33762
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
-------------------------
Senior Subordinated Discount Notes Due 2009
-------------------------------------------
(Title of the indenture securities)
<PAGE> 2
GENERAL
ITEM 1. General Information.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
<TABLE>
<CAPTION>
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York, N.Y. 10006,
New York and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20549
New York Clearing House Association New York, N.Y.
</TABLE>
(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.
-----------------------------
ITEM 16. List of Exhibits:
Exhibits identified in parentheses below, on file with the
Commission, are incorporated herein by reference as an exhibit hereto, pursuant
to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. - A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (See Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. - A copy of the existing By-laws of the Trustee. (See Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. - The consent of the Trustee required by Section 321(b) of the Act.
(See Exhibit 6 to Form T-1, Registration Statement No. 33-44051.)
7. - A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
2
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a
corporation organized and existing 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 13th day of December, 1999.
The Bank of New York
By: /s/ Annette Kos
------------------------
Annette Kos
Assistant Vice President
3
<PAGE> 4
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
1999, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
In Thousands
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ........... $ 6,394,412
Interest-bearing balances .................................... 3,966,749
Securities:
Held-to-maturity securities .................................. 805,227
Available-for-sale securities ................................ 4,152,260
Federal funds sold and Securities purchased under
agreements to resell ......................................... 1,449,439
Loans and lease financing receivables:
Loans and leases, net of unearned
income ..................................................... 37,900,739
LESS: Allowance for loan and
lease losses ............................................... 572,761
LESS: Allocated transfer risk
reserve .................................................... 11,754
Loans and leases, net of unearned income,
allowance, and reserve ..................................... 37,316,224
Trading Assets .................................................. 1,646,634
Premises and fixed
assets (including capitalized leases) ........................... 678,439
Other real estate owned ......................................... 11,571
Investments in unconsolidated subsidiaries and
associated companies ......................................... 183,038
Customers' liability to this bank on acceptances
outstanding .................................................. 349,282
Intangible assets ............................................... 790,558
Other assets .................................................... 2,498,658
-----------
Total assets .................................................... $60,242,491
===========
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
LIABILITIES
Deposits:
In domestic offices ...................................... $ 26,030,231
Noninterest-bearing ...................................... 11,348,986
Interest-bearing ......................................... 14,681,245
In foreign offices, Edge and Agreement
subsidiaries, and IBFs ................................. 18,530,950
Noninterest-bearing ...................................... 156,624
Interest-bearing ......................................... 18,374,326
Federal funds purchased and Securities sold under
agreements to repurchase ................................. 2,094,678
Demand notes issued to the U.S.Treasury ..................... 232,459
Trading liabilities ......................................... 2,081,462
Other borrowed money:
With remaining maturity of one year or less .............. 863,201
With remaining maturity of more than one year
through three years .................................... 449
With remaining maturity of more than three years ......... 31,080
Bank's liability on acceptances executed and
outstanding .............................................. 351,286
Subordinated notes and debentures ........................... 1,308,000
Other liabilities ........................................... 3,055,031
------------
Total liabilities ........................................... 54,578,827
============
EQUITY CAPITAL
Common stock ................................................ 1,135,284
Surplus ..................................................... 815,314
Undivided profits and capital reserves ...................... 3,759,164
Net unrealized holding gains (losses) on
available-for-sale securities ............................ (15,440)
Cumulative foreign currency translation adjustments ......... (30,658)
Total equity capital ........................................ 5,663,664
------------
Total liabilities and equity capital ........................ $ 60,242,491
============
</TABLE>
5
<PAGE> 6
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
/s/ Thomas J. Mastro
--------------------
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this
Report of Condition 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 Board of Governors of the Federal Reserve System and
is true and correct.
Thomas A. Reyni ]
Alan R. Griffith ] Directors
Gerald L. Hassell ]
- --------------------------------------------------------------------------------
6
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001100855
<NAME> Maxxim Medical Group, Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-02-1998
<PERIOD-END> AUG-01-1999
<CASH> 5,354
<SECURITIES> 0
<RECEIVABLES> 102,796
<ALLOWANCES> 1,608
<INVENTORY> 131,512
<CURRENT-ASSETS> 262,169
<PP&E> 237,493
<DEPRECIATION> 53,881
<TOTAL-ASSETS> 754,806
<CURRENT-LIABILITIES> 120,615
<BONDS> 100,000
0
0
<COMMON> 14
<OTHER-SE> 284,399
<TOTAL-LIABILITY-AND-EQUITY> 754,806
<SALES> 485,367
<TOTAL-REVENUES> 485,367
<CGS> 324,327
<TOTAL-COSTS> 437,645
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,940
<INCOME-PRETAX> 28,081
<INCOME-TAX> 12,228
<INCOME-CONTINUING> 15,853
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,853
<EPS-BASIC> 1.11
<EPS-DILUTED> 1.09
</TABLE>
