<PAGE>
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
(Mark One) Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-------------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 1-14142
Renal Treatment Centers, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-2518331
- --------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1180 W. Swedesford Road
Building 2, Suite 300
Berwyn, PA 19312
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 610-644-4796
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at August 1, 1996
----- -------------------------------------
Common Stock, Par Value $.01 24,218,767 shares
THE EXHIBIT INDEX IS LOCATED ON PAGE 13
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income--
Three and Six months ended June 30, 1996 and 1995............... 3
Consolidated Balance Sheets--
June 30, 1996 and December 31, 1995............................. 4
Consolidated Statements of Cash Flows--
Six months ended June 30, 1996 and 1995......................... 5
Notes to Consolidated Financial Statements...................... 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 7-10
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders............. 11
Item 6. Exhibits and Reports on Form 8-K................................ 11
SIGNATURES ................................................................ 12
EXHIBITS ............................................................... 14-15
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Renal Treatment Centers, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
1996 1995 1996 1995
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Net patient revenue $54,130,060 $38,698,124 $103,334,224 $75,012,464
Patient care costs 26,181,091 18,976,948 49,887,324 36,775,150
- --------------------------------------------------------------------------------
Operating profit 27,948,969 19,721,176 53,446,900 38,237,314
General and administrative
expense 13,259,805 9,874,701 26,163,088 19,915,645
Provision for doubtful
accounts 1,677,793 900,589 3,213,737 1,860,101
Depreciation and
amortization 4,035,477 2,873,849 7,571,865 5,573,202
Merger expenses - - 1,708,247 1,587,542
- --------------------------------------------------------------------------------
Income from operations 8,975,894 6,072,037 14,789,963 9,300,824
Interest expense, net 842,572 636,060 1,508,380 1,266,714
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Income before income taxes 8,133,322 5,435,977 13,281,583 8,034,110
Provision for income taxes 3,009,329 1,767,248 4,999,536 2,332,211
- --------------------------------------------------------------------------------
Net income $ 5,123,993 $ 3,668,729 $ 8,282,047 $ 5,701,899
- --------------------------------------------------------------------------------
Net income per common and
common stock equivalent $0.21 $0.17 $0.34 $0.26
===== ===== ===== =====
Weighted average number of
common and common stock
equivalents outstanding 25,346,357 21,622,682 24,801,972 21,575,276
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Renal Treatment Centers, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 81,124 $ 7,624,259
Investments 45,963,081 -
Accounts receivable, net of allowance for
doubtful accounts of $5,450,000 in 1996
and $3,200,000 in 1995 62,961,636 51,351,999
Inventories 3,673,966 2,683,234
Deferred taxes 1,412,519 819,835
Prepaid expenses and other current assets 1,215,549 1,391,775
- --------------------------------------------------------------------------------
Total current assets 115,307,875 63,871,102
- --------------------------------------------------------------------------------
Property and equipment (net of accumulated
depreciation of $15,812,617 in 1996
and $10,378,141 in 1995.) 30,386,994 20,087,284
Intangibles (net of accumulated amortization
of $26,925,574 in 1996 and $22,263,385 in 1995.) 121,718,883 86,341,433
Deferred taxes, non-current 1,749,754 1,749,754
- --------------------------------------------------------------------------------
Total assets $269,163,506 $172,049,573
================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 3,161,543 $ 4,539,635
Accounts payable 6,076,037 4,222,147
Accrued compensation 2,604,415 2,670,384
Accrued expenses 3,170,103 6,576,600
Accrued income taxes 320,024 2,218,692
Accrued interest 399,015 1,087,415
- --------------------------------------------------------------------------------
Total current liabilities 15,731,137 21,314,873
- --------------------------------------------------------------------------------
Long-term debt, net 130,729,923 41,654,966
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized: none issued
Common stock, $.01 par value, 45,000,000
shares authorized: issued and
outstanding 23,773,592 and 21,727,312
shares in 1996 and 1995, respectively. 237,736 217,273
Additional paid-in capital 85,230,723 83,006,891
Retained earnings 37,628,063 26,249,646
- --------------------------------------------------------------------------------
123,096,522 109,473,810
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Less treasury stock, 37,202 shares in
1996 and 1995, at cost (394,076) (394,076)
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122,702,446 109,079,734
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $269,163,506 $172,049,573
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Renal Treatment Centers, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months ended
June 30,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,282,047 $ 5,701,899
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 7,592,831 5,599,687
Provision for doubtful accounts 3,213,737 1,860,101
Changes in operating assets and
liabilities, net of effects of
companies acquired:
Accounts receivable (11,480,413) (8,317,266)
Inventories (694,687) 475,615
Prepaid expenses and other current assets 238,597 175,595
Accounts payable and accrued expenses (5,649,012) (350,580)
Accrued income taxes (1,898,668) (298,908)
- --------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (395,568) 4,846,143
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (6,128,693) (3,496,979)
Purchase of businesses, net of cash acquired (37,030,623) (5,144,291)
Sale of investments 9,347,962 2,661,944
Purchase of investments (55,311,043) -
Other (979,804) (1,356,734)
- --------------------------------------------------------------------------------
Net cash used in investing activities (90,102,201) (7,336,060)
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Issuance of 5 5/8% convertible subordinated notes $125,000,000 -
Proceeds from long-term debt borrowings 30,500,000 9,000,000
Repayments of debt (70,360,293) (6,305,811)
Proceeds from issuance of common stock 2,137,012 623,329
Payment of dividends - (222,331)
Debt issuance costs (3,750,000) -
Payments on capital lease obligations (1,535,784) (313,312)
Cash portion of consideration received for
common stock 963,699 -
- --------------------------------------------------------------------------------
Net cash provided by financing activities 82,954,634 2,781,875
- --------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (7,543,135) 291,958
Cash and cash equivalents at beginning of period 7,624,259 2,152,322
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 81,124 $ 2,444,280
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Supplemental disclosures of cash flow
information:
Noncash financing activities:
Reduction of note issued in connection with
purchase of business - $ 135,900
Acquisition of treasury stock in connection
with payroll taxes resulting from exercise
of stock options - $ 346,857
Capital lease obligations entered into $ 2,370,838 $ 388,200
Issuance of common stock in connection with
purchase of business $ 89,137 -
Noncash investing activities:
Net assets relating to pooling transaction $ 3,096,370 -
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Renal Treatment Centers, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been prepared
by the Company in accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended June
30, 1996 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996. The interim consolidated financial statements
should be read in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's Form 10-K filed with the Securities
and Exchange Commission on April 1, 1996.
2. COMMITMENTS AND CONTINGENCIES:
The Company is a party to certain legal actions arising in the ordinary course
of business. The Company believes it has adequate legal defenses and/or
insurance coverage for these actions and that the ultimate outcome of these
actions will not have a material adverse impact on the Company's results of
operations, financial condition or liquidity.
3. SIGNIFICANT EVENTS:
On February 20, 1996, the Company acquired Intercontinental Medical Services,
Inc. ("IMS"), which operated four dialysis facilities in Hawaii. The
transaction was accounted for as a pooling of interests. Accordingly, the
Company's financial statements include the results of IMS as of January 1, 1996.
In total, 1,047,464 shares of the Company's common stock were exchanged for all
outstanding shares of IMS.
On February 29, 1996, the Company acquired Midwest Dialysis Units and its
affiliates (collectively "MDU"), which operated 11 dialysis facilities in
Oklahoma. The transaction was accounted for as a pooling of interests.
Accordingly, the Company's financial statements include the results of MDU as of
January 1, 1996. In total 767,168 shares of the Company's common stock were
exchanged for all outstanding shares of MDU.
Prior year financial statements have not been restated to reflect these
transactions because the impact on the Company's financial statements of such
transactions is not material.
On May 29, 1996, with an effective date of May 31, 1996, the Company acquired
substantially all of the assets of Kidney Center of Delaware County, Ltd.
("KCDC") and Kidney Center of Chester County, Ltd. ("KCCC"). These two
outpatient dialysis centers, located in the Philadelphia, Pennsylvania area,
provide care to approximately 400 patients and perform acute treatments at nine
area hospitals.
On June 5, 1996 the Company amended its Credit Agreement with a consortium of
banks to increase the amount available under the line of credit from $68,125,000
to $100,000,000 and to make certain other changes to the terms of the Credit
Agreement, including amendments to certain covenants, the amortization schedule,
the interest rates and the events of default.
On June 12, 1996 the Company issued $125,000,000 of 5 5/8% Convertible
Subordinated Notes due 2006. The Company is using the proceeds of the offering
for the repayment of indebtedness, acquisitions, development of additional
dialysis centers, capital expenditures and general corporate purposes.
<PAGE>
Item 2. Renal Treatment Centers, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Overview
Renal Treatment Centers, Inc. (the "Company") provides dialysis treatments and
ancillary services to patients suffering from chronic kidney failure, primarily
in its freestanding outpatient dialysis treatment centers or in the patient's
home. The Company also provides acute inpatient dialysis services to hospitals.
As of August 1, 1996, the Company operated 102 outpatient dialysis centers in 21
states, the District of Columbia and the Republic of Argentina and provided
dialysis services for approximately 7,000 patients. In addition, the Company
provided inpatient dialysis services at 79 hospitals.
Results of Operations
The following table sets forth, for the periods indicated, selected financial
information expressed as a percentage of net patient revenue and the period-to-
period percentage changes in such information.
<TABLE>
<CAPTION>
Percentage of Percentage of
Net Patient Revenue Net Patient Revenue
Three Months Ended Period-to-Period Six Months Ended Period-to-Period
June 30, Percentage Change June 30, Percentage Change
- ---------------------------------------------------------------------------------------------------------------------
1996 1995 1996 vs. 1995 1996 1995 1996 vs. 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net patient revenue 100.0% 100.0% 39.9% 100.0% 100.0% 37.8%
Patient care costs 48.4% 49.0% 38.0% 48.3% 49.0% 35.7%
General and administrative
expense 24.5% 25.5% 34.3% 25.3% 26.5% 31.4%
Provision for doubtful accounts 3.1% 2.3% 86.3% 3.1% 2.5% 72.8%
Depreciation and amortization expense 7.5% 7.4% 40.4% 7.3% 7.4% 35.9%
Merger expenses ---- ---- ---- 1.7% 2.1% 7.6%
Income from operations 16.6% 15.7% 47.8% 14.3% 12.4% 59.0%
Interest expense, net 1.6% 1.6% 32.5% 1.5% 1.7% 19.1%
Provision for income taxes 5.6% 4.6% 70.3% 4.8% 3.1% 114.4%
Net income 9.5% 9.5% 39.7% 8.0% 7.6% 45.3%
</TABLE>
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Net Patient Revenue. Net patient revenue for the six months ended June 30, 1996
was $103,334,224 as compared to $75,012,464 for the same period in 1995,
representing an increase of 37.8%. Of this increase, $4,363,505 was
attributable to the revenue generated from the operations of nine centers and
certain acute care agreements acquired in four separate purchase transactions
from March through December 1995, and $14,175,080 was attributable to the
acquisition of various facilities and the development of new dialysis centers
("de novo" developments) during the first six months of 1996. Of the $9,783,175
remaining, $5,475,121 was attributable to an increase in same-center treatments
and $4,308,054 was attributable to an increase in the average same-center
revenue per treatment, which, in turn, was due to an increase in the
administration of EPO and an improvement in the Company's payor mix.
Patient Care Costs. Patient care costs increased 35.7% to $49,887,324 for the
six months ended June 30, 1996 from $36,775,150 for the same period in 1995.
The increase was principally the result of acquisitions that occurred subsequent
to the second quarter of 1995. However, as a percentage of net patient revenue,
patient care costs decreased to 48.3% for the six months ended June 30, 1996
from 49.0% for the same period in 1995. This percentage decrease was primarily
related to the increase in net revenue per treatment. The increase in net
revenue per treatment was offset in part by the additional costs related to the
increased administration of EPO.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
General and Administrative Expense. General and administrative expense
increased $6,247,443, or 31.4%, to $26,163,088 for the six months ended June 30,
1996, as compared to $19,915,645 for the six months ended June 30, 1995. This
increase was primarily the result of additional facility operating costs as well
as additional corporate and facility personnel required to support the centers
acquired and opened during 1995 and 1996. As a percentage of net patient
revenue, these expenses were approximately 25.3% for the six months ended June
30, 1996, as compared to 26.5% for the six months ended June 30, 1995. The
decrease as a percentage of net patient revenue was attributable to the
Company's ability to maintain certain support costs, while increasing net
revenues through acquisitions, internal growth and de novo developments.
Provision for doubtful accounts. Provision for doubtful accounts increased
$1,353,636, or 72.8%, to $3,213,737 for the six months ended June 30, 1996, as
compared to $1,860,101 for the six months ended June 30, 1995. This increase
was principally a result of the additional net patient revenue generated from
acquisitions that occurred subsequent to the second quarter of 1995. As a
percentage of net patient revenue, the provision for doubtful accounts was 3.1%
for the six months ended June 30, 1996 as compared to 2.5% for the same period
in 1995.
Depreciation and Amortization Expense. Depreciation and amortization expense
increased $1,998,663, or 35.9%, for the six months ended June 30, 1996, when
compared to the six months ended June 30, 1995. The increase was due to the
acquisition and start-up of various facilities since July 1995. As a percentage
of net patient revenue, depreciation and amortization expense was 7.3% for the
six months ended June 30, 1996, as compared to 7.4% for the six months ended
June 30, 1995.
Merger Expenses. Merger expenses increased to $1,708,247 for the six months
ended June 30, 1996 from $1,587,542 for the same period in 1995. For the six
months ended June 30, 1995, the merger expenses represent expenses incurred in
connection with the mergers with (i) Healthcare Corporation and its affiliates
and (ii) Wichita Dialysis Center, P.A., Southeast Kansas Dialysis Center, P.A.,
Garden City Dialysis, P.A., and Wichita Dialysis Center, East, P.A.,
(collectively "the Wichita Companies") which were completed on March 6, 1995 and
August 1, 1995, respectively, and were accounted for under the pooling-of-
interests method of accounting. For the six months ended June 30, 1996, merger
expenses were incurred as a result of the mergers between the Company and IMS in
a pooling-of-interests transaction that was completed on February 20, 1996, and
between the Company and MDU that was completed on February 29, 1996. Merger
expenses include fees for the investment banker, attorneys, accountants and
various other expenses incurred as a result of combining the companies.
Income from Operations. Income from operations increased to $14,789,963 for the
six months ended June 30, 1996 from $9,300,824 for the same period in 1995.
This increase was due to the increase in net revenues from acquired businesses
and same-center growth, which was greater than the increases in patient care
costs, general and administrative expense and depreciation and amortization
expense related to such acquired businesses.
Interest Expense, net. Interest expense (net) was $1,508,380 for the six months
ended June 30, 1996 as compared to interest expense (net) of $1,266,714 for the
same period in 1995. The increase in interest expense (net) was attributable to
the additional borrowings for the funding of acquisitions that were completed in
1995 and 1996 that remained outstanding through June 12, 1996, as well as the
additional interest expense (net) incurred as a result of the issuance of
$125,000,000 principal amount of 5 5/8% in Convertible Subordinated Notes due
2006 ("the Notes") by the Company on June 12, 1996.
Provision for Income Taxes. Provision for income taxes increased to $4,999,536
from $2,332,211 for the six months ended June 30, 1996 and 1995, respectively.
For the six months ended June 30, 1996, the Company's effective tax rate was
37.6%, compared to an effective tax rate of 29.0% during the same period in
1995. The increase in the effective tax rate was primarily attributable to the
one-time tax benefit of $325,000 recorded in the first quarter of 1995 as a
result of the merger with Healthcare Corporation and its affiliates. In
addition, the Company incurred a one-time tax charge of $85,350 related to the
merger with MDU recorded in the first quarter of 1996.
Net Income. Net income increased to $8,282,047 for the six months ended June
30, 1996 from $5,701,899 for the same period in 1995. The increase was due to
each of the items discussed above.
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Net Patient Revenue. Net patient revenue for the three months ended June 30,
1996 was $54,130,060 as compared to $38,698,124 for the same period in 1995,
representing an increase of 39.9%. Of this increase, $1,917,560 was
attributable to the revenue generated from the operations of four centers and
certain acute care agreements acquired in three separate purchase transactions
from July through December 1995, and $8,031,423 was attributable to the
acquisition of various facilities and de novo developments during the first six
months of 1996. Of the $5,482,953 remaining, $2,705,004 was attributable to an
increase in same-center treatments and
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
$2,777,949 was attributable to an increase in the average same-center revenue
per treatment, which, in turn, was due to an increase in the administration of
EPO and an improvement in the Company's payor mix.
Patient Care Costs. Patient care costs increased 38.0% to $26,181,091 for the
three months ended June 30, 1996 from $18,976,948 for the same period in 1995.
The increase was principally the result of acquisitions that occurred subsequent
to the second quarter of 1995. However, as a percentage of net patient revenue,
patient care costs decreased to 48.4% for the three months ended June 30, 1996
from 49.0% for the same period in 1995. This decrease was primarily related to
the increase in net revenue per treatment. The increase in net revenue per
treatment was offset in part by the additional costs related to the increased
administration of EPO.
General and Administrative Expense. General and administrative expense increased
$3,385,104, or 34.3%, to $13,259,805 for the three months ended June 30, 1996,
as compared to $9,874,701 for the three months ended June 30, 1995. This
increase was primarily the result of additional facility operating costs as well
as additional corporate and facility personnel required to support the centers
acquired and opened during 1995 and 1996. As a percentage of net patient
revenue, these expenses were approximately 24.5% for the three months ended June
30, 1996, as compared to 25.5% for the three months ended June 30, 1995. The
decrease as a percentage of net patient revenue was attributable to the
Company's ability to maintain certain support costs, while increasing net
revenues through acquisitions, internal growth and de novo developments.
Provision for doubtful accounts. Provision for doubtful accounts increased
$777,204, or 86.3%, to $1,677,793 for the three months ended June 30, 1996, as
compared to $900,589 for the three months ended June 30, 1995. This increase
was principally a result of the additional net patient revenue generated from
acquisitions that occurred subsequent to the second quarter of 1995. As a
percentage of net patient revenue the provision for doubtful accounts was 3.1%
for the three months ended June 30, 1996 as compared to 2.3% for the same period
in 1995.
Depreciation and Amortization Expense. Depreciation and amortization expense
increased $1,161,628, or 40.4%, for the three months ended June 30, 1996, when
compared to the three months ended June 30, 1995. The increase was due to the
acquisition and startup of various facilities since October 1995. As a
percentage of net patient revenue, depreciation and amortization expense was
7.5% for the three months ended June 30, 1996, as compared to 7.4% for the three
months ended June 30, 1995.
Income from Operations. Income from operations increased to $8,975,894 for the
three months ended June 30, 1996 from $6,072,037 for the same period in 1995.
This increase was due to the increase in net revenues from acquired businesses
and same-center growth, which was greater than the increases in patient care
costs, general and administrative expense and depreciation and amortization
expense related to such acquired businesses.
Interest Expense, net. Interest expense (net) was $842,572 for the three
months ended June 30, 1996 as compared to interest expense (net) of $636,060 for
the same period in 1995. The increase in interest expense (net) was
attributable to the additional borrowings for the funding of acquisitions that
were completed in 1995 and 1996 that remained outstanding through June 12, 1996,
as well as the additional interest expense (net) incurred as a result of the
issuance of the Notes by the Company on June 12, 1996.
Provision for Income Taxes. Provision for income taxes increased to $3,009,329
from $1,767,248 for the three months ended June 30, 1996 and 1995, respectively.
For the three months ended June 30, 1996, the Company's effective tax rate was
37.0% compared to an effective tax rate of 32.5% during the same period last
year. The increase in the effective tax rate was attributable to the state and
federal income tax benefit related to the S corporation status of the Wichita
Companies during the three months ended June 30, 1995.
Net Income. Net income increased to $5,123,993 for the three months ended June
30, 1996 from $3,668,729 for the same period in 1995. The increase was due to
each of the items discussed above.
Liquidity and Capital Resources
The Company requires capital for the acquisition of dialysis centers, for the
expansion of operations of its existing dialysis centers, including the
replacement of equipment and addition of leasehold improvements, for the
integration of new centers into its network of existing dialysis services and
for meeting working capital requirements.
During the six months ended June 30,1996, expenditures for acquisitions totalled
$37,030,623, compared to $5,144,291 for acquisitions for the six months ended
June 30, 1995. The expenditures in 1996 resulted from the acquisition of one
center in March 1996, one center in April 1996, three centers in May 1996 and
one center in June 1996, as compared to the expenditures in 1995, which resulted
from the acquisition of five centers in March 1995. For the six months ended
June 30, 1996 and 1995, capital
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
expenditures were $6,128,693 and $3,496,979, respectively. Cash from operations
before investing and financing activities was ($395,568) and $4,846,145 for the
six months ended June 30, 1996 and 1995, respectively. The principal sources of
the Company's liquidity during the first six months of 1996 were earnings,
additional borrowings under the Company's loan and revolving credit agreement
with a consortium of banks (the "Credit Agreement") and the issuance of
$125,000,000 of convertible subordinated notes on June 12, 1996. The Company
had cash and cash equivalents of $81,124 at June 30, 1996.
The Company Credit Agreement provides for a $100,000,000 revolving credit term
facility available to fund acquisitions and general working capital
requirements, of which $0 and $33,675,000 were outstanding as of June 30, 1996
and December 31, 1995, respectively. Prior to the amendment of the Credit
Agreement on June 5, 1996, the Credit Agreement also provided for a term loan
payable in quarterly installments, of which $0 and $3,750,000 were outstanding
as of June 30, 1996 and December 31, 1995, respectively. On June 5, 1996, the
Company's Credit Agreement was amended to increase the amount available under
the line of credit from $68,125,000 to $100,000,000 and to make certain other
changes to the terms of the Credit Agreement, including amendments to certain
covenants, the amortization schedule, the interest rates and the events of
default. In connection with this amendment, the $3,125,000 principal amount
outstanding under the term loan as of June 5, 1996 was repaid through borrowings
under the line of credit under the Credit Agreement. The line of credit
converts into a term loan in September 1999 that is payable in 16 equal
quarterly installments commencing December 1999 through September 2003.
Borrowings under the Credit Agreement bear interest, at the Company's option, at
either (i) the agent bank's base rate plus 0.25% if the Applicable Margin, which
is determined by the Company's ratio of senior debt to annualized cash flow, is
not less than 2.25 to 1, payable on a quarterly basis or (ii) a one-, two-,
three-, or six-month period LIBOR rate plus 0.75% to 1.75% depending upon the
Applicable Margin, payable at maturity. The weighted average interest rate of
all loans outstanding at December 31, 1995 was 7.4%. Loans under the Credit
Agreement are collateralized by the pledge of all stock of the Company's
subsidiaries and the assignment of all intercompany notes.
The Company has historically expended the majority of its capital resources to
implement its growth strategy and the Company intends to pursue a strategy of
growth through the acquisition and development of dialysis centers. Management
estimates that the development of a new center, depending on its size, requires
approximately $500,000 to $1,000,000 for construction costs and the purchase of
certain furniture and equipment and approximately $75,000 to $150,000 in working
capital. Acquisition of a dialysis center with an existing patient base
typically requires more capital investment, but each investment varies based on
relative size and other factors. No assurance can be given that the Company
will be successful in implementing its growth strategy or that adequate sources
of capital will be available on terms acceptable to the Company to pursue its
growth strategy in the future.
The Company believes that capital resources available to it will be sufficient
to meet the needs of its business, both on a short- and long-term basis.
<PAGE>
Part II. Other Information
- -------- -----------------
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Company's Annual Meeting of Stockholders was held on May 2, 1996.
(c) 1. The stockholders elected the following persons as Class III
directors of the Company:
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Robert L. Mayer, Jr. 17,081,526 59,580
Frederick C. Jansen 17,081,526 59,580
</TABLE>
There were no broker non-votes with respect to the election of
directors.
2. The stockholders approved an amendment to the Company's Amended
and Restated 1990 Stock Plan to increase the number of shares of
Common Stock covered thereby from 2,437,000 shares to 3,237,000
shares.
For: 15,103,696 Against: 1,671,552 Abstain: 187,816
----------- ---------- --------
There were 178,042 broker non-votes in connection with the
---------
approval of the amendment to the Company's Amended and Restated
1990 Stock Plan.
3. The stockholders ratified the appointment of Coopers & Lybrand,
L.L.P. as independent public accountants for the Company for its
1996 fiscal year.
For: 16,957,080 Against: 1,610 Abstain: 182,416
----------- ------ --------
There were no broker non-votes in connection with the
ratification of the appointment of the Company's independent
public accountants.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
4.1 Specimen Certificate of Common Stock of the Company
(incorporated herein by reference to Exhibit No. 4.1 filed
under the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
4.2 Indenture dated June 12, 1996 by the Company to PNC Bank,
National Association, Trustee, including form of the
Company's 5 5/8% Convertible Subordinated Note due 2006
issued under the Indenture.
4.3 Registration Rights Agreement dated as of June 12, 1996 by
and among the Company, Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, UBS Securities LLC, J.C.
Bradford & Co. and Wessels, Arnold & Henderson.
10.2.2* Amendment No. 1 to the Company's Equity Incentive Plan for
Outside Directors dated May 2, 1996.
10.3.1* First Amendment to Employment Agreement dated as of May 2,
1996 between the Company and Robert L. Mayer, Jr.
10.4.1* First Amendment to Employment Agreement dated as of May 2,
1996 between the Company and Frederick C. Jansen.
10.5* Employment Agreement dated as of May 2, 1996 between the
Company and Barbara A. Bednar.
10.6.1* First Amendment to Employment Agreement dated as of May 2,
1996 between the Company and John A. Chambers.
<PAGE>
Part II. Item 6(a) continued:
10.8.1* First Amendment to Executive Severance Agreement dated as of
May 2, 1996 between the Company and Barbara A. Bednar.
10.9.1* First Amendment to Executive Severance Agreement dated as of
May 2, 1996 between the Company and Ronald H. Rodgers, Jr.
10.10.1* First Amendment to Executive Severance Agreement dated as of
May 2, 1996 between the Company and John A. Chambers.
10.11 Fourth Amended and Restated Loan Agreement dated as of
June 5, 1996 between the Company and First Union National
Bank of North Carolina and the other lenders set forth
therein (incorporated herein by reference to Exhibit No. 99.1
filed under the Company's Current Report on Form 8-K dated
May 29, 1996).
10.12.5 Fourth Amendment to Lease dated May 30, 1996.
10.25* Employment Agreement dated as of May 2, 1996 between the
Company and Ronald H. Rodgers, Jr.
10.26* Employment Agreement dated as of March 11, 1996 between the
Company and Thomas J. Karl.
10.27* Executive Severance Agreement dated as of March 11, 1996
between the Company and Thomas J. Karl.
10.28 Asset Purchase Agreement dated as of May 29, 1996 between
Renal Treatment Centers - Pennsylvania, Inc. and KCCC
Liquidating Trust (incorporated herein by reference to
Exhibit No. 2.1 filed under the Company's Current Report on
Form 8-K dated May 29, 1996).
10.29 Asset Purchase Agreement dated as of May 29, 1996 between
Renal Treatment Centers - Pennsylvania, Inc. and KCDC
Liquidating Trust (incorporated herein by reference to
Exhibit No. 2.2 filed under the Company's Current Report on
Form 8-K dated May 29, 1996).
11.1 Computation of Primary and Fully Diluted Earnings Per Share.
27 Financial Date Schedule.
--------------------------
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
Form 8-K dated May 28, 1996 filed to report under Item 5 the press
release announcing the Company's offering of the Notes.
Form 8-K dated May 29, 1996 filed to report under Item 2 the
acquisition of substantially all of the assets of KCCC and KCDC and
under Item 5 to report the amended and restated Credit Agreement.
Form 8-K/A Amendment No. 1 to Current Report dated May 29, 1996 filed
on July 15, 1996 to file pursuant to Item 7(1) historical financial
information for the year ended December 31, 1995 and the three months
ended March 31, 1996 and (2) pro forma financial information for the
Company for the year ended December 31, 1995 and the three months
ended March 31, 1996 related to the acquisition of KCDC and KCCC as
reported on Form 8-K dated May 29, 1996.
<PAGE>
4.1 Specimen Certificate of Common Stock of the Company (incorporated
herein by reference to Exhibit No. 4.1 filed under the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
4.2 Indenture dated June 12, 1996 by the Company to PNC Bank, National
Association, Trustee, including form of the Company's 5 5/8%
Convertible Subordinated Note due 2006 issued under the Indenture.
4.3 Registration Rights Agreement dated as of June 12, 1996 by and among
the Company, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, UBS Securities LLC, J.C. Bradford & Co. and Wessels,
Arnold & Henderson.
10.2.2* Amendment No. 1 to the Company's Equity Incentive Plan for Outside
Directors dated May 2, 1996.
10.3.1* First Amendment to Employment Agreement dated as of May 2, 1996
between the Company and Robert L. Mayer, Jr.
10.4.1* First Amendment to Employment Agreement dated as of May 2, 1996
between the Company and Frederick C. Jansen.
10.5* Employment Agreement dated as of May 2, 1996 between the Company and
Barbara A. Bednar.
10.6.1* First Amendment to Employment Agreement dated as of May 2, 1996 between
the Company and John A. Chambers.
10.8.1* First Amendment to Executive Severance Agreement dated as of
May 2, 1996 between the Company and Barbara A. Bednar.
10.9.1* First Amendment to Executive Severance Agreement dated as of
May 2, 1996 between the Company and Ronald H. Rodgers, Jr.
10.10.1* First Amendment to Executive Severance Agreement dated as of
May 2, 1996 between the Company and John A. Chambers.
10.11 Fourth Amended and Restated Loan Agreement dated as of June 5, 1996
between the Company and First Union National Bank of North Carolina
and the other lenders set forth therein (incorporated herein by
reference to Exhibit No. 99.1 filed under the Company's Current Report
on Form 8-K dated May 29, 1996).
10.12.5 Fourth Amendment to Lease dated May 30, 1996.
10.25* Employment Agreement dated as of May 2, 1996 between the Company and
Ronald H. Rodgers, Jr.
10.26* Employment Agreement dated as of March 11, 1996 between the Company
and Thomas J. Karl.
10.27* Executive Severance Agreement dated as of March 11, 1996 between the
Company and Thomas J. Karl.
10.28 Asset Purchase Agreement dated as of May 29, 1996 between Renal
Treatment Centers - Pennsylvania, Inc. and KCCC Liquidating Trust
(incorporated herein by reference to Exhibit No. 2.1 filed under the
Company's Current Report on Form 8-K dated May 29, 1996.)
10.29 Asset Purchase Agreement dated as of May 29, 1996 between Renal
Treatment Centers - Pennsylvania, Inc. and KCDC Liquidating Trust
(incorporated herein by reference to Exhibit No. 2.2 filed under the
Company's Current Report on Form 8-K dated May 29, 1996).
11.1 Computation of Primary and Fully Diluted Earnings Per Share.
27 Financial Data Schedule.
* Management contract or compensatory plan or arrangement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RENAL TREATMENT CENTERS, INC.
Date: August 5, 1996 By: /s/ Frederick C. Jansen
- -------------------------- ---------------------------
Frederick C. Jansen
Executive Vice President and
Chief Financial Officer
Date: August 5, 1996 By: /s/ Ronald H. Rodgers, Jr.
- -------------------------- ---------------------------
Ronald H. Rodgers, Jr.
Vice President - Finance and
Chief Accounting Officer
<PAGE>
________________________________________________________________________________
RENAL TREATMENT CENTERS, INC.
TO
PNC BANK, NATIONAL ASSOCIATION
Trustee
INDENTURE
Dated as of June 12, 1996
5 5/8% Convertible Subordinated Notes due 2006
_______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I. DEFINITIONS........................................................1
Section 1.1. Definitions.....................................................1
Affiliate......................................................2
Board of Directors.............................................2
Business Day...................................................2
Cedel..........................................................2
Change in Control..............................................2
Closing Price..................................................2
Commission.....................................................2
Common Stock...................................................2
Company........................................................3
Conversion Price...............................................3
Corporate Trust Office.........................................3
Credit Agreement...............................................3
Custodian......................................................3
default........................................................3
Depositary.....................................................3
Designated Senior Indebtedness.................................3
Exchange Act...................................................4
Exchange Time..................................................4
Euroclear......................................................4
Event of Default...............................................4
Foreign Person.................................................4
Global Note....................................................4
Indebtedness...................................................4
Indenture......................................................5
Initial Purchasers.............................................5
Note or Notes..................................................5
Noteholder or holder...........................................5
Note register..................................................5
Offering Memorandum............................................5
Officers' Certificate..........................................5
Opinion of Counsel.............................................5
outstanding....................................................5
Payment Blockage Notice........................................6
Person.........................................................6
PORTAL Market..................................................6
Predecessor Note...............................................6
Payment Blockage Notice........................................6
Purchased Securities...........................................6
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(continued)
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QIB............................................................6
Registration Rights Agreement..................................6
Regulation S...................................................7
Regulation S Global Note.......................................7
Representative.................................................7
Responsible Officer............................................7
Repurchase Date................................................7
Repurchase Price...............................................7
Restricted Securities..........................................7
Rule 144A......................................................7
Rule 144A Global Note..........................................7
Rule 144(k)....................................................7
Securities Act.................................................7
Senior Indebtedness............................................7
Subsidiary.....................................................8
Trading Day....................................................8
Trigger Event..................................................8
Trust Indenture Act............................................8
Trustee........................................................8
ARTICLE II. ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF
NOTES..........................................................................9
Section 2.1. Designation, Amount and Issue of Notes..........................9
Section 2.2. Form of Notes...................................................9
Section 2.3. Date and Denomination of Notes; Payments of Interest...........10
Section 2.4. Execution of Notes.............................................11
Section 2.5. Exchange and Registration of Transfer of Notes:
Restrictions on Transfer: Depositary........................12
Section 2.6. Mutilated, Destroyed, Lost or Stolen Notes.....................22
Section 2.7. Temporary Notes................................................23
Section 2.8. Cancellation of Notes Paid, Etc................................24
ARTICLE III. REDEMPTION OF NOTES.............................................24
Section 3.1. Redemption Prices..............................................24
Section 3.2. Notice of Redemption: Selection of Notes.......................25
Section 3.3. Payment of Notes Called for Redemption.........................26
Section 3.4. Conversion Arrangement on Call for Redemption..................27
ARTICLE IV. SUBORDINATION OF NOTES...........................................27
Section 4.1. Agreement of Subordination.....................................27
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(continued)
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Section 4.2. Payments to Noteholders........................................27
Section 4.3. Subrogation of Notes...........................................30
Section 4.4. Authorization to Effect Subordination..........................31
Section 4.5. Notice to Trustee..............................................31
Section 4.6. Trustee's Relation to Senior Indebtedness......................32
Section 4.7. No Impairment of Subordination.................................33
Section 4.8. Certain Conversions Deemed Payment.............................33
Section 4.9. Article Applicable to Paying Agents............................33
Section 4.10. Senior Indebtedness Entitled to Rely..........................34
ARTICLE V. PARTICULAR COVENANTS OF THE COMPANY...............................34
Section 5.1. Payment of Principal, Premium and Interest.....................34
Section 5.2. Maintenance of Office or Agency................................34
Section 5.3. Appointments to Fill Vacancies in Trustee's Office.............35
Section 5.4. Provisions as to Paying Agent..................................35
Section 5.5. Corporate Existence............................................36
Section 5.6. Rule 144A Information Requirement..............................36
Section 5.7. Stay, Extension and Usury Laws.................................36
Section 5.8. Compliance Certificate.........................................37
ARTICLE VI. NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND TRUSTEE.......37
Section 6.1. Noteholders' Lists.............................................37
Section 6.2. Preservation and Disclosure of Lists...........................37
Section 6.3. Reports by Trustee.............................................38
Section 6.4. Reports by Company.............................................38
ARTICLE VII. REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF
DEFAULT.......................................................................38
Section 7.1. Events of Default..............................................38
Section 7.2. Payments of Notes on Default: Suit Therefor....................41
Section 7.3. Application of Monies Collected by Trustee.....................42
Section 7.4. Proceedings by Noteholder......................................43
Section 7.5. Proceedings by Trustee.........................................44
Section 7.6. Remedies Cumulative and Continuing.............................44
Section 7.7. Direction of Proceedings and Waiver of Defaults by Majority
of Noteholders...............................................44
Section 7.8. Notice of Defaults.............................................45
Section 7.9. Undertaking to Pay Costs.......................................45
ARTICLE VIII. CONCERNING THE TRUSTEE.........................................45
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(continued)
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Section 8.1. Duties and Responsibilities of Trustee.........................45
Section 8.2. Reliance on Documents, Opinions, Etc...........................47
Section 8.3. No Responsibility for Recitals, Etc............................48
Section 8.4. Trustee, Paying Agents, Conversion Agents or Registrar May
Own Notes.....................................................48
Section 8.5. Monies to Be Held in Trust.....................................48
Section 8.6. Compensation and Expenses of Trustee...........................48
Section 8.7. Officers' Certificate as Evidence..............................49
Section 8.8. Conflicting Interests of Trustee...............................49
Section 8.9. Eligibility of Trustee.........................................49
Section 8.10. Resignation or Removal of Trustee.............................49
Section 8.11. Acceptance by Successor Trustee...............................51
Section 8.12. Succession by Merger, Etc.....................................52
Section 8.13. Limitation on Rights of Trustee as Creditor...................52
ARTICLE IX. CONCERNING THE NOTEHOLDERS.......................................52
Section 9.1. Action by Noteholders..........................................52
Section 9.2. Proof of Execution by Noteholders..............................53
Section 9.3. Who Are Deemed Absolute Owners.................................53
Section 9.4. Company-Owned Notes Disregarded................................53
Section 9.5. Revocation of Consents: Future Holders Bound...................54
ARTICLE X. NOTEHOLDERS' MEETINGS.............................................54
Section 10.1. Purpose of Meetings...........................................54
Section 10.2. Call of Meetings by Trustee...................................54
Section 10.3. Call of Meetings by Company or Noteholders....................55
Section 10.4. Qualifications for Voting.....................................55
Section 10.5. Regulations...................................................55
Section 10.6. Voting........................................................56
Section 10.7. No Delay of Rights by Meeting.................................56
ARTICLE XI. SUPPLEMENTAL INDENTURES..........................................56
Section 11.1. Supplemental Indentures Without Consent of Noteholders........56
Section 11.2. Supplemental Indentures with Consent of Noteholders...........58
Section 11.3. Effect of Supplemental Indenture..............................59
Section 11.4. Notation on Notes.............................................59
Section 11.5. Evidence of Compliance of Supplemental Indenture to Be
Furnished Trustee.............................................59
ARTICLE XII. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE...............59
</TABLE>
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(continued)
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Section 12.1. Company May Consolidate Etc. on Certain Terms.................59
Section 12.2. Successor Corporation to Be Substituted.......................60
Section 12.3. Opinion of Counsel to Be Given Trustee........................60
ARTICLE XIII. SATISFACTION AND DISCHARGE OF INDENTURE........................61
Section 13.1. Discharge of Indenture........................................61
Section 13.2. Deposited Monies to Be Held in Trust by Trustee...............61
Section 13.3. Paying Agent to Repay Monies Held.............................61
Section 13.4. Return of Unclaimed Monies....................................62
Section 13.5. Reinstatement.................................................62
ARTICLE XIV. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS.....................................................................62
Section 14.1. Indenture and Notes Solely Corporate Obligations..............62
ARTICLE XV. CONVERSION OF NOTES..............................................63
Section 15.1. Right to Convert..............................................63
Section 15.2. Exercise of Conversion Privilege; Issuance of Common Stock
on Conversion; No Adjustment for Interest or Dividends........63
Section 15.3. Cash Payments in Lieu of Fractional Shares....................64
Section 15.4. Conversion Price..............................................65
Section 15.5. Adjustment of Conversion Price................................65
Section 15.6. Effect of Reclassification, Consolidation, Merger or Sale.....75
Section 15.7. Taxes on Shares Issued........................................76
Section 15.8. Reservation of Shares; Shares to Be Fully Paid; Compliance
with Governmental Requirements; Listing of Common Stock.......76
Section 15.9. Responsibility of Trustee.....................................77
Section 15.10. Notice to Holders Prior to Certain Actions...................77
ARTICLE XVI. REPURCHASE OF NOTES AT OPTION OF THE HOLDER UPON CHANGE IN
CONTROL.......................................................................78
Section 16.1. Right to Require Repurchase...................................78
Section 16.2. Notices; Method of Exercising Repurchase Right, Etc...........79
Section 16.3. Certain Definitions...........................................81
Section 16.4. Change in Control.............................................81
Section 16.5. Consolidation, Merger, Etc....................................82
ARTICLE XVII. MISCELLANEOUS PROVISIONS.......................................82
Section 17.1. Provisions Binding on Company's Successors....................82
Section 17.2. Official Acts by Successor Corporation........................82
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Section 17.3. Addresses for Notices, Etc....................................83
Section 17.4. Governing Law.................................................83
Section 17.5. Evidence of Compliance with Conditions Precedent;
Certificates to Trustee.......................................83
Section 17.6. Legal Holidays................................................84
Section 17.7. Trust Indenture Act...........................................84
Section 17.8. No Security Interest Created..................................84
Section 17.9. Benefits of Indenture.........................................84
Section 17.10. Table of Contents, Headings, Etc.............................84
Section 17.11. Authenticating Agent.........................................84
Section 17.12. Execution in Counterparts....................................85
</TABLE>
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<PAGE>
INDENTURE dated as of June 12, 1996, between Renal Treatment Centers, Inc.,
a Delaware corporation (hereinafter sometimes called the "Company," as more
fully set forth in Section 1.1), and PNC Bank, National Association, a bank duly
organized and existing under the laws of the United States of America, as
trustee hereunder (hereinafter sometimes called the "Trustee," as more fully set
forth in Section 1.1).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized
the issue of its 5 5/8% Convertible Subordinated Notes due 2006 (hereinafter
sometimes called the "Notes"), in an aggregate principal amount not to exceed
$143,750,000 and, to provide the terms and conditions upon which the Notes are
to be authenticated, issued and delivered, the Company has duly authorized the
execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be borne by the
Notes, a form of assignment, a form of option to elect repurchase upon a Change
in Control and a form of conversion notice to be borne by the Notes are to be
substantially in the forms hereinafter provided for; and
WHEREAS, all acts and things necessary to make the Notes, when executed by
the Company and authenticated and delivered by the Trustee or a duly authorized
authenticating agent, as in this Indenture provided, the valid, binding and
legal obligations of the Company, and to constitute these presents a valid
agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes are,
and are to be, authenticated, issued and delivered, and in consideration of the
premises and of the purchase and acceptance of the Notes by the holders thereof,
the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions. The terms defined in this Section 1.1 (except
-----------
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture that are defined in the Trust Indenture Act or
which are by reference therein defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise requires) shall
have the meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in
<PAGE>
force at the date of the execution of this Indenture. The words "herein,"
"hereof," "hereunder," and words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other Subdivision. The terms
defined in this Article include the plural as well as the singular.
Affiliate: The term "Affiliate" of any specified Person shall mean any
---------
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person. For the purposes of this
definition, "control," when used with respect to any specified Person, means the
power to direct or cause the direction of 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.
Board of Directors: The term "Board of Directors" shall mean the Board of
------------------
Directors of the Company or a committee of such Board duly authorized to act for
it hereunder.
Business Day: The term "Business Day" means each Monday, Tuesday,
------------
Wednesday, Thursday and Friday which is not a day on which the banking
institutions in The City of New York and Philadelphia are authorized or
obligated by law or executive order to close or be closed.
Cedel: The term "Cedel" shall mean Cedel, S.A.
-----
Change in Control: The term "Change in Control" shall have the meaning
-----------------
specified in Section 16.4.
Closing Price: The term "Closing Price" shall have the meaning specified
-------------
in Section 15.5(h)(1).
Commission: The term "Commission" shall mean the Securities and Exchange
----------
Commission.
Common Stock: The term "Common Stock" shall mean any stock of any class of
------------
the Company which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which is not subject to redemption by the Company.
Subject to the provisions of Section 15.6, however, shares issuable on
conversion of Notes shall include only shares of the class designated as common
stock of the Company at the date of this Indenture or shares of any class or
classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company; provided
--------
that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such
-2-
<PAGE>
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
Company: The term "Company" shall mean Renal Treatment Centers, Inc., a
-------
Delaware corporation, and, subject to the provisions of Article XII, shall
include its successors and assigns.
Conversion Price: The term "Conversion Price" shall have the meaning
----------------
specified in Section 15.4.
Corporate Trust Office: The term "Corporate Trust Office" or other similar
----------------------
term shall mean the office of the Trustee at which at any particular time its
corporate trust business shall be principally administered, which office is, at
the date as of which this Indenture is dated, located at 1700 Market Street,
Philadelphia, PA 19103, Attention: Corporate Trust Division (Renal Treatment
Centers, Inc., 5 5/8% Convertible Subordinated Notes due 2006).
Credit Agreement: The term "Credit Agreement" shall mean the Fourth
----------------
Amended and Restated Loan Agreement between First Union National Bank of North
Carolina, as Agent, various lenders named therein and the Company, dated as of
June 5, 1996, as amended through the date hereof, as further amended, amended
and restated, supplemented or otherwise modified from time to time.
Custodian: The term "Custodian" shall mean PNC Bank, National Association,
---------
as custodian with respect to the Notes in global form, or any successor entity
thereto.
default: The term "default" shall mean any event that is, or after notice
-------
or passage of time, or both, would be, an Event of Default.
Defaulted Interest: The term "Defaulted Interest" shall have the meaning
------------------
specified in Section 2.3.
Depositary: The term "Depositary" means, with respect to the Notes
----------
issuable or issued in whole or in part in global form, the person specified in
Section 2.5(d) as the Depositary with respect to such Notes, until a successor
shall have been appointed and become such pursuant to the applicable provisions
of this Indenture, and thereafter "Depositary" shall mean or include such
successor.
Designated Senior Indebtedness: The term "Designated Senior Indebtedness"
------------------------------
means the Credit Agreement and any particular Senior Indebtedness in which the
instrument creating or evidencing the same or the assumption or guarantee
thereof (or related agreements or documents to which the Company is a party)
expressly provides that such Senior Indebtedness shall be "Designated Senior
Indebtedness" for purposes of the Indenture (provided that such instrument,
agreement or other document may place limitations and conditions on the right of
such Senior Indebtedness to exercise the rights of Designated Senior
Indebtedness).
-3-
<PAGE>
Exchange Act: The term "Exchange Act" shall mean the Securities Exchange
------------
Act of 1934, as amended, and the rules and regulations promulgated thereunder,
as in effect from time to time.
Expiration Time: The term "Expiration Time" shall have the meaning
---------------
specified in Section 15.5(f).
Euroclear: The term "Euroclear" shall mean the Euroclear System.
---------
Event of Default: The term "Event of Default" shall mean any event
----------------
specified in Section 7.1(a), (b), (c), (d), (e), (f) or (g).
Foreign Person: The term "Foreign Person" shall have the meaning specified
--------------
in Section 2.5(b).
Global Note: The term "Global Note" shall have the meaning specified in
-----------
Section 2.5(d).
Indebtedness: The term "Indebtedness means, with respect to any Person,
------------
and without duplication, (a) all indebtedness, obligations and other liabilities
(contingent or otherwise) of such Person for borrowed money (including
obligations of such Person in respect of overdrafts, foreign exchange contracts,
currency exchange agreements, interest rate protection agreements, and any loans
or advances from banks, whether or not evidenced by notes or similar
instruments) or evidenced by bonds, debentures, notes or similar instruments
(whether or not the recourse of the lender is to the whole of the assets of such
Person or to only a portion thereof) (other than any account payable or other
accrued current liability or obligation incurred in the ordinary course of
business in connection with the obtaining of materials or services), (b) all
reimbursement obligations and other liabilities (contingent or otherwise) of
such Person with respect to letters of credit, bank guarantees or bankers'
acceptances, (c) all obligations and liabilities (contingent or otherwise) in
respect of leases of such Person required, in conformity with generally accepted
accounting principles, to be accounted for as capitalized lease obligations on
the balance sheet of such Person and all obligations and other liabilities
(contingent or otherwise) under any lease or related document (including a
purchase agreement) in connection with the lease of real property which provides
that such Person is contractually obligated to purchase or cause a third party
to purchase the leased property and thereby guarantee a minimum residual value
of the leased property to the lessor and the obligations of such Person under
such lease or related document to purchase or to cause a third party to purchase
such leased property, (d) all obligations of such Person (contingent or
otherwise) with respect to an interest rate or other swap, cap or collar
agreement or other similar instrument or agreement or foreign currency hedge,
exchange, purchase or similar instrument or agreement, (e) all direct or
indirect guaranties or similar agreements by such Person in respect of, and
obligations or liabilities (contingent or otherwise) of such Person to purchase
or otherwise acquire or otherwise assure a creditor against loss in respect of
indebtedness, obligations or liabilities of another Person of the kind described
in clauses (a) through (d), (f) any indebtedness or other obligations described
in clauses (a) through (d)
-4-
<PAGE>
secured by any mortgage, pledge, lien or other encumbrance existing on property
which is owned or held by such Person, regardless of whether the indebtedness or
other obligation secured thereby shall have been assumed by such Person and (g)
any and all deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligation or liability of
the kind described in clauses (a) through (f).
Indenture: The term "Indenture" shall mean this instrument as originally
---------
executed or, if amended or supplemented as herein provided, as so amended or
supplemented.
Initial Purchasers: The term "Initial Purchasers" means Merrill Lynch &
------------------
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS Securities LLC,
J.C. Bradford & Co. and Wessels, Arnold & Henderson.
Note or Notes: The terms "Note" or "Notes" shall mean any Note or Notes,
---- -----
as the case may be, authenticated and delivered under this Indenture.
Noteholder or holder: The terms "Noteholder" or "holder" as applied to any
---------- ------
Note, or other similar terms (but excluding the term "beneficial holder"), shall
mean any person in whose name at the time a particular Note is registered on the
Note registrar's books.
Note register: The term "Note register" shall have the meaning specified
-------------
in Section 2.5.
Offering Memorandum: The term "Offering Memorandum" means that certain
-------------------
Offering Memorandum, dated June 6, 1996, used in connection with the offering of
the Notes by the Company.
Officers' Certificate: The term "Officers' Certificate," when used with
---------------------
respect to the Company, shall mean a certificate signed by both (a) the
President, the Chief Executive Officer, Executive or Senior Vice President or
any Vice President (whether or not designated by a number or numbers or word or
words added before or after the title "Vice President") and (b) the Treasurer or
any Assistant Treasurer or Secretary or any Assistant Secretary of the Company.
Opinion of Counsel: The term "Opinion of Counsel" shall mean an opinion in
------------------
writing signed by legal counsel, who may be an employee of or counsel to the
Company, or other counsel acceptable to the Trustee.
outstanding: The term "outstanding," when used with reference to Notes,
-----------
shall, subject to the provisions of Section 9.4, mean, as of any particular
time, all Notes authenticated and delivered by the Trustee under this Indenture,
except
(a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
-5-
<PAGE>
(b) Notes, or portions thereof, for the redemption of which monies
in the necessary amount shall have been deposited in trust with the Trustee
or with any paying agent (other than the Company) or shall have been set
aside and segregated in trust by the Company (if the Company shall act as
its own paying agent); provided that if such Notes are to be redeemed prior
--------
to the maturity thereof, notice of such redemption shall have been given as
in Article III provided, or provision satisfactory to the Trustee shall
have been made for giving such notice;
(c) Notes in lieu of which, or in substitution for which, other
Notes shall have been authenticated and delivered pursuant to the terms of
Section 2.6 unless proof satisfactory to the Trustee is presented that any
such Notes are held by bona fide holders in due course; and
(d) Notes converted into Common Stock pursuant to Article XV and
Notes deemed not outstanding pursuant to Article III.
Payment Blockage Notice: The term "Payment Blockage Notice" has the
-----------------------
meaning specified in Section 4.2.
Person: The term "Person" shall mean a corporation, an association, a
------
partnership, an individual, a joint venture, a joint stock company, a trust, an
unincorporated organization or a government or an agency or a political
subdivision thereof.
PORTAL Market: The term "PORTAL Market" shall mean the Private Offerings,
-------------
Resales and Trading through Automated Linkages Market operated by the National
Association of Securities Dealers, Inc. or any successor thereto.
Predecessor Note: The term "Predecessor Note" of any particular Note shall
----------------
mean every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purposes of this definition, any
Note authenticated and delivered under Section 2.6 in lieu of a lost, destroyed
or stolen Note shall be deemed to evidence the same debt as the lost, destroyed
or stolen Note that it replaces.
Purchased Shares: The term "Purchased Shares" has the meaning specified in
----------------
Section 15.5(f).
QIB: The term "QIB" shall mean a "qualified institutional buyer" as
---
defined in Rule 144A.
Registration Rights Agreement: The term "Registration Rights Agreement"
-----------------------------
means that certain Registration Rights Agreement, dated as of June 12, 1996,
between the Company and the Initial Purchasers.
-6-
<PAGE>
Regulation S: The term "Regulation S" shall mean Regulation S as
------------
promulgated under the Securities Act.
Regulation S Global Note: The term "Regulation S Global Note" shall have
------------------------
the meaning specified in Section 2.5(d).
Representative: The term "Representative" means the (a) indenture trustee
--------------
or other trustee, agent or representative for any Senior Indebtedness or (b)
with respect to any Senior Indebtedness that does not have any such trustee,
agent or other representative, (i) in the case of such Senior Indebtedness
issued pursuant to an agreement providing for voting arrangements as among the
holders or owners of such Senior Indebtedness, any holder or owner of such
Senior Indebtedness acting with the consent of the required persons necessary to
bind such holders or owners of such Senior Indebtedness and (ii) in the case of
all other such Senior Indebtedness, the holder or owner of such Senior
Indebtedness.
Responsible Officer: The term "Responsible Officer," when used with
-------------------
respect to the Trustee, shall mean an officer of the Trustee in the Corporate
Trust Office assigned and duly authorized by the Trustee to administer its
corporate trust matters.
Repurchase Date: The term "Repurchase Date" shall have the meaning
---------------
specified in Section 16.1.
Repurchase Price: The term "Repurchase Price" shall have the meaning
----------------
specified in Section 16.l.
Restricted Securities: The term "Restricted Securities" has the meaning
---------------------
specified in Section 2.5.
Rule 144A: The term "Rule 144A" shall mean Rule 144A as promulgated under
---------
the Securities Act.
Rule 144A Global Note: The term "Rule 144A Global Note" shall have the
---------------------
meaning specified in Section 2.5(d).
Rule 144(k): The term "Rule 144(k)" shall mean Rule 144(k) as promulgated
-----------
under the Securities Act.
Securities Act: The term "Securities Act" shall mean the Securities Act of
--------------
1933, as amended, and the rules and regulations promulgated thereunder.
Senior Indebtedness: The term "Senior Indebtedness" means the principal
-------------------
of, premium, if any, interest (including all interest accruing subsequent to the
commencement of any bankruptcy or similar proceeding, whether or not a claim for
post-petition interest is allowable as a claim in any such proceeding) and rent
payable on or in connection with, and all fees, costs, expenses and other
amounts accrued or due on or in connection with,
-7-
<PAGE>
Indebtedness of the Company, whether outstanding on the date of this Indenture
or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by
the Company (including all deferrals, renewals, extensions or refundings of, or
amendments, modifications or supplements to, the foregoing), unless in the case
of any particular Indebtedness the instrument creating or evidencing the same or
the assumption or guarantee thereof expressly provides that such Indebtedness
shall not be senior in right of payment to the Notes or expressly provides that
such Indebtedness is "pari passu" with or "junior" to the Notes. Notwithstanding
the foregoing, the term Senior Indebtedness shall not include any Indebtedness
of the Company to any Subsidiary of the Company.
Subsidiary: The term "Subsidiary" means, with respect to any Person, (i)
----------
any corporation, association or other business entity of which more than 50% of
the total voting power of shares of capital stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more Subsidiaries of such Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
managing general partner of which is such Person or a Subsidiary of such Person
or (b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
Trading Day: The term "Trading Day" shall have the meaning specified in
-----------
Section 15.5(h)(5).
Trigger Event: The term "Trigger Event" shall have the meaning specified
-------------
in Section 15.5(d).
Trust Indenture Act: The term "Trust Indenture Act" shall mean the Trust
-------------------
Indenture Act of 1939, as amended, as it was in force at the date of execution
of this Indenture, except as provided in Sections 11.3, 15.6 and 16.5; provided,
--------
however, that in the event the Trust Indenture Act of 1939 is amended after the
- -------
date hereof, the term "Trust Indenture Act" shall mean, to the extent required
by such amendment, the Trust Indenture Act of 1939 as so amended.
Trustee: The term "Trustee" shall mean PNC Bank, National Association, and
-------
its successors and any corporation resulting from or surviving any consolidation
or merger to which it or its successors may be a party and any successor trustee
at the time serving as successor trustee hereunder.
The definitions of certain other terms are as specified in Section 2.5,
Article XV and Article XVI.
-8-
<PAGE>
ARTICLE II.
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1. Designation, Amount and Issue of Notes. The Notes shall be
--------------------------------------
designated as "5 5/8% Convertible Subordinated Notes due 2006." Notes not to
exceed the aggregate principal amount of $125,000,000 (or $143,750,000 if the
over-allotment option set forth in Section 2 of the Purchase Agreement, dated
June 6, 1996 (as amended from time to time by the parties thereto) by and
between the Company and the Initial Purchasers is exercised in full) upon the
execution of this Indenture, or (except pursuant to Sections 2.5, 2.6, 3.3, 15.2
and 16.2 hereof) from time to time thereafter, may be executed by the Company
and delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Notes to or upon the written order of the Company,
signed by its (a) President, Executive or Senior Vice President or any Vice
President (whether or not designated by a number or numbers or word or words
added before or after the title "Vice President") and (b) Treasurer or Assistant
Treasurer or its Secretary or any Assistant Secretary, without any further
action by the Company hereunder.
Section 2.2. Form of Notes. The Notes and the Trustee's certificate of
-------------
authentication to be borne by such Notes shall be substantially in the form set
forth in Exhibit A, which is incorporated in and made a part of this Indenture.
Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed, or to conform to usage.
Any Note in global form shall represent such of the outstanding Notes as
shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be increased or reduced to reflect transfers or exchanges permitted
hereby. Any endorsement of a Note in global form to reflect the amount of any
increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee or the Custodian, at the direction of the Trustee,
in such manner and upon instructions given by the holder of such Notes in
accordance with this Indenture. Payment of principal of and interest and
premium, if any, on any Note in global form shall be made to the holder of such
Note.
The terms and provisions contained in the form of Note attached as Exhibit
A hereto shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent
-9-
<PAGE>
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
Section 2.3. Date and Denomination of Notes; Payments of Interest. The
----------------------------------------------------
Notes shall be issuable in registered form without coupons in denominations of
$1,000 principal amount and integral multiples thereof. Every Note shall be
dated the date of its authentication and shall bear interest from the applicable
date in each case as specified on the face of the form of Note attached as
Exhibit A hereto. Interest on the Notes shall be computed on the basis of a
360-day year comprised of twelve 30-day months.
The person in whose name any Note (or its Predecessor Note) is registered
at the close of business on any record date with respect to any interest payment
date (including any Note that is converted after the record date and on or
before the interest payment date) shall be entitled to receive the interest
payable on such interest payment date notwithstanding the cancellation of such
Note upon any transfer, exchange or conversion subsequent to the record date and
on or prior to such interest payment date; provided, that in the case of any
--------
Note, or portion thereof, called for redemption on a redemption date or
repurchased in connection with a Change in Control on a Repurchase Date that is
after a record date and prior to (but excluding) the next succeeding interest
payment date, interest shall not be paid to the person in whose name the Note,
or portion thereof, is registered on the close of business on such record date
and the Company shall have no obligation to pay interest on such Note or such
portion except to the extent required to be paid upon redemption or repurchase
of such Note or portion thereof pursuant to Section 3.3 or 16.1 hereof.
Interest may, at the option of the Company, be paid by check mailed to the
address of such person on the Note register; provided that, with respect to any
--------
holder of Notes with an aggregate principal amount equal to or in excess of
$5,000,000, at the request of such holder in writing to the Company (who shall
then furnish written notice to such effect to the Trustee), interest on such
holder's Notes shall be paid by wire transfer in immediately available funds in
accordance with the wire transfer instructions supplied by such holder to the
Trustee and paying agent (if different from the Trustee). The term "record
date" with respect to any interest payment date shall mean the January 1 or
July 1 preceding said January 15 or July 15, respectively.
Any interest on any Note which is payable, but is not punctually paid or
duly provided for, on any said January 15 or July 15 (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Noteholder on the relevant
record date by virtue of his having been such Noteholder; and such Defaulted
Interest shall be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below.
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a special record date for
the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest to be paid on each Note and the date of the
payment (which shall be not less than twenty-five (25) days after the
receipt by the Trustee of such notice, unless
-10-
<PAGE>
the Trustee shall consent to an earlier date), and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such Defaulted Interest as in
this clause provided. Thereupon the Trustee shall fix a special record date
for the payment of such Defaulted Interest which shall be not more than
fifteen (15) days and not less than ten (10) days prior to the date of the
proposed payment and not less than ten (10) days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such special record date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the special record date therefor to be mailed,
first-class postage prepaid, to each Noteholder at his address as it
appears in the Note register, not less than ten (10) days prior to such
special record date. Notice of the proposed payment of such Defaulted
Interest and the special record date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the Notes
(or their respective Predecessor Notes) were registered at the close of
business on such special record date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange and automated quotation system on which the Notes may
be listed or designated for listing, and upon such notice as may be
required by such exchange and automated quotation system, if, after notice
given by the Company to the Trustee of the proposed payment pursuant to
this clause, such manner of payment shall be deemed practicable by the
Trustee.
Section 2.4. Execution of Notes. The Notes shall be signed in the name
------------------
and on behalf of the Company by the facsimile signature of its President, any
Executive or Senior Vice President or any Vice President (whether or not
designated by a number or numbers or word or words added before or after the
title "Vice President") and attested by the facsimile signature of its Secretary
or any of its Assistant Secretaries (which may be printed, engraved or otherwise
reproduced thereon, by facsimile or otherwise). Only such Notes as shall bear
thereon a certificate of authentication substantially in the form set forth on
the form of Note attached as Exhibit A hereto, manually executed by the Trustee
(or an authenticating agent appointed by the Trustee as provided by Section
17.11), shall be entitled to the benefits of this Indenture or be valid or
obligatory for any purpose. Such certificate by the Trustee (or such an
authenticating agent) upon any Note executed by the Company shall be conclusive
evidence that the Note so authenticated has been duly authenticated and
delivered hereunder and that the holder is entitled to the benefits of this
Indenture.
In case any officer of the Company who shall have signed any of the Notes
shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by
-11-
<PAGE>
the Trustee, or disposed of by the Company, such Notes nevertheless may be
authenticated and delivered or disposed of as though the person who signed such
Notes had not ceased to be such officer of the Company; and any Note may be
signed on behalf of the Company by such persons as, at the actual date of the
execution of such Note, shall be the proper officers of the Company, although at
the date of the execution of this Indenture any such person was not such an
officer.
Section 2.5. Exchange and Registration of Transfer of Notes; Restrictions
------------------------------------------------------------
on Transfer; Depositary.
- ------------------------
(a) The Company shall cause to be kept at the Corporate Trust
Office a register (the register maintained in such office and in any other
office or agency of the Company designated pursuant to Section 5.2 being
herein sometimes collectively referred to as the "Note register") in which,
subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Notes and of transfers of Notes. The
Note register shall be in written form or in any form capable of being
converted into written form within a reasonably prompt period of time. The
Trustee is hereby appointed "Note registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. The Company may appoint
one or more co-registrars in accordance with Section 5.2.
Upon surrender for registration of transfer of any Note to the Note
registrar or any co-registrar, and satisfaction of the requirements for
such transfer set forth in this Section 2.5, the Company shall execute, and
the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Notes of any authorized
denominations and of a like aggregate principal amount and bearing such
restrictive legends as may be required by this Indenture.
Notes may be exchanged for other Notes of any authorized denominations
and of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at any such office or agency maintained by the Company pursuant
to Section 5.2. Whenever any Notes are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Notes which the Noteholder making the exchange is entitled to receive
bearing registration numbers not contemporaneously outstanding.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
All Notes presented or surrendered for registration of transfer or for
exchange, redemption, repurchase or conversion shall (if so required by the
-12-
<PAGE>
Company or the Note registrar) be duly endorsed, or be accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Company, and the Notes shall be duly executed by the Noteholder thereof or
his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient
to cover any tax, assessment or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Notes.
Neither the Company nor the Trustee nor any Note registrar nor any co-
registrar shall be required to exchange or register a transfer of (a) any
Notes for a period of fifteen (15) days next preceding any selection of
Notes to be redeemed or (b) any Notes or portions thereof called for
redemption pursuant to Article III or (c) any Notes or portion thereof
surrendered for conversion pursuant to Article XV.
(b) So long as the Notes are eligible for book-entry settlement with
the Depositary, unless otherwise required by law, all Notes to be traded
(i) on the PORTAL Market shall be represented by a Note in global form (the
"Rule 144A Global Note") or (ii) to a Person who is not a U.S. Person (as
defined in Regulation S) who is acquiring the Note in an offshore
transaction (a "Foreign Person") in accordance with Regulation S shall be
represented by a Note in global form (the "Regulation S Global Note") (the
Rule 144A Global Note and the Regulation S Global Note collectively
referred to in this Indenture as the "Global Note"), the Rule 144A Global
Note and the Regulation S Global Note being registered in the name of the
Depositary or the nominee of the Depositary. The transfer and exchange of
beneficial interests in the Global Note, which does not involve the
issuance of a Note in certificated form, shall be effected through the
Depositary, in accordance with this Indenture (including the restrictions
on transfer set forth herein) and the procedures of the Depositary
therefor.
At any time at the request of the beneficial holder of an interest in
the Global Note to obtain a Note in certificated form, such beneficial
holder shall be entitled to obtain a Note in certificated form upon written
request to the Trustee and the Custodian in accordance with the standing
instructions and procedures existing between the Custodian and Depositary
for the issuance thereof. Upon receipt of any such request, the Trustee,
or the Custodian at the direction of the Trustee, will cause, in accordance
with the standing instructions and procedures existing between the
Depositary and the Custodian, the aggregate principal amount of the Rule
144A Global Note or Regulation S Global Note, as appropriate, to be reduced
by the principal amount of the Note in certificated form issued upon such
request to such beneficial holder and, following such reduction, the
Company will execute and the Trustee will
-13-
<PAGE>
authenticate and deliver to such beneficial holder (or its nominee) a Note
or Notes in certificated form in the appropriate aggregate principal amount
in the name of such beneficial holder (or its nominee) and bearing such
restrictive legends as may be required by this Indenture.
Any transfer of a beneficial interest in the Global Note which cannot
be effected through book-entry settlement must be effected by the delivery
to the transferee (or its nominee) of a Note or Notes in certificated form
registered in the name of the transferee (or its nominee) on the books
maintained by the Note registrar in accordance with the transfer
restrictions set forth herein. With respect to any such transfer, the
Trustee, or the Custodian at the direction of the Trustee, will cause, in
accordance with the standing instructions and procedures existing between
the Depositary and the Custodian, the aggregate principal amount of the
Rule 144A Global Note or Regulation S Global Note to be reduced by the
principal amount of the respective beneficial interest in the Rule 144A
Global Note or Regulation S Global Note being transferred and, following
such reduction, the Company will execute and the Trustee will authenticate
and deliver to the transferee (or such transferee's nominee, as the case
may be), a Note or Notes in certificated form in the appropriate aggregate
principal amount in the name of such transferee (or its nominee) and
bearing such restrictive legends as may be required by this Indenture.
(c) So long as the Notes are eligible for book-entry settlement, or
unless otherwise required by law, upon any transfer of a Note in
certificated form to a QIB in accordance with Rule 144A or a Foreign Person
in accordance with Regulation S, and upon receipt of the Note or Notes in
certificated form being so transferred, together with a certification from
the transferor that the transferee is a QIB or a Foreign Person (or other
evidence satisfactory to the Trustee), the Trustee shall make, or direct
the Custodian to make, an endorsement on the Rule 144A Global Note or
Regulation S Global Note to reflect an increase in the aggregate principal
amount of the Notes represented by the Rule 144A Global Note or Regulation
S Global Note, and the Trustee shall cancel such Note or Notes in
certificated form and cause, or direct the Custodian to cause, in
accordance with the standing instructions and procedures existing between
the Depositary and the Custodian, the aggregate principal amount of Notes
represented by the Rule 144A Global Note or Regulation S Global Note to be
increased accordingly; provided that no Note in certificated form, or
--------
portion thereof, in respect of which the Company or an Affiliate of the
Company held any beneficial interest shall be included in the Global Note
until such Note in certificated form is freely tradeable in accordance with
Rule 144(k); provided further that the Trustee shall issue Notes in
-------- -------
certificated form upon any transfer of a beneficial interest in the Global
Note to the Company or an Affiliate of the Company.
-14-
<PAGE>
Any Global Note may be endorsed with or have incorporated in the text
thereof such legends or recitals or changes not inconsistent with the
provisions of this Indenture as may be required by the Custodian, the
Depositary or by the National Association of Securities Dealers, Inc. in
order for the Notes to be tradeable on the PORTAL Market or tradeable on
Euroclear or Cedel or as may be required for the Notes to be tradeable on
any other market developed for trading of securities pursuant to Rule 144A
or Regulation S under the Securities Act or required to comply with any
applicable law or any regulation thereunder or with the rules and
regulations of any securities exchange or automated quotation system upon
which the Notes may be listed or traded or to conform with any usage with
respect thereto, or to indicate any special limitations or restrictions to
which any particular Notes are subject.
(d) Every Note that bears or is required under this Section 2.5(d)
to bear the legend set forth in this Section 2.5(d) (together with any
Common Stock issued upon conversion of the Notes and required to bear the
legend set forth in Section 2.5(e), collectively, the "Restricted
Securities") shall be subject to the restrictions on transfer set forth in
this Section 2.5(d) (including those set forth in the legend set forth
below) unless such restrictions on transfer shall be waived by written
consent of the Company, and the holder of each such Restricted Security, by
such Noteholder's acceptance thereof, agrees to be bound by all such
restrictions on transfer. As used in Sections 2.5(d) and 2.5(e), the term
"transfer" encompasses any sale, pledge, transfer or other disposition
whatsoever of any Restricted Security.
Until three (3) years after the original issuance date of any Note,
any certificate evidencing such Note (and all securities issued in exchange
therefor or substitution thereof, other than Common Stock, if any, issued
upon conversion thereof, which shall bear the legend set forth in Section
2.5(e), if applicable) shall bear a legend in substantially the following
form, unless otherwise agreed by the Company in writing, with written
notice thereof to the Trustee:
THE NOTE EVIDENCED HEREBY HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER: (1) REPRESENTS THAT (A) IT IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE
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501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE
NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL
NOT PRIOR TO THE DATE THAT IS THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THE NOTE EVIDENCED HEREBY AND THE LAST DATE ON WHICH RENAL
TREATMENT CENTERS, INC. (THE "COMPANY") OR ANY "AFFILIATE" (AS DEFINED IN
RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY WAS THE OWNER OF THE NOTE
(THE "RESTRICTION TERMINATION DATE") RESELL OR OTHERWISE TRANSFER THE NOTE
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO PNC BANK, NATIONAL ASSOCIATION, AS TRUSTEE (OR
A SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
SUCH TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED
STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH
CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY BEFORE
THE RESTRICTION TERMINATION DATE, THE HOLDER MUST CHECK THE APPROPRIATE BOX
SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS NOTE TO PNC BANK, NATIONAL ASSOCIATION, AS TRUSTEE (OR A
SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFER IS PURSUANT TO
CLAUSE (C), (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO PNC BANK, NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), SUCH
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CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
THIS LEGEND WILL BE REMOVED UPON ANY TRANSFER OF THE NOTE EVIDENCED
HEREBY UPON THE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any Note (or security issued in exchange or substitution therefor) as
to which such restrictions on transfer shall have expired in accordance
with their terms or as to which the conditions for removal of the foregoing
legend set forth therein have been satisfied may, upon surrender of such
Note for exchange to the Note registrar in accordance with the provisions
of this Section 2.5, be exchanged for a new Note or Notes, of like tenor
and aggregate principal amount, which shall not bear the restrictive legend
required by this Section 2.5(d).
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in the second paragraph of Section 2.5(b) and in this
Section 2.5(d)), a Global Note may not be transferred as a whole or in part
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.
The Depositary shall be a clearing agency registered under the
Exchange Act. The Company initially appoints The Depository Trust Company
to act as Depositary with respect to the Global Note. Initially, the Rule
144A Global Note and the Regulation S Global Note shall be issued to the
Depositary, registered in the name of Cede & Co., as the nominee of the
Depositary, and deposited with the Custodian for Cede & Co.
If at any time the Depositary for the Global Note notifies the Company
that it is unwilling or unable to continue as Depositary for the Note, the
Company may appoint a successor Depositary with respect to such Note. If a
successor Depositary is not appointed by the Company within ninety (90)
days after the Company receives such notice, the Company will execute, and
the Trustee, upon receipt of an Officers' Certificate for the
authentication and delivery of Notes, will authenticate and deliver, Notes
in certificated form, in an aggregate principal amount equal to the
principal amount of the Global Note, in exchange for the Global Note.
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If a Note in certificated form is issued in exchange for any portion
of a Global Note after the close of business at the office or agency where
such exchange occurs on any record date and before the opening of business
at such office or agency on the next succeeding interest payment date,
interest will not be payable on such interest payment date in respect of
such Note, but will be payable on such interest payment date only to the
person to whom interest in respect of such portion of such Global Note is
payable in accordance with the provisions of this Indenture.
Notes in certificated form issued in exchange for all or a part of a
Global Note pursuant to this Section 2.5 shall be registered in such names
and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. Upon execution and authentication, the Trustee shall
deliver such Notes in certificated form to the persons in whose names such
Notes in certificated form are so registered.
At such time as all interests in a Global Note have been redeemed,
repurchased, converted, canceled, exchanged for Notes in certificated form,
or transferred to a transferee who receives Notes in certificated form,
such Global Note shall, upon receipt thereof, be canceled by the Trustee in
accordance with standing procedures and instructions existing between the
Depositary and the Custodian. At any time prior to such cancellation, if
any interest in a Global Note is exchanged for Notes in certificated form,
redeemed, converted, repurchased or canceled, or transferred to a
transferee who receives Notes in certificated form therefor or any Note in
certificated form is exchanged or transferred for part of a Global Note,
the principal amount of such Global Note shall, in accordance with the
standing procedures and instructions existing between the Depositary and
the Custodian, be appropriately reduced or increased, as the case may be,
and an endorsement shall be made on such Global Note, by the Trustee or the
Custodian, at the direction of the Trustee, to reflect such reduction or
increase. In the event of any transfer of any beneficial interest between
the Rule 144A Global Note and the Regulation S Global Note in accordance
with the standing procedures and instructions between the Depositary and
the Custodian and the transfer restrictions set forth herein, the aggregate
principal amount of each of the Rule 144A Global Note and the Regulation S
Global Note shall be appropriately increased or decreased, as the case may
be, and an endorsement shall be made on each of the Rule 144A Global Note
and the Regulation S Global Note by the Trustee or the Custodian, at the
direction of the Trustee, to reflect such reduction or increase.
(e) Until three (3) years after the original issuance date of any
Note, any stock certificate representing Common Stock issued upon
conversion of such Note shall bear a legend in substantially the following
form, unless such
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Common Stock has been transferred pursuant to a registration statement that
has been declared effective under the Securities Act (and which continues
to be effective at the time of such transfer) or such Common Stock has been
issued upon conversion of Notes that have been transferred pursuant to a
registration statement that has been declared effective under the
Securities Act, or unless otherwise agreed by the Company in writing with
written notice thereof to the transfer agent:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
THE HOLDER HEREOF AGREES THAT PRIOR TO THE DATE THAT IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THE NOTE UPON THE CONVERSION OF
WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED AND THE LAST DATE ON
WHICH RENAL TREATMENT CENTERS, INC. (THE "COMPANY") OR ANY "AFFILIATE" (AS
DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY WAS THE OWNER
OF THE NOTE (THE "RESTRICTION TERMINATION DATE"); (1) IT WILL NOT RESELL OR
OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO THE
COMPANY, OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN COMPLIANCE WITH RULE 144A, (C) INSIDE THE UNITED STATES
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT) OR A PURCHASER WHO IS NOT A U.S.
PERSON THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS
APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE COMMON STOCK
EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE)), (D) OUTSIDE
THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED
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EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT
THE TIME OF SUCH TRANSFER); (2) PRIOR TO SUCH TRANSFER BEFORE THE
RESTRICTION TERMINATION DATE (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(F)
ABOVE), IT WILL FURNISH FIRST UNION NATIONAL BANK OF NORTH CAROLINA, AS
TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (3) IT WILL DELIVER TO EACH PERSON
TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A
TRANSFER PURSUANT TO CLAUSE 1(F) ABOVE) A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE
COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE 1(F) ABOVE OR UPON THE
RESTRICTION TERMINATION DATE OR UPON THE EARLIER SATISFACTION OF FIRST
UNION NATIONAL BANK OF NORTH CAROLINA, AS TRANSFER AGENT (OR A SUCCESSOR
TRANSFER AGENT, AS APPLICABLE), THAT THE COMMON STOCK HAS BEEN OR IS BEING
OFFERED AND SOLD IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT.
AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any such Common Stock as to which such restrictions on transfer shall
have expired in accordance with their terms or as to which the conditions
for removal of the foregoing legend set forth therein have been satisfied
may, upon surrender of the certificates representing such shares of Common
Stock for exchange in accordance with the procedures of the transfer agent
for the Common Stock, be exchanged for a new certificate or certificates
for a like number of shares of Common Stock, which shall not bear the
restrictive legend required by this Section 2.5(e).
(f) Any certificate evidencing a Note that has been transferred to
an Affiliate of the Company within three (3) years after the original
issuance date of the Note, as evidenced by a notation on the Assignment
Form for such transfer or in the representation letter delivered in respect
thereof (substantially in the form attached as an exhibit to the Offering
Memorandum), shall, until three (3) years after the last date on which the
Company or any Affiliate of the Company was an owner of such Note, bear a
legend in substantially the
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following form, unless otherwise agreed by the Company (with written
notice thereof to the Trustee):
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER AGREES (1) THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO RENAL TREATMENT
CENTERS, INC. OR ANY SUBSIDIARY THEREOF, (B) IN A TRANSACTION REGISTERED
UNDER THE SECURITIES ACT OR (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) AND (2) THAT
IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS
LEGEND SHALL BE REMOVED UPON THE TRANSFER OF THE NOTE EVIDENCED HEREBY OR
THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE PURSUANT TO THE
IMMEDIATELY PRECEDING SENTENCE.
IF THE PROPOSED TRANSFER IS PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH PNC BANK, NATIONAL ASSOCIATION, AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Any stock certificate representing Common Stock issued upon conversion
of such Note shall also bear a legend in substantially the form indicated
above, unless otherwise agreed by the Company (with written notice thereof
to the Trustee).
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(g) Notwithstanding any provision of Section 2.5 to the contrary, in
the event Rule 144(k) (or any successor rule) is amended to shorten the
three (3) year period under Rule 144(k) (or the corresponding period under
any successor rule), from and after receipt by the Trustee of the Officers'
Certificate and Opinion of Counsel provided for in this Section 2.5(g), (i)
the references in the first sentence of the second paragraph of Section
2.5(d) to "three (3) years" and in the restrictive legend set forth in such
paragraph to "THREE YEARS" shall be deemed for all purposes hereof to be
references to such shorter period, (ii) the references in the first
paragraph of Section 2.5(e) to "three (3) years" and in the restrictive
legend set forth in such paragraph to "THREE YEARS" shall be deemed for all
purposes hereof to be references to such shorter period and (iii) all
corresponding references in the Notes and the restrictive legends on the
Restricted Securities shall be deemed for all purposes hereof to be
references to such shorter period, provided that such changes shall not
become effective if they are otherwise prohibited by, or would otherwise
cause a violation of, the then-applicable federal securities laws. As soon
as practicable after the Company has knowledge of the effectiveness of any
such amendment to shorten the three (3) year period under Rule 144(k) (or
the corresponding period under any successor rule), unless such changes
would otherwise be prohibited by, or would otherwise cause a violation of,
the then-applicable securities laws, the Company shall provide to the
Trustee an Officers' Certificate and Opinion of Counsel informing the
Trustee of the effectiveness of such amendment and the effectiveness of the
foregoing changes to Sections 2.5(d) and 2.5(e) and the restrictive legends
on the Restricted Securities. This Section 2.5(g) shall apply to
successive amendments to Rule 144(k) (or any successor rule) shortening the
holding period thereunder.
Section 2.6. Mutilated, Destroyed, Lost or Stolen Notes. In case any
------------------------------------------
Note shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its request the Trustee or an authenticating
agent appointed by the Trustee shall authenticate and deliver, a new Note,
bearing a number not contemporaneously outstanding, in exchange and substitution
for the mutilated Note, or in lieu of and in substitution for the Note so
destroyed, lost or stolen. In every case the applicant for a substituted Note
shall furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be required by them to
save each of them harmless for any loss, liability, cost or expense caused by or
connected with such substitution, and, in every case of destruction, loss or
theft, the applicant also shall furnish to the Company, to the Trustee and, if
applicable, to such authenticating agent evidence to their satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof.
The Trustee or such authenticating agent may authenticate any such
substituted Note and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Note, the Company may
require the payment of a sum sufficient to cover any tax
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or other governmental charge that may be imposed in relation thereto and any
other expenses connected therewith. In case any Note which has matured or is
about to mature or has been called for redemption or is about to be converted
into Common Stock shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substitute Note, pay or authorize the payment
of or convert or authorize the conversion of the same (without surrender thereof
except in the case of a mutilated Note), as the case may be, if the applicant
for such payment or conversion shall furnish to the Company, to the Trustee and,
if applicable, to such authenticating agent such security or indemnity as may be
required by them to save each of them harmless for any loss, liability, cost or
expense caused by or connected with such substitution, and, in case of
destruction, loss or theft, evidence satisfactory to the Company, the Trustee
and, if applicable, any paying agent or conversion agent of the destruction,
loss or theft of such Note and of the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section 2.6
by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment or conversion of negotiable
instruments or other securities without their surrender.
Section 2.7. Temporary Notes. Pending the preparation of Notes in
---------------
certificated form, the Company may execute and the Trustee or an authenticating
agent appointed by the Trustee shall, upon the written request of the Company,
authenticate and deliver temporary Notes (printed, typewritten or lithographed).
Temporary Notes shall be issuable in any authorized denomination, and
substantially in the form of the Notes in certificated form, but with such
omissions, insertions and variations as may be appropriate for temporary Notes,
all as may be determined by the Company. Every such temporary Note shall be
executed by the Company and authenticated by the Trustee or such authenticating
agent upon the same conditions and in substantially the same manner, and with
the same effect, as the Notes in certificated form. Without unreasonable delay
the Company will execute and deliver to the Trustee or such authenticating agent
Notes in certificated form (other than in the case of Notes in global form) and
thereupon any or all temporary Notes (other than any such Note in global form)
may be surrendered in exchange therefor, at each office or agency maintained by
the Company pursuant to Section 5.2 and the Trustee or such authenticating agent
shall authenticate and deliver in exchange for such temporary Notes an equal
aggregate principal amount of Notes in certificated form. Such exchange shall
be made by the Company at its own expense and without any charge therefor.
Until so exchanged, the temporary Notes shall in all respects be entitled to the
same benefits and subject to the same limitations under this Indenture as Notes
in certificated form authenticated and delivered hereunder.
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Section 2.8. Cancellation of Notes Paid, Etc. All Notes surrendered for
--------------------------------
the purpose of payment, redemption, repurchase, conversion, exchange or
registration of transfer, shall, if surrendered to the Company or any paying
agent or any Note registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be
promptly canceled by it, and no Notes shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture; provided that
--------
any Note or portion thereof surrendered for repurchase shall only be canceled at
such time as such Note or portion thereof has been repurchased pursuant to
Article XVI hereof. The Trustee shall destroy canceled Notes (unless the
Company directs it to do otherwise) and, after such destruction, shall, if
requested by the Company, deliver a certificate of such destruction to the
Company. If the Company shall acquire any of the Notes, such acquisition shall
not operate as a redemption or satisfaction of the indebtedness represented by
such Notes unless and until the same are delivered to the Trustee for
cancellation.
ARTICLE III.
REDEMPTION OF NOTES
Section 3.1. Redemption Prices. The Company may not redeem the Notes
-----------------
prior to July 17, 1999. At any time on or after July 17, 1999, the Company may,
at its option from time to time, redeem all or any part of the Notes on any date
prior to maturity, upon notice as set forth in Section 3.2, and at the optional
redemption prices set forth in the form of Note attached as Exhibit A hereto,
together with accrued interest to, but excluding, the date fixed for redemption.
Section 3.2. Notice of Redemption; Selection of Notes. In case the
----------------------------------------
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Notes pursuant to Section 3.1, it shall fix a date for
redemption and it or, at its request, the Trustee in the name of and at the
expense of the Company, shall mail or cause to be mailed a notice of such
redemption at least 15 and not more than 60 days prior to the date fixed for
redemption to the holders of Notes so to be redeemed as a whole or in part at
their last addresses as the same appear on the Note register (provided that if
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the Company shall give such notice, it shall also give written notice, and
written notice of the Notes to be redeemed, to the Trustee). Such mailing shall
be by first class mail. The notice if mailed in the manner herein provided
shall be conclusively presumed to have been duly given, whether or not the
holder receives such notice. In any case, failure to give such notice by mail
or any defect in the notice to the holder of any Note designated for redemption
as a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Note.
Each such notice of redemption shall specify the aggregate principal amount
of Notes to be redeemed, the date fixed for redemption, the redemption price at
which Notes are to be redeemed, the place or places of payment, that payment
will be made upon presentation and surrender of such Notes, that interest
accrued to the date fixed for redemption will be paid as specified in said
notice, and that on and after said date interest thereon or on the portion
thereof to be redeemed will cease to accrue. Such notice shall also state the
current
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Conversion Price and the date on which the right to convert such Notes or
portions thereof into Common Stock will expire. If fewer than all the Notes are
to be redeemed, the notice of redemption shall identify the Notes to be
redeemed. In case any Note is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for redemption, upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion thereof will be issued.
On or prior to the redemption date specified in the notice of redemption
given as provided in this Section 3.2, the Company will deposit with the Trustee
or with one or more paying agents (or, if the Company is acting as its own
paying agent, set aside, segregate and hold in trust as provided in Section 5.4)
an amount of money sufficient to redeem on the redemption date all the Notes (or
portions thereof) so called for redemption (other than those theretofore
surrendered for conversion into Common Stock) at the appropriate redemption
price, together with accrued interest to, but excluding, the date fixed for
redemption; provided that if such payment is made on the redemption date it must
--------
be received by the Trustee or paying agent, as the case may be, by 10:00 a.m.
New York City time, on such date. If any Note called for redemption is
converted pursuant hereto, any money deposited with the Trustee or any paying
agent or so segregated and held in trust for the redemption of such Note shall
be paid to the Company upon its written request, or, if then held by the
Company, shall be discharged from such trust. If fewer than all the Notes are
to be redeemed, the Company will give the Trustee written notice in the form of
an Officers' Certificate not fewer than forty-five (45) days (or such shorter
period of time as may be acceptable to the Trustee) prior to the redemption date
as to the aggregate principal amount of Notes to be redeemed.
If fewer than all the Notes are to be redeemed, the Trustee shall select
the Notes or portions thereof to be redeemed (in principal amounts of $1,000 or
integral multiples thereof), by lot or, in its discretion, on a pro rata basis
with such adjustments up to $1,000 in order to retain the minimum denominations
of the Notes. If any Note selected for partial redemption is converted in part
after such selection, the converted portion of such Note shall be deemed (so far
as may be) to be the portion to be selected for redemption. The Notes (or
portions thereof) so selected shall be deemed duly selected for redemption for
all purposes hereof, notwithstanding that any such Note is converted as a whole
or in part before the mailing of the notice of redemption.
Upon any redemption of less than all Notes, the Company and the Trustee may
(but need not) treat as outstanding any Notes surrendered for conversion during
the period of fifteen (15) days next preceding the mailing of a notice of
redemption and may (but need not) treat as outstanding any Note authenticated
and delivered during such period in exchange for the unconverted portion of any
Note converted in part during such period.
Section 3.3. Payment of Notes Called for Redemption. If notice of
--------------------------------------
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date and at
the place or places stated in such notice at the
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applicable redemption price, together with interest accrued to (but excluding)
the date fixed for redemption, and on and after said date (unless the Company
shall default in the payment of such Notes at the redemption price, together
with interest accrued to said date) interest on the Notes or portion of Notes so
called for redemption shall cease to accrue and such Notes shall cease after the
close of business on the Business Day next preceding the date fixed for
redemption to be convertible into Common Stock and, except as provided in
Sections 8.5 and 13.4, to be entitled to any benefit or security under this
Indenture, and the holders thereof shall have no right in respect of such Notes
except the right to receive the redemption price thereof and unpaid interest to
(but excluding) the date fixed for redemption. On presentation and surrender of
such Notes at a place of payment in said notice specified, the said Notes or the
specified portions thereof shall be paid and redeemed by the Company at the
applicable redemption price, together with interest accrued thereon to (but
excluding) the date fixed for redemption; provided that, if the applicable
--------
redemption date is an interest payment date, the semi-annual payment of interest
becoming due on such date shall be payable to the holders of such Notes
registered as such on the relevant record date instead of the holders
surrendering such Notes for redemption on such date.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the holder thereof, at
the expense of the Company, a new Note or Notes, of authorized denominations, in
principal amount equal to the unredeemed portion of the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not pay the redemption
price of any Notes or mail any notice of optional redemption during the
continuance of a default in payment of interest or premium on the Notes or of
any Event of Default of which, in the case of any Event of Default other than
under Sections 7.1 (a) or 7.1 (b), a Responsible Officer of the Trustee has
knowledge. If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and premium, if any, shall,
until paid or duly provided for, bear interest from the date fixed for
redemption at the rate borne by the Note and such Note shall remain convertible
into Common Stock until the principal and premium, if any, shall have been paid
or duly provided for.
Section 3.4. Conversion Arrangement on Call for Redemption. In
---------------------------------------------
connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more investment
bankers or other purchasers to purchase such Notes by paying to the Trustee in
trust for the Noteholders, on or before the date fixed for redemption, an amount
not less than the applicable redemption price, together with interest accrued to
(but excluding) the date fixed for redemption, of such Notes. Notwithstanding
anything to the contrary contained in this Article III, the obligation of the
Company to pay the redemption price of such Notes, together with interest
accrued to (but excluding) the date fixed for redemption, shall be deemed to be
satisfied and discharged to the extent such amount is so paid by such
purchasers. If such an agreement is entered into (a copy of which shall be
filed with the Trustee prior to the date fixed for redemption), any Notes not
duly surrendered for conversion by the holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such holders and
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(notwithstanding anything to the contrary contained in Article XV) surrendered
by such purchasers for conversion, all as of immediately prior to the close of
business on the date fixed for redemption (and the right to convert any such
Notes shall be extended through such time), subject to payment of the above
amount as aforesaid. At the direction of the Company, the Trustee shall hold and
dispose of any such amount paid to it in the same manner as it would monies
deposited with it by the Company for the redemption of Notes. Without the
Trustee's prior written consent, no arrangement between the Company and such
purchasers for the purchase and conversion of any Notes shall increase or
otherwise affect any of the powers, duties, responsibilities or obligations of
the Trustee as set forth in this Indenture, and the Company agrees to indemnify
the Trustee from, and hold it harmless against, any loss, liability or expense
arising out of or in connection with any such arrangement for the purchase and
conversion of any Notes between the Company and such purchasers to which the
Trustee has not consented in writing, including the costs and expenses,
including reasonable legal fees, incurred by the Trustee in the defense of any
claim or liability arising out of or in connection with the exercise or
performance of any of its powers, duties, responsibilities or obligations under
this Indenture.
ARTICLE IV.
SUBORDINATION OF NOTES
Section 4.1. Agreement of Subordination. The Company covenants and
--------------------------
agrees, and each holder of Notes issued hereunder by his acceptance thereof
likewise covenants and agrees, that all Notes shall be issued subject to the
provisions of this Article IV; and each Person holding any Note, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts and
agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest on all Notes
(including, but not limited to, the redemption price with respect to the Notes
called for redemption in accordance with Section 3.2 or submitted for repurchase
in accordance with Section 16.2, as the case may be, as provided in the
Indenture) issued hereunder shall, to the extent and in the manner hereinafter
set forth, be subordinated and subject in right of payment to the prior payment
in full of all Senior Indebtedness, whether outstanding at the date of this
Indenture or thereafter incurred.
No provision of this Article IV shall prevent the occurrence of any default
or Event of Default hereunder.
Section 4.2. Payments to Noteholders. No payment shall be made with
-----------------------
respect to the principal of, or premium, if any, or interest on the Notes
(including, but not limited to, the redemption price with respect to the Notes
to be called for redemption in accordance with Section 3.2 or submitted for
repurchase in accordance with Section 16.2, as the case may be, as provided in
the Indenture), except payments and distributions made by the Trustee as
permitted by the first or second paragraph of Section 4.5, if:
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(1) a default in the payment of principal, premium, interest,
rent or other obligations due on any Senior Indebtedness occurs and is
continuing (or, in the case of Senior Indebtedness for which there is a
period of grace, in the event of such a default that continues beyond the
period of grace, if any, specified in the instrument or lease evidencing
such Senior Indebtedness), unless and until such default shall have been
cured or waived or shall have ceased to exist; or
(2) a default, other than a payment default, on any Designated
Senior Indebtedness occurs and is continuing that then permits holders of
such Designated Senior Indebtedness to accelerate its maturity and the
Trustee receives a notice of the default (a "Payment Blockage Notice") from
a Representative or the Company.
If the Trustee receives any Payment Blockage Notice pursuant to clause (2)
above, no subsequent Payment Blockage Notice shall be effective for purposes of
this Section unless and until (A) at least 365 days shall have elapsed since the
initial effectiveness of the immediately prior Payment Blockage Notice, and (B)
all scheduled payments of principal, premium, if any, and interest on the Notes
that have come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
The Company may and shall resume payments on and distributions in respect
of the Notes upon the earlier of:
(1) the date upon which the default is cured or waived or
ceases to exist, or
(2) in the case of a default referred to in clause (2) above,
179 days pass after notice is received if the maturity of such Designated
Senior Indebtedness has not been accelerated,
unless this Article IV otherwise prohibits the payment or distribution at the
time of such payment or distribution.
Upon any payment by the Company, or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding-up or liquidation or reorganization of the
Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full in cash or other payment
satisfactory to the holders of such Senior Indebtedness, or payment thereof in
accordance with its terms provided for in cash or other payment satisfactory to
the holders of such Senior Indebtedness, before any payment is made on account
of the principal of, premium, if any, or interest on the Notes (except payments
made pursuant to Article XIII from monies deposited with the Trustee pursuant
thereto prior to commencement of proceedings for such dissolution, winding-up,
liquidation or reorganization); and upon any such dissolution or winding-up or
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liquidation or reorganization of the Company or bankruptcy, insolvency,
receivership or other proceeding, any payment by the Company, or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to which the holders of the Notes or the Trustee would be entitled,
except for the provision of this Article IV, shall (except as aforesaid) be paid
by the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the holders of
the Notes or by the Trustee under this Indenture if received by them or it,
directly to the holders of Senior Indebtedness (pro rata to such holders on the
basis of the respective amounts of Senior Indebtedness held by such holders, or
as otherwise required by law or a court order) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay all
Senior Indebtedness in full, in cash or other payment satisfactory to the
holders of such Senior Indebtedness, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness, before any
payment or distribution or provision therefor is made to the holders of the
Notes or to the Trustee.
For purposes of this Article IV, the words, "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article IV with respect to
the Notes to the payment of all Senior Indebtedness which may at the time be
outstanding; provided that (i) the Senior Indebtedness is assumed by the new
--------
corporation, if any, resulting from any reorganization or readjustment, and (ii)
the rights of the holders of Senior Indebtedness (other than leases which are
not assumed by the Company or the new corporation, as the case may be) are not,
without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article XII shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 4.2
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article XII.
In the event of the acceleration of the Notes because of an Event of
Default, no payment or distribution shall be made to the Trustee or any holder
of Notes in respect of the principal of, premium, if any, or interest on the
Notes (including, but not limited to, the redemption price with respect to the
Notes called for redemption in accordance with Section 3.2 or submitted for
repurchase in accordance with Section 16.2, as the case may be, as provided in
the Indenture), except payments and distributions made by the Trustee as
permitted by the first or second paragraph of Section 4.5, until all Senior
Indebtedness has been paid in full in cash or other payment satisfactory to the
holders of Senior Indebtedness or such acceleration is rescinded in accordance
with the terms of this Indenture. If payment of the Notes is accelerated
because of an Event of Default, the Company shall promptly notify holders of
Senior Indebtedness of the acceleration and the Trustee shall use its best
efforts to
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promptly notify First Union National Bank of North Carolina, as Agent under the
Credit Agreement (or any successor agent thereunder of which it has received
prior written notice) of such acceleration, in each case at the address set
forth in the notice from the Agent (or successor agent) to the Trustee as being
the address to which the Trustee should send its notice pursuant to this Section
4.2, unless, in each case, there are no payment obligations of the Company
thereunder and all obligations thereunder to extend credit have been terminated
or expired.
In the event that, notwithstanding the foregoing provisions, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (including, without limitation, by way of setoff or
otherwise), prohibited by the foregoing, shall be received by the Trustee or the
holders of the Notes before all Senior Indebtedness is paid in full in cash or
other payment satisfactory to the holders of such Senior Indebtedness, or
provision is made for such payment thereof in accordance with its terms in cash
or other payment satisfactory to the holders of such Senior Indebtedness, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated by
the Company, for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay all Senior Indebtedness in full in cash or
other payment satisfactory to the holders of such Senior Indebtedness, after
giving effect to any concurrent payment or distribution to or for the holders of
such Senior Indebtedness.
Nothing in this Section 4.2 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 8.6. This Section 4.2 shall be subject to
the further provisions of Section 4.5.
Section 4.3. Subrogation of Notes. Subject to the payment in full of
--------------------
all Senior Indebtedness, the rights of the holders of the Notes shall be
subrogated to the extent of the payments or distributions made to the holders of
such Senior Indebtedness pursuant to the provisions of this Article IV (equally
and ratably with the holders of all indebtedness of the Company which by its
express terms is subordinated to other indebtedness of the Company to
substantially the same extent as the Notes are subordinated and is entitled to
like rights of subrogation) to the rights of the holders of Senior Indebtedness
to receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Indebtedness until the principal, premium, if
any, and interest on the Notes shall be paid in full; and, for the purposes of
such subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the holders of the
Notes or the Trustee would be entitled except for the provisions of this Article
IV, and no payment over pursuant to the provisions of this Article IV, to or for
the benefit of the holders of Senior Indebtedness by holders of the Notes or the
Trustee, shall, as between the Company, its creditors other than holders of
Senior Indebtedness, and the holders of the Notes, be deemed to be a payment by
the Company to or on account of the Senior Indebtedness; and no payments or
distributions of cash, property or securities to or for the benefit of the
holders of
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the Notes pursuant to the subrogation provisions of this Article IV, which would
otherwise have been paid to the holders of Senior Indebtedness shall be deemed
to be a payment by the Company to or for the account of the Notes. It is
understood that the provisions of this Article IV are and are intended solely
for the purposes of defining the relative rights of the holders of the Notes, on
the one hand, and the holders of the Senior Indebtedness, on the other hand.
Nothing contained in this Article IV or elsewhere in this Indenture or in
the Notes is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Notes the principal of (and premium, if any) and interest on the
Notes as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the holders of
the Notes and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or the
holder of any Note from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article IV of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
Upon any payment or distribution of assets of the Company referred to in
this Article IV, the Trustee, subject to the provisions of Section 8.1, and the
holders of the Notes shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such bankruptcy, dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution, delivered to the Trustee or
to the holders of the Notes, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon and all other facts pertinent thereto or to this Article IV.
Section 4.4. Authorization to Effect Subordination. Each holder of a
-------------------------------------
Note by the holder's acceptance thereof authorizes and directs the Trustee on
the holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article IV and appoints the
Trustee to act as the holder's attorney-in-fact for any and all such purposes.
If the Trustee does not file a proper proof of claim or proof of debt in the
form required in any proceeding referred to in the third paragraph of Section
7.2 hereof at least 30 days before the expiration of the time to file such
claim, the holders of any Senior Indebtedness or their representatives are
hereby authorized to file an appropriate claim for and on behalf of the holders
of the Notes.
Section 4.5. Notice to Trustee. The Company shall give prompt written
-----------------
notice in the form of an Officers' Certificate to a Responsible Officer of the
Trustee and to any paying agent of any fact known to the Company which would
prohibit the making of any payment of monies to or by the Trustee or any paying
agent in respect of the Notes pursuant to the
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provisions of this Article IV. Notwithstanding the provisions of this Article IV
or any other provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts which would prohibit the making of any
payment of monies to or by the Trustee in respect of the Notes pursuant to the
provisions of this Article IV, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof at the Corporate Trust Office
from the Company (in the form of an Officers' Certificate) or a Representative
or a holder or holders of Senior Indebtedness or from any trustee thereof; and
before the receipt of any such written notice, the Trustee, subject to the
provisions of Section 8.1, shall be entitled in all respects to assume that no
such facts exist; provided that if on a date not fewer than two Business Days
--------
prior to the date upon which by the terms hereof any such monies may become
payable for any purpose (including, without limitation, the payment of the
principal of, or premium, if any, or interest on any Note) the Trustee shall not
have received, with respect to such monies, the notice provided for in this
Section 4.5, then, anything herein contained to the contrary notwithstanding,
the Trustee shall have full power and authority to receive such monies and to
apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such prior date.
Notwithstanding anything in this Article IV to the contrary, nothing shall
prevent any payment by the Trustee to the Noteholders of monies deposited with
it pursuant to Section 13.1, and any such payment shall not be subject to the
provisions of Section 4.1 or 4.2; provided, however, that if the deposit of
-------- -------
monies with the Trustee was effected in violation of the provisions of the
Credit Agreement, the payment of monies so deposited shall be subject to the
provisions of Sections 4.1 and 4.2.
The Trustee, subject to the provisions of Section 8.1, shall be entitled to
rely on the delivery to it of a written notice by a Representative or a person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a
Representative or a holder of Senior Indebtedness or a trustee on behalf of any
such holder or holders. In the event that the Trustee determines in good faith
that further evidence is required with respect to the right of any person as a
holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article IV, the Trustee may request such person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such person, the extent to which such person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such person under this Article IV, and if such
evidence is not furnished, the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.
Section 4.6. Trustee's Relation to Senior Indebtedness. The Trustee in
-----------------------------------------
its individual capacity shall be entitled to all the rights set forth in this
Article IV in respect of any Senior Indebtedness at any time held by it, to the
same extent as any other holder of Senior Indebtedness, and nothing in Section
8.13 or elsewhere in this Indenture shall deprive the Trustee of any of its
rights as such holder.
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With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article IV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 8.1, the Trustee shall not be liable to any holder of
Senior Indebtedness if it shall pay over or deliver to holders of Notes, the
Company or any other person money or assets to which any holder of Senior
Indebtedness shall be entitled by virtue of this Article IV or otherwise.
Section 4.7. No Impairment of Subordination. No right of any present
------------------------------
or future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Section 4.8. Certain Conversions Deemed Payment. For the purposes of
----------------------------------
this Article IV only, (1) the issuance and delivery of junior securities upon
conversion of Notes in accordance with Article XV shall not be deemed to
constitute a payment or distribution on account of the principal of (or premium,
if any) or interest on Notes or on account of the purchase or other acquisition
of Notes, and (2) the payment, issuance or delivery of cash (except in
satisfaction of fractional shares pursuant to Section 15.2), property or
securities (other than junior securities) upon conversion of a Note shall be
deemed to constitute payment on account of the principal of such Note. For the
purposes of this Section 4.8, the term "junior securities" means (a) shares of
any stock of any class of the Company, or (b) securities of the Company which
are subordinated in right of payment to all Senior Indebtedness which may be
outstanding at the time of issuance or delivery of such securities to
substantially the same extent as, or to a greater extent than, the Notes are so
subordinated as provided in this Article. Nothing contained in this Article IV
or elsewhere in this Indenture or in the Notes is intended to or shall impair,
as among the Company, its creditors other than holders of Senior Indebtedness
and the Noteholders, the right, which is absolute and unconditional, of the
Holder of any Note to convert such Note in accordance with Article XV.
Section 4.9. Article Applicable to Paying Agents. If at any time any
-----------------------------------
paying agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "Trustee" as used in this Article shall
(unless the context otherwise requires) be construed as extending to and
including such paying agent within its meaning as fully for all intents and
purposes as if such paying agent were named in this Article in addition to or in
place of the Trustee; provided, however, that the first paragraph of Section 4.5
-------- -------
shall not apply to the Company or any Affiliate of the Company if it or such
Affiliate acts as paying agent.
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Section 4.10. Senior Indebtedness Entitled to Rely. The holders of
------------------------------------
Senior Indebtedness (including, without limitation, Designated Senior
Indebtedness) shall have the right to rely upon this Article IV, and no
amendment or modification of the provisions contained herein shall diminish the
rights of such holders unless such holders shall have agreed in writing thereto.
ARTICLE V.
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1. Payment of Principal, Premium and Interest The Company
------------------------------------------
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest on each of the Notes at the
places, at the respective times and in the manner provided herein and in the
Notes. Each installment of interest on the Notes due on any semi-annual
interest payment date may be paid by mailing checks for the interest payable to
or upon the written order of the holders of Notes entitled thereto as they shall
appear on the Note register; provided, that with respect to any holder of Notes
--------
with an aggregate principal amount equal to or in excess of $5,000,000, at the
request of such holder in writing to the Company (who shall then furnish notice
to such effect to the Trustee), interest on such holder's Notes shall be paid by
wire transfer in immediately available funds in accordance with the wire
transfer instructions supplied by such holder to the Trustee and paying agent
(if different from the Trustee).
Section 5.2. Maintenance of Office or Agency. The Company will
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or agency
where the Notes may be surrendered for registration of transfer or exchange or
for presentation for payment or for conversion or redemption and where notices
and demands to or upon the Company in respect of the Notes and this Indenture
may be served. The Company will give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency not
designated or appointed by the Trustee. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office or the office or
agency of the Trustee in the Borough of Manhattan, The City of New York.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided that no
--------
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of New York, for such purposes. The Company will give prompt written notice to
the holders of any such designation or rescission and of any change in the
location of any such other office or agency.
The Company hereby initially designates the Trustee as paying agent, Note
registrar, Custodian and conversion agent, and each of the Corporate Trust
Office of the Trustee and the
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office or agency of the Trustee in the Borough of Manhattan, The City of New
York (which shall initially be the Depository Trust Company, located at 55 Water
Street, Jeannette Park Entrance, 1st Floor, New York, New York 10041), one such
office or agency of the Company for each of the aforesaid purposes.
The Trustee agrees to mail, or cause to be mailed, the notices set forth in
Section 8.10(a) and the third paragraph of Section 8.11.
Section 5.3. Appointments to Fill Vacancies in Trustee's Office. The
--------------------------------------------------
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.4. Provisions as to Paying Agent.
-----------------------------
(a) If the Company shall appoint a paying agent other than the
Trustee, or if the Trustee shall appoint such a paying agent, it will cause
such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of
this Section 5.4:
(1) that it will hold all sums held by it as such agent for the
payment of the principal of and premium, if any, or interest on the
Notes (whether such sums have been paid to it by the Company or by any
other obligor on the Notes) in trust for the benefit of the holders of
the Notes;
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Notes) to make any payment of
the principal of and premium, if any, or interest on the Notes when
the same shall be due and payable; and
(3) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it will forthwith pay to the
Trustee all sums so held in trust.
The Company shall, on or before each due date of the principal of,
premium, if any, or interest on the Notes, deposit with the paying agent a
sum sufficient to pay such principal, premium, if any, or interest, and
(unless such paying agent is the Trustee) the Company will promptly notify
the Trustee of any failure to take such action; provided that if such
--------
deposit is made on the due date, such deposit shall be received by the
paying agent by 10:00 a.m. New York City time, on such date.
(b) If the Company shall act as its own paying agent, it will, on
or before each due date of the principal of, premium, if any, or interest
on the Notes, set aside, segregate and hold in trust for the benefit of the
holders of the
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Notes a sum sufficient to pay such principal, premium, if any, or interest
so becoming due and will notify the Trustee of any failure to take such
action and of any failure by the Company (or any other obligor under the
Notes) to make any payment of the principal of, premium, if any, or
interest on the Notes when the same shall become due and payable.
(c) Anything in this Section 5.4 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a satisfaction
and discharge of this Indenture, or for any other reason, pay or cause to
be paid to the Trustee all sums held in trust by the Company or any paying
agent hereunder as required by this Section 5.4, such sums to be held by
the Trustee upon the trusts herein contained and upon such payment by the
Company or any paying agent to the Trustee, the Company or such paying
agent shall be released from all further liability with respect to such
sums.
(d) Anything in this Section 5.4 to the contrary
notwithstanding, the agreement to hold sums in trust as provided in this
Section 5.4 is subject to Sections 13.3 and 13.4.
Section 5.5. Corporate Existence. Subject to Article XII, the Company
-------------------
will do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence.
Section 5.6. Rule 144A Information Requirement. During the period
---------------------------------
beginning on the latest date of the original issuance of the Notes and ending on
the date that is three years from such date, the Company covenants and agrees
that it shall, during any period in which it is not subject to Section 13 or
15(d) under the Exchange Act, make available to any holder or beneficial holder
of Notes or any Common Stock issued upon conversion thereof which continue to be
Restricted Securities in connection with any sale thereof and any prospective
purchaser of Notes or such Common Stock from such holder or beneficial holder,
the information required pursuant to Rule 144A(d)(4) under the Securities Act
upon the request of any holder or beneficial holder of the Notes or such Common
Stock and it will take such further action as any holder or beneficial holder of
such Notes or such Common Stock may reasonably request, all to the extent
required from time to time to enable such holder or beneficial holder to sell
its Notes or Common Stock without registration under the Securities Act within
the limitation of the exemption provided by Rule 144A, as such Rule may be
amended from time to time. Upon the request of any holder or any beneficial
holder of the Notes or such Common Stock, the Company will deliver to such
holder a written statement as to whether it has complied with such requirements.
Section 5.7. Stay, Extension and Usury Laws. The Company covenants (to
------------------------------
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of premium,
if any, or interest on the Notes as contemplated herein, wherever
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enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture and the Company (to the extent it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law has been
enacted.
Section 5.8. Compliance Certificate. The Company shall deliver to the
----------------------
Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending closest to December 31, 1996) an
Officers' Certificate stating whether or not the signers know of any Event of
Default that occurred during such period. If they do, such Officers'
Certificate shall describe the Event of Default and its status.
ARTICLE VI.
NOTEHOLDERS' LISTS AND REPORTS BY
THE COMPANY AND TRUSTEE
Section 6.1. Noteholders' Lists. The Company covenants and agrees that
------------------
it will furnish or cause to be furnished to the Trustee, semiannually, not more
than fifteen (15) days after each January 1 and July 1 in each year beginning
with July 1, 1996, and at such other times as the Trustee may request in
writing, within thirty (30) days after receipt by the Company of any such
request (or such lesser time as the Trustee may reasonably request in order to
enable it to timely provide any notice to be provided by it hereunder), a list
in such form as the Trustee may reasonably require of the names and addresses of
the holders of Notes as of a date not more than fifteen (15) days (or such other
date as the Trustee may reasonably request in order to so provide any such
notices) prior to the time such information is furnished, except that no such
list need be furnished so long as the Trustee is acting as Note registrar.
Section 6.2. Preservation and Disclosure of Lists.
------------------------------------
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of
the holders of Notes contained in the most recent list furnished to it as
provided in Section 6.1 or maintained by the Trustee in its capacity as
Note registrar, if so acting. The Trustee may destroy any list furnished to
it as provided in Section 6.1 upon receipt of a new list so furnished.
(b) The rights of Noteholders to communicate with other holders
of Notes with respect to their rights under this Indenture or under the
Notes, and the corresponding rights and duties of the Trustee, shall be as
provided by the Trust Indenture Act.
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(c) Every Noteholder, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of holders of Notes
made pursuant to the Trust Indenture Act.
Section 6.3. Reports by Trustee.
------------------
(a) Within 60 days after May 15 of each year commencing with
the year 1997, the Trustee shall transmit to holders of Notes such reports
dated as of May 15 of the year in which such reports are made concerning
the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant thereto.
(b) A copy of such report shall, at the time of such
transmission to holders of Notes, be filed by the Trustee with each stock
exchange and automated quotation system upon which the Notes are listed and
with the Company. The Company will notify the Trustee within a reasonable
time when the Notes are listed on any stock exchange and automated
quotation system.
Section 6.4. Reports by Company. The Company shall file with the
------------------
Trustee (and the Commission if at any time the Indenture becomes qualified under
the Trust Indenture Act), and transmit to holders of Notes, such information,
documents and other reports and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant to such Act; provided that any such information, documents or reports
--------
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act shall be filed with the Trustee within fifteen (15) days after the
same is so required to be filed with the Commission.
ARTICLE VII.
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS
ON AN EVENT OF DEFAULT
Section 7.1. Events of Default. In case one or more of the following
-----------------
Events of Default (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body) shall have occurred and be
continuing:
(a) default in the payment of any installment of interest upon
any of the Notes as and when the same shall become due and payable, and
continuance of such default for a period of thirty (30) days, whether or
not such payment is permitted under Article IV hereof; or
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(b) default in the payment of the principal of or premium, if
any, on any of the Notes as and when the same shall become due and payable
either at maturity or in connection with any redemption pursuant to Article
III or repurchase pursuant to Article XVI, by acceleration or otherwise,
whether or not such payment is permitted under Article IV hereof; or
(c) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the Company
in the Notes or in this Indenture (other than a covenant or agreement a
default in whose performance or whose breach is elsewhere in this Section
7.1 specifically dealt with) continued for a period of sixty (60) days
after the date on which written notice of such failure, requiring the
Company to remedy the same, shall have been given to the Company by the
Trustee, or to the Company and a Responsible Officer of the Trustee by the
holders of at least 25 percent in aggregate principal amount of the Notes
at the time outstanding determined in accordance with Section 9.4; or
(d) failure on the part of the Company to make any payment at
maturity, including any applicable grace period, in respect of indebtedness
for borrowed money of the Company, which payment is in an amount in excess
of $5 million, and continuance of such failure for a period of thirty (30)
days after the date on which the written notice of such failure, requiring
the Company to remedy the same, shall have been given to the Company by the
Trustee, or to the Company and a Responsible Officer of the Trustee by the
holders of at least 25 percent in aggregate principal amount of the Notes
at the time outstanding determined in accordance with Section 9.4; or
(e) default by the Company with respect to any indebtedness for
borrowed money of the Company, which default results in acceleration of any
such indebtedness which is in an amount of in excess of $5 million without
such indebtedness having been discharged, or such acceleration having been
rescinded or annulled for a period of thirty (30) days after the date on
which the written notice of such default, requiring the Company to remedy
the same, shall have been given to the Company by the Trustee, or to the
Company and a Responsible Officer of the Trustee by the holders of at least
25 percent in aggregate principal amount of the Notes at the time
outstanding determined in accordance with Section 9.4; or
(f) the Company shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect
to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to
the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or
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shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or
(g) an involuntary case or other proceeding shall be commenced
against the Company seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of sixty (60)
consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(f) or (g)), unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the holders of not less
than 25 percent in aggregate principal amount of the Notes then outstanding
hereunder determined in accordance with Section 9.4, by notice in writing to the
Company (and to the Trustee if given by Noteholders), may declare the principal
of all the Notes and the interest accrued thereon to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in
Section 7.1(f) or (g) occurs, the principal of all the Notes and the interest
accrued thereon shall be immediately and automatically due and payable without
necessity of further action. This provision, however, is subject to the
condition that if, at any time after the principal of the Notes shall have been
so declared due and payable, and before any judgment or decree for the payment
of the monies due shall have been obtained or entered as hereinafter provided,
the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
all matured installments of interest upon all Notes and the principal of and
premium, if any, on any and all Notes which shall have become due otherwise than
by acceleration (with interest on overdue installments of interest (to the
extent that payment of such interest is enforceable under applicable law) and on
such principal and premium, if any, at the rate borne by the Notes, to the date
of such payment or deposit) and amounts due to the Trustee pursuant to Section
8.6, and if any and all defaults under this Indenture, other than the nonpayment
of principal of and premium, if any, and accrued interest on Notes which shall
have become due by acceleration, shall have been cured or waived pursuant to
Section 7.7, then and in every such case the holders of a majority in aggregate
principal amount of the Notes then outstanding determined in accordance with
Section 9.4, by written notice to the Company and to the Trustee, may waive all
defaults or Events of Default and rescind and annul such declaration and its
consequences; but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or Event of Default, or shall impair any
right consequent thereon. The Company shall notify a Responsible Officer of the
Trustee, promptly upon becoming aware thereof, of any Event of Default.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such waiver or rescission and annulment or for any other reason or shall have
been determined adversely to
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the Trustee, then and in every such case the Company, the holders of Notes, and
the Trustee shall be restored respectively to their several positions and rights
hereunder, and all rights, remedies and powers of the Company, the holders of
Notes, and the Trustee shall continue as though no such proceeding had been
taken.
Section 7.2. Payments of Notes on Default; Suit Therefor. The Company
-------------------------------------------
covenants that (a) in case default shall be made in the payment of any
installment of interest upon any of the Notes as and when the same shall become
due and payable, and such default shall have continued for a period of thirty
(30) days, or (b) in case default shall be made in the payment of the principal
of or premium, if any, on any of the Notes as and when the same shall have
become due and payable, whether at maturity of the Notes or in connection with
any redemption or repurchase, under this Indenture, by declaration or otherwise,
then, upon demand of the Trustee, the Company will pay to the Trustee, for the
benefit of the holders of the Notes, the whole amount that then shall have
become due and payable on all such Notes for principal and premium, if any, or
interest, or both, as the case may be, with interest upon the overdue principal
and premium, if any, and (to the extent that payment of such interest is
enforceable under applicable law) upon the overdue installments of interest at
the rate borne by the Notes; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
compensation to the Trustee, its agents, attorney and counsel, and any expenses
or liabilities incurred by the Trustee hereunder. Until such demand by the
Trustee, the Company may pay the principal of and premium, if any, and interest
on the Notes to the registered holders, whether or not the Notes are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In the case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Notes under Title
11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest owing and unpaid in respect of the Notes, and, in case of any
judicial
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proceedings, to 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 of the
Noteholders allowed in such judicial proceedings relative to the Company or any
other obligor on the Notes, its or their creditors, or its or their property,
and to collect and receive any monies or other property payable or deliverable
on any such claims, and to distribute the same after the deduction of any
amounts due the Trustee under Section 8.6; and any receiver, assignee or trustee
in bankruptcy or reorganization, liquidator, custodian or similar official is
hereby authorized by each of the Noteholders to make such payments to the
Trustee, and, in the event that the Trustee shall consent to the making of such
payments directly to the Noteholders, to pay to the Trustee any amount due it
for reasonable compensation, expenses, advances and disbursements, including
counsel fees incurred by it up to the date of such distribution. To the extent
that such payment of reasonable compensation, expenses, advances and
disbursements out of the estate in any such proceedings shall be denied for any
reason, payment of the same shall be secured by a lien on, and shall be paid out
of, any and all distributions, dividends, monies, securities and other property
which the holders of the Notes may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise.
All rights of action and of asserting claims under this Indenture, or under
any of the Notes, may be enforced by the Trustee without the possession of any
of the Notes, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in any proceedings involving
the interpretation of any provision of this Indenture to which the Trustee shall
be a party) the Trustee shall be held to represent all the holders of the Notes,
and it shall not be necessary to make any holders of the Notes parties to any
such proceedings.
Section 7.3. Application of Monies Collected by Trustee. Any monies
------------------------------------------
collected by the Trustee pursuant to this Article VII shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
First: To the payment of all amounts due the Trustee under Section
8.6;
Second: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall not have become due and be unpaid,
to the payment of interest on the Notes in default in the order of the
maturity of the installments of such interest, with interest (to the extent
that such interest has been collected by the Trustee) upon the overdue
installments of interest at the
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rate borne by the Notes, such payments to be made ratably to the persons
entitled thereto;
Third: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall have become due, by declaration or
otherwise, and be unpaid, to the payment of the whole amount then owing and
unpaid upon the Notes for principal and premium, if any, and interest, with
interest on the overdue principal and premium, if any, and (to the extent
that such interest has been collected by the Trustee) upon overdue payments
of interest at the rate borne by the Notes; and in case such monies shall
be insufficient to pay in full the whole amounts so due and unpaid upon the
Notes, then to the payment of such principal and premium, if any, and
interest without preference or priority of principal and premium, if any,
over interest, or of interest over principal and premium, if any, or of any
installment of interest over any other installment of interest, or of any
Note over any other Note, ratably to the aggregate of such principal and
premium, if any, and accrued and unpaid interest; and
Fourth: Subject to the provisions of Article IV, to the payment of
the remainder, if any, to the Company or any other person lawfully entitled
thereto.
Section 7.4. Proceedings by Noteholder. No holder of any Note shall
-------------------------
have any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than 25 percent in aggregate
principal amount of the Notes then outstanding determined in accordance with
Section 9.4 shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee for sixty (60) days after its receipt of such notice, request and offer
of indemnity, shall have neglected or refused to institute any such action, suit
or proceeding and no direction inconsistent with such written request shall have
been given to the Trustee pursuant to Section 7.7; it being understood and
intended, and being expressly covenanted by the taker and holder of every Note
with every other taker and holder and the Trustee, that no one or more holders
of Notes shall have any right in any manner whatever by virtue of or by availing
of any provision of this Indenture to affect, disturb or prejudice the rights of
any other holder of Notes, or to obtain or seek to obtain priority over or
preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Notes (except as otherwise provided herein).
For the protection and enforcement of this Section 7.4, each and every
Noteholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision of
any Note, the right of any holder of any Note to receive payment of the
principal of and premium, if
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any, and interest on such Note, on or after the respective due dates therefor,
or to institute suit for the enforcement of any such payment on or after such
respective dates against the Company shall not be impaired or affected without
the consent of such holder.
Anything in this Indenture or the Notes to the contrary notwithstanding,
the holder of any Note, without the consent of either the Trustee or the holder
of any other Note, in his own behalf and for his own benefit, may enforce, and
may institute and maintain any proceeding suitable to enforce, his rights of
conversion as provided herein.
Section 7.5. Proceedings by Trustee. In case of an Event of Default
-----------------------
the Trustee may in its discretion proceed to protect and enforce the rights
vested in it by this Indenture by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any of such rights,
either by suit in equity or by action at law or by proceeding in bankruptcy or
otherwise, whether for the specific enforcement of any covenant or agreement
contained in this Indenture or in aid of the exercise of any power granted in
this Indenture, or to enforce any other legal or equitable right vested in the
Trustee by this Indenture or by law.
Section 7.6. Remedies Cumulative and Continuing. Except as provided in
----------------------------------
the last paragraph of Section 2.6, all powers and remedies given by this Article
VII to the Trustee or to the Noteholders shall, to the extent permitted by law,
be deemed cumulative and not exclusive of any thereof or of any other powers and
remedies available to the Trustee or the holders of the Notes, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Trustee or of any holder of any of the Notes to exercise any right or
power accruing upon any default or Event of Default occurring and continuing as
aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or any acquiescence therein; and, subject to the
provisions of Section 7.4, every power and remedy given by this Article VII or
by law to the Trustee or to the Noteholders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the Noteholders.
Section 7.7. Direction of Proceedings and Waiver of Defaults by
--------------------------------------------------
Majority of Noteholders. The holders of a majority in aggregate principal
- -----------------------
amount of the Notes at the time outstanding determined in accordance with
Section 9.4 shall have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee; provided, however, that (a) such
-------- -------
direction shall not be in conflict with any rule of law or with this Indenture,
and (b) the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction. The holders of a majority in aggregate
principal amount of the Notes at the time outstanding determined in accordance
with Section 9.4 may on behalf of the holders of all of the Notes waive any past
default or Event of Default hereunder and its consequences except (i) a default
in the payment of interest or premium, if any, on, or the principal of, the
Notes, (ii) a failure by the Company to convert any Notes into Common Stock,
(iii) a default in the payment of redemption price pursuant to Article III or
repurchase price pursuant to Article XVI or (iv) a default in respect of a
covenant or provisions hereof which under Article XI
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cannot be modified or amended without the consent of the holders of all Notes
then outstanding. Upon any such waiver the Company, the Trustee and the holders
of the Notes shall be restored to their former positions and rights hereunder;
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon. Whenever any default or Event of
Default hereunder shall have been waived as permitted by this Section 7.7, said
default or Event of Default shall for all purposes of the Notes and this
Indenture be deemed to have been cured and to be not continuing; but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
Section 7.8. Notice of Defaults. The Trustee shall, within ninety (90)
------------------
days after it has knowledge of the occurrence of a default, mail to all
Noteholders, as the names and addresses of such holders appear upon the Note
register, notice of all defaults known to a Responsible Officer, unless such
defaults shall have been cured or waived before the giving of such notice; and
provided that, except in the case of default in the payment of the principal of,
or premium, if any, or interest on any of the Notes, the Trustee shall be
protected in withholding such notice if and so long as a trust committee of
directors and/or Responsible Officers of the Trustee in good faith determine
that the withholding of such notice is in the interests of the Noteholders.
Section 7.9. Undertaking to Pay Costs. All parties to this Indenture
------------------------
agree, and each holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may, in its discretion, require, 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, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; provided that the provisions of this Section 7.9 (to the extent
--------
permitted by law) shall not apply to any suit instituted by the Trustee, to any
suit instituted by any Noteholder, or group of Noteholders, holding in the
aggregate more than ten percent in principal amount of the Notes at the time
outstanding determined in accordance with Section 9.4, or to any suit instituted
by any Noteholder for the enforcement of the payment of the principal of or
premium, if any, or interest on any Note on or after the due date therefor or to
any suit for the enforcement of the right to convert any Note in accordance with
the provisions of Article XV or to require the Company to repurchase any Note in
accordance with Article XVI.
ARTICLE VIII.
CONCERNING THE TRUSTEE
Section 8.1. Duties and Responsibilities of Trustee. The Trustee,
--------------------------------------
prior to the occurrence of an Event of Default and after the curing of all
Events of Default which may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture. In case an
Event of Default has occurred (which has not been cured or
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waived) the Trustee shall exercise such of 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 man would exercise or use under the circumstances in the conduct of
his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own misconduct, except that
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture and
the Trust Indenture Act, and the Trustee shall not be liable except
for the performance of such duties and obligations as are specifically
set forth in this Indenture and no implied covenants or obligations
shall be read into this Indenture or the Trust Indenture Act against
the Trustee; and
(2) in the absence of bad faith and willful misconduct on the
part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Trustee
and conforming to the requirements of this Indenture; but, in the case
of any such certificates or opinions which by any provisions hereof
are specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Officers of the Trustee, unless the
Trustee was negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the holders of not less than a majority in principal amount of the Notes
at the time outstanding determined as provided in Section 9.4 relating to
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Indenture; and
(d) whether or not therein provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or
affording protection to, the Trustee shall be subject to the provisions of
this Section.
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None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 8.2. Reliance on Documents, Opinions, Etc. Except as otherwise
-------------------------------------
provided in Section 8.1:
(a) the Trustee may rely and shall be protected in acting upon
any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, note, coupon or other
paper or document believed by it in good faith to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors may
be evidenced to the Trustee by a copy thereof certified by the Secretary or
an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or omitted by it hereunder in
good faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order
or direction of any of the Noteholders pursuant to the provisions of this
Indenture, unless such Noteholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney; provided, however, that if the payment within a reasonable time
-------- -------
to the Trustee of the costs, expenses or liabilities likely to be incurred
by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to
it by the terms of this Indenture, the Trustee may require reasonable
indemnity
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against such expenses or liability as a condition to so proceeding; the
reasonable expenses of every such examination shall be paid by the Company
or, if paid by the Trustee or any predecessor Trustee, shall be repaid by
the Company upon demand; and
(f) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed
by it with due care hereunder.
Section 8.3. No Responsibility for Recitals, Etc. The recitals
-----------------------------------
contained herein and in the Notes (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
Section 8.4. Trustee, Paying Agents, Conversion Agents or Registrar May
----------------------------------------------------------
Own Notes. The Trustee, any paying agent, any conversion agent or Note
- ---------
registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Note registrar.
Section 8.5. Monies to Be Held in Trust. Subject to the provisions of
--------------------------
Section 13.4, all monies received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received.
Money held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as may be
agreed from time to time by the Company and the Trustee.
Section 8.6. Compensation and Expenses of Trustee. The Company
------------------------------------
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation for all services rendered by it
hereunder in any capacity (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and the Company
will pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence, willful misconduct, recklessness or
bad faith. The Company also covenants to indemnify the Trustee in any capacity
under this Indenture and its agents and any authenticating agent for, and to
hold them harmless against, any loss, liability or expense incurred without
negligence, willful misconduct, recklessness, or bad faith on the part of the
Trustee or such agent or authenticating agent, as the case may be, and arising
out of or in connection with the
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acceptance or administration of this trust or in any other capacity hereunder,
including the costs and expenses of defending themselves against any claim of
liability in the premises. The obligations of the Company under this Section 8.6
to compensate or indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall be secured by a lien prior to that of
the Notes upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the benefit of the holders of particular Notes.
The obligation of the Company under this Section shall survive the satisfaction
and discharge of this Indenture.
When the Trustee and its agents and any authenticating agent incur expenses
or render services after an Event of Default specified in Section 7.1(f) or (g)
occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any bankruptcy, insolvency or
similar laws.
Section 8.7. Officers' Certificate as Evidence. Except as otherwise
---------------------------------
provided in Section 8.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence, willful misconduct, recklessness,
or bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee.
Section 8.8. Conflicting Interests of Trustee. If the Trustee has or
--------------------------------
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.
Section 8.9. Eligibility of Trustee. There shall at all times be a
----------------------
Trustee hereunder which shall be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000. If such person publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 8.10. Resignation or Removal of Trustee.
---------------------------------
(a) The Trustee may at any time resign by giving written notice
of such resignation to the Company and to the holders of Notes. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor trustee by written instrument, in duplicate, executed by order of
the Board of Directors, one copy of which instrument shall be delivered to
the resigning Trustee and one copy to the successor trustee. If no
successor trustee shall have been so appointed and have accepted
appointment within sixty (60) days after
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the mailing of such notice of resignation to the Noteholders, the resigning
Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee, or any Noteholder who has been a bona
fide holder of a Note or Notes for at least six months may, subject to the
provisions of Section 7.9, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may
deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8 after
written request therefor by the Company or by any Noteholder who has
been a bona fide holder of a Note or Notes for at least six months;
or
(2) the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.9 and shall fail to resign after
written request therefor by the Company or by any such Noteholder; or
(3) the Trustee shall become incapable of acting, or shall
be adjudged a bankrupt or insolvent, or a receiver of the Trustee
or of its property shall be appointed, or any public officer shall
take charge or control of the Trustee or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation;
then, in any such case, the Company may remove the Trustee and appoint
a successor trustee by written instrument, in duplicate, executed by order
of the Board of Directors, one copy of which instrument shall be delivered
to the Trustee so removed and one copy to the successor trustee, or,
subject to the provisions of Section 7.9, any Noteholder who has been a
bona fide holder of a Note or Notes for at least six months may, on behalf
of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment
of a successor trustee. Such court may thereupon, after such notice, if
any, as it may deem proper and prescribe, remove the Trustee and appoint a
successor trustee.
(c) The holders of a majority in aggregate principal amount of
the Notes at the time outstanding may at any time remove the Trustee and
nominate a successor trustee which shall be deemed appointed as successor
trustee unless within ten (10) days after notice to the Company of such
nomination the Company objects thereto, in which case the Trustee so
removed or any Noteholder, upon the terms and conditions and otherwise as
in Section 8.10(a)
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provided, may petition any court of competent jurisdiction for an
appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of
a successor trustee pursuant to any of the provisions of this Section 8.10
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 8.11.
Section 8.11. Acceptance by Successor Trustee. Any successor trustee
-------------------------------
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions of
Section 8.6, execute and deliver an instrument transferring to such successor
trustee all the rights and powers of the trustee so ceasing to act. Upon request
of any such successor trustee, the Company shall execute any and all instruments
in writing for more fully and certainly vesting in and confirming to such
successor trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property and funds held or collected by
such trustee as such, except for funds held in trust for the benefit of holders
of particular Notes, to secure any amounts then due it pursuant to the
provisions of Section 8.6.
No successor trustee shall accept appointment as provided in this
Section 8.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as provided in this
Section 8.11, the Company (or the former trustee, at the written direction of
the Company) shall mail or cause to be mailed notice of the succession of such
trustee hereunder to the holders of Notes at their addresses as they shall
appear on the Note register. If the Company fails to mail such notice within
ten (10) days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.
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Section 8.12. Succession by Merger, Etc. Any corporation into which the
--------------------------
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Trustee (including any trust created
by this Indenture), shall be the successor to the Trustee hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that in the case of any corporation succeeding to all
or substantially all of the corporate trust business of the Trustee such
corporation shall be qualified under the provisions of Section 8.8 and eligible
under the provisions of Section 8.9.
In case at the time such successor 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 or authenticating agent appointed
by such 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 or an authenticating agent appointed by such successor
trustee may authenticate such Notes either in the name of any predecessor
trustee hereunder or in the name of the successor 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;
provided, however, that the right to adopt the certificate of authentication of
- -------- -------
any predecessor Trustee or authenticate Notes in the name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.
Section 8.13. Limitation on Rights of Trustee as Creditor. If and when the
-------------------------------------------
Trustee shall be or become a creditor of the Company (or any other obligor upon
the Notes), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company (or any
such other obligor).
ARTICLE IX.
CONCERNING THE NOTEHOLDERS
Section 9.1. Action by Noteholders. When in this Indenture it is provided
---------------------
that the holders of a specified percentage in aggregate principal amount of the
Notes may take any action (including the making of any demand or request, the
giving of any notice, consent or waiver or the taking of any other action), the
fact that at the time of taking any such action, the holders of such specified
percentage have joined therein may be evidenced (a) by any instrument or any
number of instruments of similar tenor executed by Noteholders in person or by
agent or proxy appointed in writing, or (b) by the record of the holders of
Notes voting in favor thereof at any meeting of Noteholders duly called and held
in accordance with the provisions of Article X, or (c) by a combination of such
instrument or instruments and any such record of such a meeting of Noteholders.
Whenever the Company or the Trustee solicits the taking of any action by the
holders of the Notes, the Company or the Trustee may fix in advance of such
solicitation, a date as the record date for determining holders entitled to take
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such action. The record date shall be not more than fifteen (15) days prior to
the date of commencement of solicitation of such action.
Section 9.2. Proof of Execution by Noteholders. Subject to the provisions
---------------------------------
of Sections 8.1, 8.2 and 10.5, proof of the execution of any instrument by a
Noteholder or his agent or proxy shall be sufficient if made in accordance with
such reasonable rules and regulations as may be prescribed by the Trustee or in
such manner as shall be satisfactory to the Trustee. The holding of Notes shall
be proved by the registry of such Notes or by a certificate of the Note
registrar.
The record of any Noteholders' meeting shall be proved in the manner
provided in Section 10.6.
Section 9.3. Who Are Deemed Absolute Owners. The Company, any other
------------------------------
obligor on the Notes, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note registrar may deem the person in whose name
such Note shall be registered upon the Note register to be, and may treat him
as, the absolute owner of such Note (whether or not such Note shall be overdue
and notwithstanding any notation of ownership or other writing thereon) for the
purpose of receiving payment of or on account of the principal of, premium, if
any, and interest on such Note, for conversion of such Note and for all other
purposes; and neither the Company nor any other obligor on the Notes nor the
Trustee nor any paying agent nor any conversion agent nor any authenticating
agent nor any Note registrar shall be affected by any notice to the contrary.
All such payments so made to any holder for the time being, or upon his order,
shall be valid, and, to the extent of the sum or sums so paid, effectual to
satisfy and discharge the liability for monies payable upon any such Note.
Section 9.4. Company-Owned Notes Disregarded. In determining whether
-------------------------------
the holders of the requisite aggregate principal amount of Notes have concurred
in any direction, consent, waiver or other action under this Indenture, Notes
which are owned by the Company or any other obligor on the Notes or by any
person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company or any other obligor on the Notes shall
be disregarded and deemed not to be outstanding for the purpose of any such
determination; provided that for the purposes of determining whether the Trustee
--------
shall be protected in relying on any such direction, consent, waiver or other
action only Notes which a Responsible Officer knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 9.4 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or a person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor.
In the case of a dispute as to such right, any decision by the Trustee taken
upon the advice of counsel shall be full protection to the Trustee. Upon
request of the Trustee, the Company shall furnish to the Trustee promptly an
Officers' Certificate listing and identifying all Notes, if any, known by the
Company to be owned or held by or for the account of any of the above described
persons; and, subject to Section 8.1, the Trustee shall be entitled to accept
such Officers' Certificate as conclusive evidence of the
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facts therein set forth and of the fact that all Notes not listed therein are
outstanding for the purpose of any such determination.
Section 9.5. Revocation of Consents: Future Holders Bound. At any time
--------------------------------------------
prior to (but not after) the evidencing to the Trustee, as provided in
Section 9.1, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Notes specified in this Indenture in
connection with such action, any holder of a Note which is shown by the evidence
to be included in the Notes the holders of which have consented to such action
may, by filing written notice with the Trustee at its Corporate Trust Office and
upon proof of holding as provided in Section 9.2, revoke such action so far as
it concerns such Note. Except as aforesaid, any such action taken by the holder
of any Note shall be conclusive and binding upon such holder and upon all future
holders and owners of such Note and of any Notes issued in exchange or
substitution therefor, irrespective of whether any notation in regard thereto is
made upon such Note or any Note issued in exchange or substitution therefor.
ARTICLE X
NOTEHOLDERS' MEETINGS
Section 10.1. Purpose of Meetings. A meeting of Noteholders may be called
-------------------
at any time and from time to time pursuant to the provisions of this Article X
for any of the following purposes:
(a) to give any notice to the Company or to the Trustee or to
give any directions to the Trustee permitted under this Indenture, or to
consent to the waiving of any default or Event of Default hereunder and its
consequences, or to take any other action authorized to be taken by
Noteholders pursuant to any of the provisions of Article VII;
(b) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article VIII;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2; or
(d) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of the
Notes under any other provision of this Indenture or under applicable law.
Section 10.2. Call of Meetings by Trustee. The Trustee may at any time
---------------------------
call a meeting of Noteholders to take any action specified in Section 10.1, to
be held at such time and at such place at a location within 10 miles of the
Corporate Trust Office or the Borough of Manhattan, The City of New York, as the
Trustee shall determine. Notice of every meeting of the Noteholders, setting
forth the time and the place of such meeting and in general terms the action
proposed to be taken at such meeting and the establishment of any record date
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pursuant to Section 9.1, shall be mailed to holders of Notes at their addresses
as they shall appear on the Note register. Such notice shall also be mailed to
the Company. Such notices shall be mailed not less than twenty (20) nor more
than ninety (90) days prior to the date fixed for the meeting.
Any meeting of Noteholders shall be valid without notice if the holders of
all Notes then outstanding are present in person or by proxy or if notice is
waived before or after the meeting by the holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
Section 10.3. Call of Meetings by Company or Noteholders. In case at any
------------------------------------------
time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least ten percent in aggregate principal amount of the Notes then
outstanding, shall have requested the Trustee to call a meeting of Noteholders,
by written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed the notice of such
meeting within twenty (20) days after receipt of such request, then the Company
or such Noteholders may determine the time and the place at any location within
10 miles of the Corporate Trust Office or the Borough of Manhattan, The City of
New York for such meeting and may call such meeting to take any action
authorized in Section 10.1, by mailing notice thereof as provided in
Section 10.2.
Section 10.4. Qualifications for Voting. To be entitled to vote at any
-------------------------
meeting of Noteholders a person shall (a) be a holder of one or more Notes on
the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes. The only
persons who shall be entitled to be present or to speak at any meeting of
Noteholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
Section 10.5. Regulations. Notwithstanding any other provisions of this
-----------
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 9.4, at any meeting each Noteholder or
proxyholder shall be entitled to one vote for each $1,000 principal amount of
Notes held or
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represented by him; provided, however, that no vote shall be cast or counted at
-------- -------
any meeting in respect of any Note challenged as not outstanding and ruled by
the chairman of the meeting to be not outstanding. The chairman of the meeting
shall have no right to vote other than by virtue of Notes held by him or
instruments in writing as aforesaid duly designating him as the proxy to vote on
behalf of other Noteholders. Any meeting of Noteholders duly called pursuant to
the provisions of Section 10.2 or 10.3 may be adjourned from time to time by the
holders of a majority of the aggregate principal amount of Notes represented at
the meeting, whether or not constituting a quorum, and the meeting may be held
as so adjourned without further notice.
Section 10.6. Voting. The vote upon any resolution submitted to any
------
meeting of Noteholders shall be by written ballot on which shall be subscribed
the signatures of the holders of Notes or of their representatives by proxy and
the principal amount of the Notes held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Noteholders shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was mailed as provided in
Section 10.2. The record shall show the principal amount of the Notes voting in
favor of or against any resolution. The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7. No Delay of Rights by Meeting. Nothing in this Article X
-----------------------------
contained shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Noteholders or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or delay in the exercise of any right
or rights conferred upon or reserved to the Trustee or to the Noteholders under
any of the provisions of this Indenture or of the Notes.
ARTICLE XI.
SUPPLEMENTAL INDENTURES
Section 11.1. Supplemental Indentures Without Consent of Noteholders.
------------------------------------------------------
The Company, when authorized by the resolutions of the Board of Directors, and
the Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
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(a) to make provision with respect to the conversion rights of the
holders of Notes pursuant to the requirements of Section 15.6 or the
repurchase obligations of the Company pursuant to the requirements of
Section 16.5;
(b) subject to Article IV, to convey, transfer, assign, mortgage or
pledge to the Trustee as security for the Notes, any property or assets;
(c) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
pursuant to Article XII ;
(d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Notes, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however, that in
-------- -------
respect of any such additional covenant, restriction or condition such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the
case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default;
(e) to provide for the issuance under this Indenture of Notes in
coupon form (including Notes registrable as to principal only) and to
provide for exchangeability of such Notes with the Notes issued hereunder
in fully registered form and to make all appropriate changes for such
purpose;
(f) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any
supplemental indenture, or to make such other provisions in regard to
matters or questions arising under this Indenture which shall not
materially adversely affect the interests of the holders of the Notes;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the Trust Indenture Act, or under any similar federal
statute hereafter enacted.
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The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section 11.1 may be executed by the Company and the Trustee without the consent
of the holders of any of the Notes at the time outstanding, notwithstanding any
of the provisions of Section 11.2.
Section 11.2. Supplemental Indentures with Consent of Noteholders. With
---------------------------------------------------
the consent (evidenced as provided in Article IX) of the holders of not less
than a majority in aggregate principal amount of the Notes at the time
outstanding determined in accordance with Section 9.4, the Company, when
authorized by the resolutions of the Board of Directors, and the Trustee may
from time to time and at any time enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or any
supplemental indenture or of modifying in any manner the rights of the holders
of the Notes; provided, however, that no such supplemental indenture shall
-------- -------
(i) extend the fixed maturity of any Note, or reduce the rate or extend the
time of payment of interest thereon, or reduce the principal amount thereof or
premium, if any, thereon, or reduce any amount payable on redemption thereof, or
impair the right of any Noteholder to institute suit for the payment thereof, or
make the principal thereof or interest or premium, if any, thereon payable in
any coin or currency other than that provided in the Notes, or modify the
provisions of this Indenture with respect to the subordination of the Notes in a
manner adverse to the Noteholders in any material respect, or change the
obligation of the Company to repurchase any Note upon the occurrence of a Change
in Control in a manner adverse to the holder of Notes, or impair the right to
convert the Notes into Common Stock subject to the terms set forth herein,
including Section 15.6, without the consent of the holder of each Note so
affected, or (ii) reduce the aforesaid percentage of Notes, the holders of which
are required to consent to any such supplemental indenture, without the consent
of the holders of all Notes then outstanding.
Upon the request of the Company, accompanied by a copy of the resolutions
of the Board of Directors certified by its Secretary or an Assistant Secretary
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Noteholders as aforesaid,
the Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
It shall not be necessary for the consent of the Noteholders under this
Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
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Section 11.3. Effect of Supplemental Indenture. Any supplemental
--------------------------------
indenture executed pursuant to the provisions of this Article XI shall comply
with the Trust Indenture Act, as then in effect; provided that this Section 11.3
--------
shall not require such supplemental indenture or the Trustee to be qualified
under the Trust Indenture Act prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act or the Indenture has been
qualified under the Trust Indenture Act, nor shall it constitute any admission
or acknowledgment by any party to such supplemental indenture that any such
qualification is required prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act or the Indenture has been
qualified under the Trust Indenture Act. Upon the execution of any supplemental
indenture pursuant to the provisions of this Article XI, this Indenture shall be
and be deemed to be modified and amended in accordance therewith and the
respective rights, limitation of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the holders of Notes shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 11.4. Notation on Notes. Notes authenticated and delivered
-----------------
after the execution of any supplemental indenture pursuant to the provisions of
this Article XI may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may, at the Company's expense, be
prepared and executed by the Company, authenticated by the Trustee (or an
authenticating agent duly appointed by the Trustee pursuant to Section 17.11 and
delivered in exchange for the Notes then outstanding, upon surrender of such
Notes then outstanding.
Section 11.5. Evidence of Compliance of Supplemental Indenture to Be
------------------------------------------------------
Furnished Trustee. The Trustee, subject to the provisions of Sections 8.1 and
- -----------------
8.2, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article XI.
ARTICLE XII.
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1. Company May Consolidate Etc. on Certain Terms. Subject to
---------------------------------------------
the provisions of Section 12.2, nothing contained in this Indenture or in any of
the Notes shall prevent any consolidation or merger of the Company with or into
any other corporation or corporations (whether or not affiliated with the
Company), or successive consolidations or mergers in which the Company or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance or lease (or successive sales, conveyances or leases) of all or
substantially all of the property of the Company, to any other corporation
(whether or not affiliated with the Company), authorized to acquire and operate
the same and which, in each case, shall be organized under the laws of the
United States of America, any state thereof or
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the District of Columbia; provided, that upon any such consolidation, merger,
--------
sale, conveyance or lease, the due and punctual payment of the principal of and
premium, if any, and interest on all of the Notes, according to their tenor, and
the due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed by the Company, shall be expressly
assumed, by supplemental indenture satisfactory in form to the Trustee, executed
and delivered to the Trustee by the corporation (if other than the Company)
formed by such consolidation, or into which the Company shall have been merged,
or by the corporation which shall have acquired or leased such property, and
such supplemental indenture shall provide for the applicable conversion rights
set forth in Section 15.6.
Section 12.2. Successor Corporation to Be Substituted. In case of any such
---------------------------------------
consolidation, merger, sale, conveyance or lease and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual payment
of the principal of and premium, if any, and interest on all of the Notes and
the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Company, such successor corporation shall
succeed to and be substituted for the Company, with the same effect as if it had
been named herein as such. Such successor corporation thereupon may cause to be
signed, and may issue either in its own name or in the name of Renal Treatment
Centers, Inc. any or all of the Notes issuable hereunder which theretofore shall
not have been signed by the Company and delivered to the Trustee; and, upon the
order of such successor corporation instead of the Company and subject to all
the terms, conditions and limitations in this Indenture prescribed, the Trustee
shall authenticate and shall deliver, or cause to be authenticated and
delivered, any Notes which previously shall have been signed and delivered by
the officers of the Company to the Trustee for authentication, and any Notes
which such successor corporation thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All the Notes so issued shall in all
respects have the same legal rank and benefit under this Indenture as the Notes
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Notes had been issued at the date of the execution hereof.
In the event of any such consolidation, merger, sale or conveyance (but not in
the event of any such lease), the person named as the "Company" in the first
paragraph of this Indenture or any successor which shall thereafter have become
such in the manner prescribed in this Article XII may be dissolved, wound up and
liquidated at any time thereafter and such person shall be released from its
liabilities as obligor and maker of the Notes and from its obligations under
this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form (but not in substance) may be made in the Notes
thereafter to be issued as may be appropriate.
Section 12.3. Opinion of Counsel To Be Given Trustee. The Trustee,
--------------------------------------
subject to Sections 8.1 and 8.2, shall receive an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance or lease and any such assumption complies with the provisions
of this Article XII.
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ARTICLE XIII.
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1. Discharge of Indenture. When (a) the Company shall deliver
----------------------
to the Trustee for cancellation all Notes theretofore authenticated (other than
any Notes which have been destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated and delivered)
and not theretofore canceled, or (b) all the Notes not theretofore canceled or
delivered to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to be called
for redemption within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption, and the Company shall deposit (without
violating the provisions of the Credit Agreement) with the Trustee, in trust,
monies sufficient to pay at maturity or upon redemption of all of the Notes
(other than any Notes which shall have been mutilated, destroyed, lost or stolen
and in lieu of or in substitution for which other Notes shall have been
authenticated and delivered) not theretofore canceled or delivered to the
Trustee for cancellation, including principal and premium, if any, and interest
due or to become due to such date of maturity or redemption date, as the case
may be, and if in either case the Company shall also pay or cause to be paid all
other sums payable hereunder by the Company, then this Indenture shall cease to
be of further effect (except as to (i) remaining rights of registration of
transfer, substitution and exchange and conversion of Notes, (ii) rights
hereunder of Noteholders to receive payments of principal of and premium, if
any, and interest on, the Notes and the other rights, duties and obligations of
Noteholders, as beneficiaries hereof with respect to the amounts, if any, so
deposited with the Trustee and (iii) the rights, obligations and immunities of
the Trustee hereunder), and the Trustee, on demand of the Company accompanied by
an Officers' Certificate and an Opinion of Counsel as required by Section 17.5
and at the cost and use of the Company, shall execute proper instruments
acknowledging satisfaction of and discharging this Indenture; the Company,
however, hereby agreeing to reimburse the Trustee for any costs or expenses
thereafter reasonably and properly incurred by the Trustee and to compensate the
Trustee for any services thereafter reasonably and properly rendered by the
Trustee in connection with this Indenture or the Notes.
Section 13.2. Deposited Monies to Be Held in Trust by Trustee. Subject to
-----------------------------------------------
Section 13.4, all monies deposited with the Trustee pursuant to Section 13.1
and not in violation of Article IV shall be held in trust for the sole benefit
of the Noteholders and not to be subject to the subordination provisions of
Article IV, and such monies shall be applied by the Trustee to the payment,
either directly or through any paying agent (including the Company if acting as
its own paying agent), to the holders of the particular Notes for the payment or
redemption of which such monies have been deposited with the Trustee, of all
sums due and to become due thereon for principal and interest and premium, if
any.
Section 13.3. Paying Agent to Repay Monies Held. Upon the satisfaction
---------------------------------
and discharge of this Indenture, all monies then held by any paying agent for
the Notes (other than
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the Trustee) shall, upon written request of the Company, be repaid to the
Company or paid to the Trustee, and thereupon such paying agent shall be
released from all further liability with respect to such monies.
Section 13.4. Return of Unclaimed Monies. Subject to the requirements of
--------------------------
applicable law, any monies deposited with or paid to the Trustee for payment of
the principal of, premium, if any, or interest on Notes and not applied but
remaining unclaimed by the holders of Notes for two years after the date upon
which the principal of, premium, if any, or interest on such Notes, as the case
may be, shall have become due and payable, shall be repaid to the Company by the
Trustee on demand and all liability of the Trustee shall thereupon cease with
respect to such monies; and the holder of any of the Notes shall thereafter look
only to the Company for any payment which such holder may be entitled to collect
unless an applicable abandoned property law designates another Person.
Section 13.5. Reinstatement. If the Trustee or the paying agent is unable
-------------
to apply any money in accordance with Section 13.2 by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 13.1 until such time as the Trustee or the paying
agent is permitted to apply all such money in accordance with Section 13.2;
provided, however, that if the Company makes any payment of interest or premium,
- -------- -------
if any, on or principal of any Note following 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 held by the Trustee or paying
agent.
ARTICLE XIV.
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1. Indenture and Notes Solely Corporate Obligations. No
------------------------------------------------
recourse for the payment of the principal of or premium, if any, or interest on
any Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer, or director or subsidiary,
as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Notes.
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ARTICLE XV.
CONVERSION OF NOTES
Section 15.1. Right to Convert. Subject to and upon compliance with the
----------------
provisions of this Indenture, the holder of any Note shall have the right, at
his option, at any time after sixty (60) days following the latest date of
original issuance of the Notes and prior to the close of business on
July 15, 2006 (except that, with respect to any Note or portion of a Note which
shall be called for redemption, such right shall terminate, except as provided
in Section 15.2 or Section 3.4, at the close of business on the Business Day
next preceding the date fixed for redemption of such Note or portion of a Note
unless the Company shall default in payment due upon redemption thereof) to
convert the principal amount of any such Note, or any portion of such principal
amount which is $1,000 or an integral multiple thereof, into that number of
fully paid and non-assessable shares of Common Stock (as such shares shall then
be constituted) obtained by dividing the principal amount of the Note or portion
thereof surrendered for conversion by the Conversion Price in effect at such
time, by surrender of the Note so to be converted in whole or in part in the
manner provided, together with any required funds, in Section 15.2. A holder of
Notes is not entitled to any rights of a holder of Common Stock until such
holder has converted his Notes to Common Stock, and only to the extent such
Notes are deemed to have been converted to Common Stock under this Article XV.
Section 15.2. Exercise of Conversion Privilege; Issuance of Common Stock
----------------------------------------------------------
on Conversion; No Adjustment for Interest or Dividends. In order to exercise
- ------------------------------------------------------
the conversion privilege with respect to any Note in certificated form, the
holder of any such Note to be converted in whole or in part shall surrender such
Note, duly endorsed, at an office or agency maintained by the Company pursuant
to Section 5.2, accompanied by the funds, if any, required by the penultimate
paragraph of this Section 15.2, and shall give written notice of conversion in
the form provided on the Notes (or such other notice which is acceptable to the
Company) to the office or agency that the holder elects to convert such Note or
the portion thereof specified in said notice. Such notice shall also state the
name or names (with address or addresses) in which the certificates or
certificates for shares of Common Stock which shall be issuable on such
conversion shall be issued, and shall be accompanied by transfer taxes, if
required pursuant to Section 15.7. Each such Note surrendered for conversion
shall, unless the shares issuable on conversion are to be issued in the same
name as the registration of such Note, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to any interest
in a Note in global form, the beneficial holder must complete the appropriate
instruction form for conversion pursuant to the Depositary's book-entry
conversion program, deliver by book-entry delivery an interest in such Note in
global form, furnish appropriate endorsements and transfer documents if required
by the Company or the Trustee or conversion agent, and pay the funds, if any,
required by this Section 15.2 and any transfer taxes if required pursuant to
Section 15.7.
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As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or portion thereof) so converted), the Company shall issue and shall deliver to
such holder at the office or agency maintained by the Company for such purpose
pursuant to Section 5.2, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such Note or portion
thereof in accordance with the provisions of this Article and a check or cash in
respect of any fractional interest in respect of a share of Common Stock arising
upon such conversion, as provided in Section 15.3. In case any Note of a
denomination greater than $1,000 shall be surrendered for partial conversion,
and subject to Section 2.3, the Company shall execute and the Trustee shall
authenticate and deliver to the holder of the Note so surrendered, without
charge to him, a new Note or Notes in authorized denominations in an aggregate
principal amount equal to the unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such Note
(or portion thereof) on the date on which the requirements set forth above in
this Section 15.2 have been satisfied as to such Note (or portion thereof), and
the person in whose name any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become on
said date the holder of record of the shares represented thereby; provided,
--------
however, that any such surrender on any date when the stock transfer books of
- -------
the Company shall be closed shall constitute the person in whose name the
certificates are to be issued as the record holder thereof for all purposes on
the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Note shall be surrendered.
Any Note or portion thereof surrendered for conversion during the period
from the close of business on the record date for any interest payment date to
the close of business on the Business Day next preceding the following interest
payment date shall (unless such Note or portion thereof being converted shall
have been called for redemption during the period from the close of business on
such record date to the close of business on the Business Day next preceding the
following interest payment date) be accompanied by payment, in New York Clearing
House funds or other funds acceptable to the Company, of an amount equal to the
interest payable on such interest payment date on the principal amount being
converted; provided, however, that no such payment need be made if there shall
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exist at the time of conversion a default in the payment of interest on the
Notes. Except as provided above in this Section 15.2, no adjustment shall be
made for interest accrued on any Note converted or for dividends on any shares
issued upon the conversion of such Note as provided in this Article.
Upon the conversion of an interest in a Note in global form, the Trustee,
or the Custodian at the direction of the Trustee, shall make a notation on such
Note in global form as to the reduction in the principal amount represented
thereby.
Section 15.3. Cash Payments in Lieu of Fractional Shares. No fractional
------------------------------------------
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same
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holder, the number of full shares which shall be issuable upon conversion shall
be computed on the basis of the aggregate principal amount of the Notes (or
specified portions thereof to the extent permitted hereby) so surrendered. If
any fractional share of stock would be issuable upon the conversion of any Note
or Notes, the Company shall make an adjustment and payment therefor in cash at
the current market value thereof to the holder of Notes. The current market
value of a share of Common Stock shall be the Closing Price on the first Trading
Day immediately preceding the day on which the Notes (or specified portions
thereof) are deemed to have been converted.
Section 15.4. Conversion Price. The conversion price shall be as specified
----------------
in the form of Note (herein called the "Conversion Price") attached as Exhibit A
hereto, subject to adjustment as provided in this Article XV.
Section 15.5. Adjustment of Conversion Price. The Conversion Price shall
------------------------------
be adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock, the Conversion Price in effect at the opening of business on
the date following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be reduced by
multiplying such Conversion Price by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination and the denominator shall
be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction to become
effective immediately after the opening of business on the day following
the date fixed for such determination. The Company will not pay any
dividend or make any distribution on shares of Common Stock held in the
treasury of the Company. If any dividend or distribution of the type
described in this Section 15.5(a) is declared but not so paid or made, the
Conversion Price shall again be adjusted to the Conversion Price which
would then be in effect if such dividend or distribution had not been
declared.
(b) In case the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them (for a
period expiring within 45 days after the date fixed for determination of
stockholders entitled to receive such rights or warrants) to subscribe for
or purchase shares of Common Stock at a price per share less than the
Current Market Price (as defined below) on the date fixed for determination
of stockholders entitled to receive such rights or warrants, the Conversion
Price shall be adjusted so that the same shall equal the price determined
by multiplying the Conversion Price in effect immediately prior to the date
fixed for determination of stockholders entitled to receive such rights or
warrants by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding at the close of business on the date fixed for
determination of stockholders entitled to receive such rights and
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warrants plus the number of shares which the aggregate offering price of
the total number of shares so offered would purchase at such Current Market
Price, and of which the denominator shall be the number of shares of Common
Stock outstanding on the date fixed for determination of stockholders
entitled to receive such rights and warrants plus the total number of
additional shares of Common Stock offered for subscription or purchase.
Such adjustment shall be successively made whenever any such rights and
warrants are issued, and shall become effective immediately after the
opening of business on the day following the date fixed for determination
of stockholders entitled to receive such rights or warrants. To the extent
that shares of Common Stock are not delivered after the expiration of such
rights or warrants, the Conversion Price shall be readjusted to the
Conversion Price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made on the basis of
delivery of only the number of shares of Common Stock actually delivered.
In the event that such rights or warrants are not so issued, the Conversion
Price shall again be adjusted to be the Conversion Price which would then
be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. In
determining whether any rights or warrants entitle the holders to subscribe
for or purchase shares of Common Stock at less than such Current Market
Price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received
by the Company for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of
Directors.
(c) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any class of
capital stock of the Company (other than any dividends or distributions to
which Section 15.5(a) applies) or evidences of its indebtedness or assets
(including securities, but excluding any rights or warrants referred to in
Section 15.5(b), and excluding any dividend or distribution paid
exclusively in cash (any of the foregoing hereinafter in this
Section 15.5(d) called the "Securities")), then, in each such case (unless
the Company elects to reserve such Securities for distribution to the
Noteholders upon the conversion of the Notes so that any such holder
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converting Notes will receive upon such conversion, in addition to the
shares of Common Stock to which such holder is entitled, the amount and
kind of such Securities which such holder would have received if such
holder had converted its Notes into Common Stock immediately prior to the
Record Date (as defined in Section 15.5(h) for such distribution of the
Securities)), the Conversion Price shall be reduced so that the same shall
be equal to the price determined by multiplying the Conversion Price in
effect on the Record Date (as defined below) with respect to such
distribution by a fraction of which the numerator shall be the Current
Market Price per share of the Common Stock on such Record Date less the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive, and described in a resolution of the
Board of Directors) on the Record Date of the portion of the Securities so
distributed applicable to one share of Common Stock and the denominator
shall be the Current Market Price per share of the Common Stock, such
reduction to become effective immediately prior to the opening of business
on the day following such Record Date; provided, however, that in the event
-------- -------
the then fair market value (as so determined) of the portion of the
Securities so distributed applicable to one share of Common Stock is equal
to or greater than the Current Market Price of the Common Stock on the
Record Date, in lieu of the foregoing adjustment, adequate provision shall
be made so that each Noteholder shall have the right to receive upon
conversion the amount of Securities such holder would have received had
such holder converted each Note on the Record Date. In the event that such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect
if such dividend or distribution had not been declared. If the Board of
Directors determines the fair market value of any distribution for purposes
of this Section 15.5(d) by reference to the actual or when issued trading
market for any securities, it must in doing so consider the prices in such
market over the same period used in computing the Current Market Price of
the Common Stock.
In the event the Company implements a stockholder rights plan, such
rights plan shall provide that upon conversion of the Notes the holders
will receive, in addition to the Common Stock issuable upon such
conversion, the rights issued under such rights plan (notwithstanding the
occurrence of an event causing such rights to separate from the Common
Stock at or prior to the time of conversion).
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of
the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a
specified event or events ("Trigger Event"): (i) are deemed to be
transferred with such shares of Common Stock; (ii) are not exercisable; and
(iii) are also issued in respect of future issuances of Common Stock, shall
be deemed not to have been distributed for purposes of this Section 15.5
(and no adjustment to the
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Conversion Price under this Section 15.5 will be required) until the
occurrence of the earliest Trigger Event, whereupon such rights and
warrants shall be deemed to have been distributed and an appropriate
adjustment (if any is required) to the Conversion Price shall be made under
this Section 15.5(d). If any such right or warrant, including any such
existing rights or warrants distributed prior to the date of this
Indenture, are subject to events, upon the occurrence of which such rights
or warrants become exercisable to purchase different securities, evidences
of indebtedness or other assets, then the date of the occurrence of any and
each such event shall be deemed to be the date of distribution and record
date with respect to new rights or warrants with such rights (and a
termination or expiration of the existing rights or warrants without
exercise by any of the holders thereof). In addition, in the event of any
distribution (or deemed distribution) of rights or warrants, or any Trigger
Event or other event (of the type described in the preceding sentence) with
respect thereto that was counted for purposes of calculating a distribution
amount for which an adjustment to the Conversion Price under this Section
15.5 was made, (1) in the case of any such rights or warrants which shall
all have been redeemed or repurchased without exercise by any holders
thereof, the Conversion Price shall be readjusted upon such final
redemption or repurchase to give effect to such distribution or Trigger
Event, as the case may be, as though it were a cash distribution, equal to
the per share redemption or repurchase price received by a holder or
holders of Common Stock with respect to such rights or warrants (assuming
such holder had retained such rights or warrants), made to all holders of
Common Stock as of the date of such redemption or repurchase, and (2) in
the case of such rights or warrants which shall have expired or been
terminated without exercise by any holders thereof, the Conversion Price
shall be readjusted as if such rights and warrants had not been issued.
For purposes of this Section 15.5(d) and Sections 15.5(a) and (b), any
dividend or distribution to which this Section 15.5(d) is applicable that
also includes shares of Common Stock, or rights or warrants to subscribe
for or purchase shares of Common Stock (or both), shall be deemed instead
to be (1) a dividend or distribution of the evidences of indebtedness,
assets or shares of capital stock other than such shares of Common Stock or
rights or warrants (and any further Conversion Price reduction required by
this Section 15.5(d) with respect to such dividend or distribution shall
then be made) immediately followed by (2) a dividend or distribution of
such shares of Common Stock or such rights or warrants (and any further
Conversion Price reduction required by Sections 15.5(a) and (b) with
respect to such dividend or distribution shall then be made), except
(A) the Record Date of such dividend or distribution shall be substituted
as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution" and "the date fixed for such
determination" within the meaning of Sections 15.5 (a) and (b) and (B) any
shares of Common Stock included in such dividend or distribution shall not
be
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deemed "outstanding at the close of business on the date fixed for such
determination" within the meaning of Section 15.5(a).
(e) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock cash (excluding any cash that is
distributed upon a merger or consolidation to which Section 15.6 applies or
as part of a distribution referred to in Section 15.5(d)) in an aggregate
amount that, combined together with (1) the aggregate amount of any other
such distributions to all holders of its Common Stock made exclusively in
cash within the 12 months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant to this
Section 15.5(e) has been made, and (2) the aggregate of any cash plus the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Board of Directors) of consideration payable in respect of any tender offer
by the Company for all or any portion of the Common Stock concluded within
the 12 months preceding the date of payment of such distribution, and in
respect of which no adjustment pursuant to Section 15.5(f) has been made,
exceeds 10% of the product of the Current Market Price (determined as
provided in Section 15.5(h)) on the Record Date with respect to such
distribution times the number of shares of Common Stock outstanding on such
date, then, and in each such case, immediately after the close of business
on such date, the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on such Record Date by a
fraction (i) the numerator of which shall be equal to the Current Market
Price on the Record Date less an amount equal to the quotient of (x) the
excess of such combined amount over such 10% and (y) the number of shares
of Common Stock outstanding on the Record Date and (ii) the denominator of
which shall be equal to the Current Market Price on such Record Date;
provided, however, that, if the portion of the cash so distributed
-------- -------
applicable to one share of Common Stock is equal to or greater than the
Current Market Price of the Common Stock on the Record Date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each
Noteholder shall have the right to receive upon conversion the amount of
cash such holder would have received had such Holder converted such Note
immediately prior to such Record Date. If such dividend or distribution is
not so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend or
distribution had not been declared.
(f) In case a tender offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock expires and such
tender offer (as amended upon the expiration thereof) requires the payment
to stockholders (based on the acceptance (up to any maximum specified in
the terms of the tender offer) of Purchased Shares (as defined below)) of
an aggregate consideration having a fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described
in a resolution
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of the Board of Directors) that, combined together with (1) the aggregate
of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors), as of the expiration of such tender
offer, of consideration payable in respect of any other tender offers, by
the Company or any of its subsidiaries for all or any portion of the Common
Stock expiring within the 12 months preceding the expiration of such tender
offer and in respect of which no adjustment pursuant to this Section
15.5(f) has been made and (2) the aggregate amount of any distributions to
all holders of the Common Stock made exclusively in cash within 12 months
preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to Section 15.5(e) has been made, exceeds 10% of the
product of the Current Market Price (determined as provided in Section
15.5(h)) as of the last time (the "Expiration Time") tenders could have
been made pursuant to such tender offer (as it may be amended) times the
number of shares of Common Stock outstanding (including any tendered
shares) at the Expiration Time, then, and in each such case, immediately
prior to the opening of business on the day after the date of the
Expiration Time, the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on the date of the
Expiration Time by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding (including any tendered shares) at the
Expiration Time multiplied by the Current Market Price of the Common Stock
on the Trading Day next succeeding the Expiration Time and the denominator
shall be the sum of (x) the fair market value (determined as aforesaid) of
the aggregate consideration payable to stockholders based on the acceptance
(up to any maximum specified in the terms of the tender offer) of all
shares validly tendered and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred to as the
"Purchased Shares") and (y) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) at the Expiration Time and
the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction (if any) to become effective
immediately prior to the opening of business on the day following the
Expiration Time. If the Company is obligated to purchase shares pursuant to
any such tender offer, but the Company is permanently prevented by
applicable law from effecting any such purchases or all such purchases are
rescinded, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such tender offer had not
been made. If the application of this Section 15.5(f) to any tender offer
would result in an increase in the Conversion Price, no adjustment shall be
made for such tender offer under this Section 15.5(f).
(g) In case of a tender or exchange offer made by a person other than
the Company or any subsidiary of the Company for an amount which increases
the offeror's ownership of Common Stock to more than 25% of the Common
Stock outstanding and shall involve the payment by such person of
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consideration per share of Common Stock having a fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive, and described in a resolution of the Board of Directors) at the
Expiration Time that exceeds the Current Market Price of the Common Stock
on the Trading Day next succeeding the Expiration Time, and in which, as of
the Expiration Time the Board of Directors is not recommending rejection of
the offer, the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the Expiration Time by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) on the Expiration Time
multiplied by the current Market Price of the Common Stock on the Trading
Day next succeeding the Expiration Time and the denominator shall be the
sum of (x) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender or exchange offer) of all
shares validly tendered or exchanged and not withdrawn as of the Expiration
Time (the shares deemed so accepted, up to any such maximum, being referred
to as the "Purchased Shares") and (y) the product of the number of shares
of Common Stock outstanding (less any Purchased Shares) on the Expiration
Time and the Current Market Price of the Common Stock on the Trading Day
next succeeding the Expiration Time, such reduction to become effective as
of immediately prior to the opening of business on the day following the
Expiration Time. In the event that such person is obligated to purchase
shares pursuant to any such tender or exchange offer, but such person is
permanently prevented by applicable law from effecting any such purchases
or all such purchases are rescinded, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
tender or exchange offer had not been made. Notwithstanding the foregoing,
the adjustment described in this Section 15.5(g) shall not be made if, as
of the Expiration Time, the offering documents with respect to such offer
disclose a plan or intention to cause the Company to engage in any
transaction described in Article XII.
(h) For purposes of this Section 15.5, the following terms shall have
the meaning indicated:
(1) "Closing Price" with respect to any securities on any day
shall mean the closing sale price regular way on such day or, in case
no such sale takes place on such day, the average of the reported
closing bid and asked prices, regular way, in each case on the New
York Stock Exchange, or, if such security is not listed or admitted to
trading on such Exchange, on the principal national security exchange
or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the
average of the closing bid and
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asked prices of such security on the over-the-counter market on the
day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service, or if
not so available, in such manner as furnished by any New York Stock
Exchange member firm selected from time to time by the Board of
Directors for that purpose, or a price determined in good faith by the
Board of Directors or, to the extent permitted by applicable law, a
duly authorized committee thereof, whose determination shall be
conclusive.
(2) "Current Market Price" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten consecutive
Trading Days immediately prior to the date in question; provided,
--------
however, that (1) if the "ex" date (as hereinafter defined) for any
-------
event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price
pursuant to Section 15.5(a), (b), (c), (d), (e), (f) or (g) occurs
during such ten consecutive Trading Days, the Closing Price for each
Trading Day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the same fraction by
which the Conversion Price is so required to be adjusted as a result
of such other event, (2) if the "ex" date for any event (other than
the issuance or distribution requiring such computation) that requires
an adjustment to the Conversion Price pursuant to Section 15.5(a),
(b), (c), (d), (e), (f) or (g) occurs on or after the "ex" date for
the issuance or distribution requiring such computation and prior to
the day in question, the Closing Price for each Trading Day on and
after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by
which the Conversion Price is so required to be adjusted as a result
of such other event, and (3) if the "ex" date for the issuance or
distribution requiring such computation is prior to the day in
question, after taking into account any adjustment required pursuant
to clause (1) or (2) of this proviso, the Closing Price for each
Trading Day on or after such "ex" date shall be adjusted by adding
thereto the amount of any cash and the fair market value (as
determined by the Board of Directors or, to the extent permitted by
applicable law, a duly authorized committee thereof in a manner
consistent with any determination of such value for purposes of
Section 15.5(d), (f) or (g), whose determination shall be conclusive
and described in a resolution of the Board of Directors or such duly
authorized committee thereof, as the case may be) of the evidences of
indebtedness, shares of capital stock or assets being distributed
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applicable to one share of Common Stock as of the close of business on
the day before such "ex" date. For purposes of any computation under
Section 15.5(f) or (g), the Current Market Price of the Common Stock
on any date shall be deemed to be the average of the daily Closing
Prices per share of Common Stock for such day and the next two
succeeding Trading Days; provided, however, that if the "ex" date for
-------- -------
any event (other than the tender or exchange offer requiring such
computation) that requires an adjustment to the Conversion Price
pursuant to Section 15.5(a), (b), (c), (d), (e), (f) or (g) occurs on
or after the Expiration Time for the tender or exchange offer
requiring such computation and prior to the day in question, the
Closing Price for each Trading Day on and after the "ex" date for such
other event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the Conversion Price is so
required to be adjusted as a result of such other event. For purposes
of this paragraph, the term "ex" date, (1) when used with respect to
any issuance or distribution, means the first date on which the Common
Stock trades regular way on the relevant exchange or in the relevant
market from which the Closing Price was obtained without the right to
receive such issuance or distribution, (2) when used with respect to
any subdivision or combination of shares of Common Stock, means the
first date on which the Common Stock trades regular way on such
exchange or in such market after the time at which such subdivision or
combination becomes effective, and (3) when used with respect to any
tender or exchange offer means the first date on which the Common
Stock trades regular way on such exchange or in such market after the
Expiration Time of such offer.
(3) "fair market value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of
Common Stock have the right to receive any cash, securities or other
property or in which the Common Stock (or other applicable security)
is exchanged for or converted into any combination of cash, securities
or other property, the date fixed for determination of shareholders
entitled to receive such cash, securities or other property (whether
such date is fixed by the Board of Directors or by statute, contract
or otherwise).
(5) "Trading Day" shall mean (x) if the applicable security is
listed or admitted for trading on the New York Stock
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Exchange or another national security exchange, a day on which the New
York Stock Exchange or another national security exchange is open for
business or (y) if the applicable security is quoted on the Nasdaq
National Market, a day on which trades may be made on thereon or (z)
if the applicable security is not so listed, admitted for trading or
quoted, any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
(i) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 15.5(a), (b), (c), (d), (e), (f) and
(g), as the Board of Directors considers to be advisable to avoid or
diminish any income tax to holders of Common Stock or rights to purchase
Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes.
To the extent permitted by applicable law, the Company from time to
time may reduce the Conversion Price by any amount for any period of time
if the period is at least twenty (20) days, the reduction is irrevocable
during the period and the Board of Directors shall have made a
determination that such reduction would be in the best interests of the
Company, which determination shall be conclusive. Whenever the Conversion
Price is reduced pursuant to the preceding sentence, the Company shall mail
to holders of record of the Notes a notice of the reduction at least
fifteen (15) days prior to the date the reduced Conversion Price takes
effect, and such notice shall state the reduced Conversion Price and the
period during which it will be in effect.
(j) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1.00% in
such price; provided, however, that any adjustments which by reason of this
-------- -------
Section 15.5(j) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Article XV shall be made by the Company and shall be made to the
nearest cent or to the nearest one hundredth of a share, as the case may
be.
(k) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Trustee and any conversion agent other
than the Trustee an Officers' Certificate setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment. Promptly after delivery of such
certificate, the Company shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the date
on which each adjustment becomes effective and shall mail such notice of
such adjustment of the Conversion Price to the holder of each Note at his
last address appearing on the Note register provided for in Section 2.5 of
this Indenture, within twenty (20) days after
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execution thereof. Failure to deliver such notice shall not affect the
legality or validity of any such adjustment.
(l) In any case in which this Section 15.5 provides that an
adjustment shall become effect immediately after a record date for an
event, the Company may defer until the occurrence of such event (i) issuing
to the holder of any Note converted after such record date and before the
occurrence of such event the additional shares of Common Stock issuable
upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such holder any amount in cash
in lieu of any fraction pursuant to Section 15.3.
(m) For purposes of this Section 15.5, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury
of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The
Company will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Company.
Section 15.6. Effect of Reclassification, Consolidation, Merger or Sale.
---------------------------------------------------------
If any of the following events occur, namely (i) any reclassification or change
of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 15.5(c) applies), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, the Company or the successor or purchasing corporation, as the
case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture) providing that such Note shall be convertible
into the kind and amount of shares of stock and other securities or property or
assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance by a holder of a number
of shares of Common Stock issuable upon conversion of such Notes (assuming, for
such purposes, a sufficient number of authorized shares of Common Stock
available to convert all such Notes) immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance assuming such
holder of Common Stock did not exercise his rights of election, if any, as to
the kind or amount of shares of stock and other securities or property or assets
(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance (provided that, if the kind or amount of
shares of stock and other securities or property or assets (including cash)
receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance is not the same for each share of Common Stock
in respect of which such rights of election shall not have been exercised
("nonelecting share")), then for the
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purposes of this Section 15.6 the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon such
reclassification change, consolidation, merger, combination, sale or conveyance
for each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares. Such
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Article.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at his address appearing on the
Note register provided for in Section 2.5 of this Indenture, within twenty (20)
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to successive
reclassifications, changes, consolidations, mergers, combinations, sales and
conveyances.
If this Section 15.6 applies to any event or occurrence, Section 15.5 shall
not apply.
Section 15.7. Taxes on Shares Issued. The issue of stock certificates
----------------------
on conversions of Notes shall be made without charge to the converting
Noteholder for any tax in respect of the issue thereof. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than that
of the holder of any Note converted, and the Company shall not be required to
issue or deliver any such stock certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
Section 15.8. Reservation of Shares; Shares to Be Fully Paid; Compliance
----------------------------------------------------------
with Governmental Requirements; Listing of Common Stock. The Company shall
- -------------------------------------------------------
reserve, free from preemptive rights, out of its authorized but unissued shares
or shares held in treasury sufficient shares of Common Stock to provide for the
conversion of the Notes from time to time as such Notes are presented for
conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may be issued
upon conversion of Notes will upon issue be fully paid and non-assessable by the
Company and free from all taxes, liens and charges with respect to the issue
thereof.
The Company covenants that if any shares of Common Stock to be provided for
the purpose of conversion of Notes hereunder require registration with or
approval of any governmental authority under any federal or state law before
such shares may be validly issued
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upon conversion, the Company will in good faith and as expeditiously as possible
endeavor to secure such registration or approval, as the case may be.
The Company further covenants that if at any time the Common Stock shall be
listed on the New York Stock Exchange or any other national securities exchange
the Company will, if permitted by the rules of such exchange, list and keep
listed so long as the Common Stock shall be so listed on such exchange, all
Common Stock issuable upon conversion of the Notes.
Section 15.9. Responsibility of Trustee. The Trustee and any other
-------------------------
conversion agent shall not at any time be under any duty or responsibility to
any holder of Notes to determine whether any facts exist which may require any
adjustment of the Conversion Price, or with respect to the nature or extent or
calculation of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. The Trustee and any other conversion agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, which may at any time
be issued or delivered upon the conversion of any Note; and the Trustee and any
other conversion agent make no representations with respect thereto. Subject to
the provisions of Section 8.1, neither the Trustee nor any conversion agent
shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any Note for the purpose of conversion or
to comply with any of the duties, responsibilities or covenants of the Company
contained in this Article. Without limiting the generality of the foregoing,
neither the Trustee nor any conversion agent shall be under any responsibility
to determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 15.6 relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Noteholders upon the conversion of their Notes after any event referred to in
such Section 15.6 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 8.1, may accept as conclusive evidence of
the correctness of any such provisions, and shall be protected in relying upon,
the Officers' Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.
Section 15.10. Notice to Holders Prior to Certain Actions. In case:
------------------------------------------
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock that would require an adjustment in the Conversion
Price pursuant to Section 15.5; or
(b) the Company shall authorize the granting to all or substantially
all the holders of its Common Stock of rights or warrants to subscribe for
or purchase any share of any class or any other rights or warrants; or
(c) of any reclassification or reorganization of the Common Stock of
the Company (other than a subdivision or combination of its outstanding
Common Stock, or a change in par value, or from par value to no par value,
or from no par value to par value), or of any consolidation or merger to
which the
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Company is a party and for which approval of any shareholders of the
Company is required, or of the sale or transfer of all or substantially all
of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register provided for in
Section 2.5 of this Indenture, as promptly as possible but in any event at least
fifteen (15) days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution, or rights or warrants are to be determined, or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up is expected to become effective
or occur, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding-up. Failure to give such
notice, or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
ARTICLE XVI.
REPURCHASE OF NOTES AT
OPTION OF THE HOLDER UPON CHANGE IN CONTROL
Section 16.1. Right to Require Repurchase. In the event that a Change
---------------------------
in Control (as hereinafter defined) shall occur, then each holder shall have the
right, at the holder's option, to require the Company to repurchase, and upon
the exercise of such right the Company shall repurchase, all of such holder's
Notes, or any portion of the principal amount thereof that is an integral
multiple of $1,000 (provided that no single Note may be repurchased in part
unless the portion of the principal amount of such Note to be outstanding after
such repurchase is equal to $1,000 or an integral multiples of $1,000), on the
date (the "Repurchase Date") that is 30 days after the date of the Company
Notice (as defined in Section 16.2) for cash at a purchase price equal to 100%
of the principal amount (the "Repurchase Price") plus interest accrued and
unpaid interest to, but excluding, the Repurchase Date; provided that if the
--------
Repurchase Date is January 15 or July 15, then the interest payable on such date
shall be paid to the holder of record of the Note on the next preceding January
1 or July 1, respectively. Whenever in this Indenture there is a reference, in
any context, to the principal of any Note as of any time, such reference shall
be deemed to include reference to the Repurchase Price payable in respect of
such Note to the extent that such Repurchase Price is, was or would be so
payable at such time, and express mention of the Repurchase Price in any
provision of this Indenture shall not be construed as excluding the Repurchase
Price in those provisions of this Indenture when such express mention is not
made.
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Section 16.2. Notices; Method of Exercising Repurchase Right, Etc.
----------------------------------------------------
(a) Unless the Company shall have theretofore called for redemption
all of the outstanding Notes pursuant to Article III, on or before the 30th
day after the occurrence of a Change in Control, the Company or, at the
request of the Company on or before the 15th day after such occurrence, the
Trustee shall give to all holders of Notes notice (the "Company Notice") of
the occurrence of the Change in Control and of the repurchase right set
forth herein arising as a result thereof. The Company shall also deliver a
copy of such notice of a repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must be exercised,
(3) the Repurchase Price,
(4) a description of the procedure which a holder must follow to
exercise a repurchase right,
(5) that on the Repurchase Date the Repurchase Price will become
due and payable upon each such Note designated by the holder to be
repurchased, and that interest thereon shall cease to accrue on and
after said date,
(6) the Conversion Price, the date on which the right to convert
the Notes to be repurchased will terminate and the places where such
Notes may be surrendered for conversion, and
(7) the place or places where such Notes are to be surrendered
for payment of the Repurchase Price and accrued interest, if any.
No failure of the Company to give the foregoing notices or defect therein
shall limit any holder's right to exercise a repurchase right or affect the
validity of the proceedings for the repurchase of Notes.
If any of the foregoing provisions or other provisions of this Article are
inconsistent with applicable law, such law shall govern.
(b) To exercise a repurchase right, a holder shall deliver to the
Trustee or any paying agent on or before the 30th day after the date of the
Company Notice (i) written notice of the holder's exercise of such right,
which notice shall set forth the name of the holder, the principal amount
of the Notes
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<PAGE>
to be repurchased (and, if any Note is to repurchased in part, the serial
number thereof, the portion of the principal amount thereof to be
repurchased and the name of the Person in which the portion thereof to
remain outstanding after such repurchase is to be registered) and a
statement that an election to exercise the repurchase right is being made
thereby, and (ii) the Notes with respect to which the repurchase right is
being exercised.
(c) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid to the
Trustee or the paying agent the Repurchase Price in cash, for payment to
the holder on the Repurchase Date, together with accrued and unpaid
interest to, but excluding, the Repurchase Date payable with respect to the
Notes as to which the purchase right has been cased.
(d) If any Note (or portion thereof) surrendered for repurchase shall
not be so paid on the Repurchase Date, the principal amount of such Note
(or portion thereof, as the case may be) shall, until paid, bear interest
from the Repurchase Date at the rate of 5 5/8% per annum, and each Note
shall remain convertible into Common Stock until the principal of such Note
(or portion thereof, as the case may be) shall have been paid or duly
provided for.
(e) Any Note which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee Shall authenticate and deliver to the holder of
such Note without service charge, a new Note or Notes, containing identical
terms and conditions, each in an authorized denomination in aggregate
principal amount equal to and in exchange for the portion of the principal
of the Note so surrendered that was not repurchased.
(f) Any holder that has delivered to the Trustee its written notice
exercising its right to require the Company to repurchase its Notes upon a
Change in Control shall have the right to withdraw such notice at any time
prior to the close of business on the Repurchase Date by delivery of a
written notice of withdrawal to the Trustee prior to the close of business
on such date. A Note in respect of which a holder is exercising its option
to require repurchase upon a Change in Control may be converted into Common
Stock in accordance with Article XV only if such holder withdraws its
notice in accordance with the preceding sentence.
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<PAGE>
Section 16.3. Certain Definitions. For purposes of this Article XVI,
-------------------
(a) the term "beneficial owner" shall be determined in accordance
with Rule 13d-3 promulgated by the Commission pursuant to the Exchange Act;
and
(b) the term "Person" shall include any syndicate or group which
would be deemed to be a "person" under Section 13(d)(3) of the Exchange
Act.
Section 16.4. Change in Control. A "Change in Control" shall be deemed
-----------------
to have occurred at such time after the original issuance of the Notes as:
(a) any Person, other than the Company, any subsidiary of the
Company, or any employee benefit plan of the Company or any such
subsidiary, is or becomes the beneficial owner, directly or indirectly,
through a purchase or other acquisition transaction or series of
transactions (other than a merger or consolidation involving the Company),
of shares of capital stock of the Company entitling such Person to exercise
in excess of 50% of the total voting power of all shares of capital stock
of the Company entitled to vote generally in the election of directors; or
(b) there occurs any consolidation of the Company with, or merger of
the Company into, any other Person, any merger of another Person into the
Company, or any sale or transfer of all or substantially all of the assets
of the Company to another Person (other than (i) any such transaction
pursuant to which the holders of the Common Stock immediately prior to such
transaction have, directly or indirectly, shares of capital stock of the
continuing or surviving corporation immediately after such transaction
which entitle such holders to exercise in excess of 50% of the total voting
power of all shares of capital stock of the continuing or surviving
corporation entitled to vote generally in the election of directors and
(ii) any merger (1) which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock
or (2) which is effected solely to change the jurisdiction of incorporation
of the Company and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock solely into shares of common stock);
provided, however, that a Change in Control shall not be deemed to have occurred
if either (a) the Closing Price per share of the Common Stock for any ten (10)
Trading Days within the period of twenty (20) consecutive Trading Days ending
immediately before the Change in Control shall equal or exceed 105% of the
Conversion Price in effect on each such Trading Day, or (b) (i) at least 90% of
the consideration (excluding cash payments for fractional shares) in the
transaction or transactions constituting the Change in Control consists of
shares of common stock with full voting rights traded on a national securities
exchange or quoted on the Nasdaq National Market (or which will be so traded or
quoted when issued or exchanged in connection with such Change in Control) (such
securities being referred to as "Publicly
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Traded Securities") and as a result of such transaction or transactions such
Notes become convertible solely into such Publicly Traded Securities and (ii)
the consideration in the transaction or transactions constituting the Change of
Control consists of cash, Publicly Traded Securities or a combination of cash
and Publicly Traded Securities with an aggregate fair market value (which, in
the case of Publicly Traded Securities, shall be equal to the average Closing
Price of such Publicly Traded Securities during the ten (10) consecutive Trading
Days commencing with the sixth Trading Day following consummation of the
transaction or transactions constituting the Change in Control) is at least 105%
of the Conversion Price in effect on the date immediately preceding the date of
consummation of such Change in Control.
Section 16.5. Consolidation, Merger, Etc. In the case of any
---------------------------
reclassification, change, consolidation, merger, combination, sale or conveyance
to which Section 15.6 applies, in which the Common Stock of the Company is
changed or exchanged as a result into the right to receive shares of stock and
other securities or property or assets (including cash) which includes shares of
Common Stock of the Company or common stock of another person that are, or upon
issuance will be, traded on a United States national securities exchange or
approved for trading on an established automated over-the-counter trading market
in the United States and such shares constitute at the time such change or
exchange becomes effective in excess of 50% of the aggregate fair market value
of such shares of stock and other securities, property and assets (including
cash) (as determined by the Company, which determination shall be conclusive and
binding), then the person formed by such consolidation or resulting from such
merger or combination or which acquires the properties or assets (including
cash) of the Company, as the case may be, shall execute and deliver to the
Trustee a supplemental indenture (which shall comply with the Trust Indenture
Act as in force at the date of execution of such supplemental indenture)
modifying the provisions of this Indenture relating to the right of holders of
the Notes to cause the Company to repurchase the Notes following a Change in
Control, including without limitation the applicable provisions of this Article
XVI and the definitions of the Common Stock and Change in Control, as
appropriate, and such other related definitions set forth herein as determined
in good faith by the Company (which determination shall be conclusive and
binding), to make such provisions apply to the common stock and the issuer
thereof if different from the Company and Common Stock of the Company (in lieu
of the Company and the Common Stock of the Company).
ARTICLE XVII
MISCELLANEOUS PROVISIONS
Section 17.1. Provisions Binding on Company's Successors. All the
------------------------------------------
covenants, stipulations, promises and agreements by the Company contained in
this Indenture shall bind its successors and assigns whether so expressed or
not.
Section 17.2. Official Acts by Successor Corporation. Any act or
--------------------------------------
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force
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and effect by the like board, committee or officer of any corporation that shall
at the time be the lawful sole successor of the Company.
Section 17.3. Addresses for Notices, Etc. Any notice or demand which
---------------------------
by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Notes on the Company shall be deemed
to have been sufficiently given or made, for all purposes, if given or served by
being deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Renal Treatment Centers, Inc., 1180 W. Swedesford Road, Building 2,
Suite 300, Berwyn, Pennsylvania 19312, Attention: Chief Financial Officer. Any
notice, direction, request or demand hereunder to or upon the Trustee shall be
deemed to have been sufficiently given or made, for all purposes, if given or
served by being deposited postage prepaid by registered or certified mail in a
post office letter box addressed to the Corporate Trust Office, which office is,
at the date as of which this Indenture is dated, located at 1700 Market Street,
Philadelphia, PA 19103, Attention: Corporate Trust Division (Renal Treatment
Centers, Inc., 5 5/8% Convertible Subordinated Notes due 2006).
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Noteholder shall be mailed to him
by first class mail, postage prepaid, at his address as it appears on the Note
register and shall be sufficiently given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Noteholder or any defect in
it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 17.4. Governing Law. This Indenture and each Note shall be
-------------
deemed to be a contract made under the laws of New York, and for all purposes
shall be construed in accordance with the laws of New York.
Section 17.5. Evidence of Compliance with Conditions Precedent;
-------------------------------------------------
Certificates to Trustee. Upon any application or demand by the Company to the
- -----------------------
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture shall include (1) a statement that the person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statement or opinion contained in such certificate or opinion is
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not
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such covenant or condition has been complied with; and (4) a statement as to
whether or not, in the opinion of such person, such condition or covenant has
been complied with.
Section 17.6. Legal Holidays. In any case where the date of maturity
--------------
of interest on or principal of the Notes or the date fixed for redemption or
repurchase of any Note will not be a Business Day, then payment of such interest
on or principal of the Notes need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption or repurchase, and no
interest shall accrue for the period from and after such date.
Section 17.7. Trust Indenture Act. This Indenture is hereby made
-------------------
subject to, and shall be governed by, the provisions of the Trust Indenture Act
required to be part of and to govern indentures qualified under the Trust
Indenture Act; provided, however, that, unless otherwise required by law,
-------- -------
notwithstanding the foregoing, this Indenture and the Notes issued hereunder
shall not be subject to the provisions of subsections (a)(1), (a)(2), and (a)(3)
of Section 314 of the Trust Indenture Act as now in effect or as hereafter
amended or modified; provided, further, that this Section 17.7 shall not require
-------- -------
this Indenture or the Trustee to be qualified under the Trust Indenture Act
prior to the time such qualification is in fact required under the terms of the
Trust Indenture Act, nor shall it constitute any admission or acknowledgment by
any party to such supplemental indenture that any such qualification is required
prior to the time such qualification is in fact required under the terms of the
Trust Indenture Act. If any provision hereof limits, qualifies or conflicts
with another provision hereof which is required to be included in an indenture
qualified under the Trust Indenture Act, such required provision shall control.
Section 17.8. No Security Interest Created. Nothing in this Indenture
----------------------------
or in the Notes, expressed or implied, shall be construed to constitute a
security interest under the Uniform Commercial Code or similar legislation, as
now or hereafter enacted and in effect, in any jurisdiction where property of
the Company or its subsidiaries is located.
Section 17.9. Benefits of Indenture. Nothing in this Indenture or in
---------------------
the Notes, expressed or implied, shall give to any Person, other than the
parties hereto, any paying agent, any authenticating agent, any Note registrar
and their successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
Section 17.10. Table of Contents, Headings, Etc. The table of contents
---------------------------------
and the titles and headings of the articles and sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 17.11. Authenticating Agent. The Trustee may appoint an
--------------------
authenticating agent which shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7, 3.3, 15.2 and 16.2, as fully to all
intents and purposes as though the authenticating agent had been
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<PAGE>
expressly authorized by this Indenture and those Sections to authenticate and
deliver Notes. For all purposes of this Indenture, the authentication and
delivery of Notes by the authenticating agent shall be deemed to be
authentication and delivery of such Notes "by the Trustee" and a certificate of
authentication executed on behalf of the Trustee by an authenticating agent
shall be deemed to satisfy any requirement hereunder or in the Notes for the
Trustee's certificate of authentication. Such authenticating agent shall at all
times be a person eligible to serve as trustee hereunder pursuant to Section
8.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section 17.11, without the execution or filing of any paper or any further act
on the part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written notice of
resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any authenticating agent by giving written notice of
termination to such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any authenticating agent shall cease to be eligible under this Section, the
Trustee shall either promptly appoint a successor authenticating agent or itself
assume the duties and obligations of the former authenticating agent under this
Indenture, and upon such appointment of a successor authenticating agent, if
made, shall give written notice of such appointment of a successor
authenticating agent to the Company and shall mail notice of such appointment of
a successor authenticating agent to all holders of Notes as the names and
addresses of such holders appear on the Note register.
The Trustee agrees to pay to the authenticating agent from time to time
reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 17.11 shall
be applicable to any authenticating agent.
Section 17.12. Execution in Counterparts. This Indenture may be executed
-------------------------
in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
PNC Bank, National Association, hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed, all as of the date first written above.
RENAL TREATMENT CENTERS, INC.
By: /s/ Robert L. Mayer, Jr.
-----------------------------------------
Name: Robert L. Mayer, Jr.
---------------------------------------
Title: President and Chief Executive Officer
Attest: --------------------------------------
/s/ Thomas J. Karl
- ------------------------------
Title: Secretary
PNC BANK, NATIONAL ASSOCIATION, as Trustee
By: /s/ Noreen Wichert
-----------------------------------------
Name: Noreen Wichert
---------------------------------------
Title: Assistant Vice President
--------------------------------------
Attest:
/s/ Constantine Hromych
- ------------------------------
Title: Vice President
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<PAGE>
EXHIBIT A
---------
[For global Note only:]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE
"DEPOSITARY," WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE
CERTIFICATES) 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 IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO. (OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
[For all Notes:]
THE NOTE EVIDENCED HEREBY HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THE NOTE EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES
THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE
EVIDENCED HEREBY RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR
THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO RENAL
TREATMENT CENTERS, INC. OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED
<PAGE>
INVESTOR OR A PURCHASER THAT IS NOT A U.S. PERSON THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO PNC BANK, NATIONAL ASSOCIATION, AS TRUSTEE (OR A
SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
SUCH TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), (D) OUTSIDE THE UNITED
STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE); AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH NOTE, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER
OF SUCH TRANSFER AND SUBMIT THIS NOTE TO PNC BANK, NATIONAL ASSOCIATION, AS
TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS
NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO PNC
BANK, NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THREE YEARS FROM
THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
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<PAGE>
RENAL TREATMENT CENTERS, INC.
5 5/8 % CONVERTIBLE SUBORDINATED NOTE DUE 2006
No. ___ CUSIP [____]
Renal Treatment Centers, Inc., a corporation duly organized and validly
existing under the laws of the State of Delaware (herein called the "Company"),
which term includes any successor corporation under the Indenture referred to on
the reverse hereof, for value received hereby promises to pay to [for global
Note, insert: CEDE & CO.] or registered assigns, the principal sum of
[__________ ($_________)] on July 15, 2006, at the office or agency of the
Company maintained for that purpose in the Borough of Manhattan, The City of New
York, or, at the option of the holder of this Note, at the Corporate Trust
Office, in such coin or currency of the United States of America as at the time
of payment shall be legal tender for the payment of public and private debts,
and to pay interest, semi-annually on January 15 and July 15 of each year,
commencing July 15, 1996, on said principal sum at said office or agency, in
like coin or currency, at the rate per annum of 5 5/8%, from January 15 or July
15, as the case may be, next preceding the date of this Note to which interest
has been paid or duly provided for, unless the date hereof is a date to which
interest has been paid or duly provided for, in which case from the date of this
Note, or unless no interest has been paid or duly provided for on the Notes, in
which case from June 12, 1996, until payment of said principal sum has been made
or duly provided for. Notwithstanding the foregoing, if the date hereof is
after any January 1 or July 1, as the case may be, and before the following
January 15 or July 15, this Note shall bear interest from such January 15 or
July 15; provided, however, that if the Company shall default in the payment of
interest due on such January 15 or July 15, then this Note shall bear interest
from the next preceding January 15 or July 15 to which interest has been paid or
duly provided for or, if no interest has been paid or duly provided for on such
Note, from June 12, 1996. The interest payable on this Note pursuant to the
Indenture on any January 15 or July 15 will be paid to the person in whose name
this Note (or one or more Predecessor Notes) is registered at the close of
business on the record date, which shall be the January 1 or July 1 (whether or
not a Business Day) next preceding such January 15 or July 15, as provided in
the Indenture; provided that any such interest not punctually paid or duly
provided for shall be payable as provided in the Indenture. Interest may, at
the option of the Company, be paid by check mailed to the registered address of
such person; provided that with respect to any holder of Notes with an aggregate
principal amount equal to or in excess of $5,000,000 interest may be paid by
wire transfer as more fully specified in the Indenture.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on the Notes to the
prior payment in full of all Senior Indebtedness, as defined in the Indenture,
and provisions giving the holder of this Note the right to convert this Note
into Common Stock of the Company on the terms and subject to the limitations
referred to on the reverse hereof and as more fully specified in the Indenture.
Such
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<PAGE>
further provisions shall for all purposes have the same effect as though fully
set forth at this place.
This Note 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 and
governed by the laws of said State.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
under its corporate seal.
Dated: RENAL TREATMENT CENTERS, INC.
By:______________________________
[SEAL] Attest: _________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
PNC BANK, NATIONAL ASSOCIATION, as Trustee
By: ________________________________________________
Authorized Signatory
By: ________________________________________________
As Authenticating Agent (if different from Trustee)
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<PAGE>
[FORM OF REVERSE OF NOTE]
RENAL TREATMENT CENTERS, INC.
5 5/8% CONVERTIBLE SUBORDINATED NOTE DUE 2006
This Note is one of a duly authorized issue of Notes of the Company,
designated as its 5 5/8% Convertible Subordinated Notes due 2006 (herein called
the "Notes"), limited to the aggregate principal amount of $143,750,000 issued
or to be issued under and pursuant to an indenture dated as of June 12, 1996
(herein called the "Indenture"), between the Company and PNC Bank, National
Association, as trustee (herein called the "Trustee"), to which Indenture and
all indentures supplemental thereto reference is hereby made for a description
of the rights, limitations of rights, obligations, duties and immunities
thereunder of the Trustee, the Company and the holders of the Notes.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of and accrued interest on all Notes
may be declared, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Notes; provided, however, that no such supplemental indenture
shall (i) extend the fixed maturity of any Note, or reduce the rate or extend
the time of payment of interest thereon, or reduce the principal amount thereof
or premium, if any, thereon, or reduce any amount payable on redemption thereof,
or impair the right of any Noteholder to institute suit for the payment thereof,
or make the principal thereof or interest or premium, if any, thereon payable in
any coin or currency other than that provided in the Note, or modify the
provisions of the Indenture with respect to the subordination of the Notes in a
manner adverse to the Noteholders in any material respect, or change the
obligation of the Company to repurchase any Note upon the occurrence of a Change
in Control in a manner adverse to the holder of the Notes, or impair the right
to convert the Notes into Common Stock subject to the terms set forth in the
Indenture, including Section 15.6 thereof, without the consent of the holder of
each Note so affected or (ii) reduce the aforesaid percentage of Notes, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of all Notes then outstanding. It is also
provided in the Indenture that the holders of a majority in aggregate principal
amount of the Notes at the time outstanding may on behalf of the holders of all
of the Notes waive any past default or Event of Default under the Indenture and
its consequences except a default in the payment of interest or any premium on
or the principal of any of the Notes, a default in the payment of redemption
price pursuant to Article III or repurchase price pursuant to Article XVI or a
failure by the Company to convert any Notes into Common Stock of the Company.
Any such consent or waiver by the holder of this Note (unless revoked as
provided in the Indenture) shall be
<PAGE>
conclusive and binding upon such holder and upon all future holders and owners
of this Note and any Notes which may be issued in exchange or substitute hereof,
irrespective of whether or not any notation thereof is made upon this Note or
such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the manner
provided in the Indenture, expressly subordinate and subject in right of payment
to the prior payment in full of all Senior Indebtedness of the Company, as
defined in the Indenture, whether outstanding at the date of the Indenture or
thereafter incurred, and this Note is issued subject to the provisions of the
Indenture with respect to such subordination. Each holder of this Note, by
accepting the same, agrees to and shall be bound by such provisions and
authorizes the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
his attorney-in-fact for such purpose.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Note at the place, at the respective times, at the rate and in the coin
or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Notes are issuable in registered form without coupons in denominations
of $1,000 and any integral multiple of $1,000. At the office or agency of the
Company referred to on the face hereof, and in the manner and subject to the
limitations provided in the Indenture, without payment of any service charge but
with payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any registration or exchange of Notes,
Notes may be exchanged for a like aggregate principal amount of Notes of other
authorized denominations.
The Notes will not be redeemable at the option of the Company prior to July
17, 1999. At any time on or after July 17, 1999, and prior to maturity the
Notes may be redeemed at the option of the Company from time to time, as a whole
or in part, upon mailing a notice of such redemption not less than 15 nor more
than 60 days before the date fixed for redemption to the holders of Notes at
their last registered addresses, all as provided in the Indenture, at the
following optional redemption prices (expressed as percentages of the principal
amount), together in each case with accrued interest to, but excluding, the date
fixed for redemption.
If redeemed during the 12-month period beginning July 15:
<TABLE>
<CAPTION>
Year Percentage Year Percentage
- ---- ---------- ---- ----------
<S> <C> <C> <C>
1999......... 103.94% 2003......... 101.69
2000......... 103.38 2004......... 101.13
2001......... 102.81 2005......... 100.56
2002......... 102.25
</TABLE>
-2-
<PAGE>
and 100% at July 15, 2006; provided that if the date fixed for redemption is on
--------
January 15 or July 15, then the interest payable on such date shall be paid to
the holder of record of the Note on the next preceding January 1 or July 1,
respectively.
The Notes are not subject to redemption through the operation of any
sinking fund.
If a Change in Control (as defined in the Indenture) occurs prior to
maturity, the holder of this Note shall have the right, in accordance with the
provisions of the Indenture, to require the Company to repurchase this Note or
any portion of the principal amount hereof that is an integral multiple of
$1,000 for cash at a Repurchase Price equal to 100% of the principal amount plus
accrued and unpaid interest to, but excluding, the Repurchase Date; provided
that if such Repurchase Date is January 15 or July 15, then the interest payable
on such date shall be paid to the holder of record of the Note on the next
preceding January 1 or July 1, respectively. Within 15 days after the
occurrence of a Change in Control, the Company is obligated to give all holders
of record of Notes notice of the occurrence of such Change in Control and of the
repurchase right arising as a result thereof.
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time after 60 days following the latest date of
original issuance of the Notes and prior to the close of business on the
maturity date, or, as to all or any portion hereof called for redemption, prior
to the close of business on the Business Day immediately preceding the date
fixed for redemption (unless the Company shall default in payment due upon
redemption thereof), to convert the principal hereof or any portion of such
principal which is $1,000 or an integral multiple thereof, into that number of
shares of Company's Common Stock, as said shares shall be constituted at the
date of conversion, obtained by dividing the principal amount of this Note or
portion thereof to be converted by the Conversion Price of $ 34.20 or such
Conversion Price as adjusted from time to time as provided in the Indenture,
upon surrender of this Note, together with a conversion notice as provided in
the Indenture, to the Company at the office or agency of the Company maintained
for that purpose in the Borough of Manhattan, The City of New York, or at the
option of such holder, the Corporate Trust Office, and, unless the shares
issuable on conversion are to be issued in the same name as this Note, duly
endorsed by, or accompanied by instruments of transfer in form satisfactory to
the Company duly executed by, the holder or by his duly authorized attorney. No
adjustment in respect of interest or dividends will be made upon any conversion;
provided, however, that if this Note shall be surrendered for conversion during
the period from the close of business on any record date for the payment of
interest to the close of business on the Business Day preceding the interest
payment date, this Note (unless it or the portion being converted shall have
been called for redemption during the period from the close of business on any
record date for the payment of interest to the close of business on the Business
Day preceding the interest payment date) must be accompanied by an amount, in
New York Clearing House funds or other funds acceptable to the Company, equal to
the interest payable on such interest payment date on the principal amount being
converted. No fractional shares will be issued upon any conversion, but an
adjustment in cash will be made, as provided in the Indenture, in respect of any
fraction of a share which would otherwise be issuable upon the surrender of any
Note or Notes for conversion.
-3-
<PAGE>
Any Notes called for redemption, unless surrendered for conversion on or
before the close of business on the date fixed for redemption, may be deemed to
be purchased from the holder of such Notes at an amount equal to the applicable
redemption price, together with accrued interest to the date fixed for
redemption, by one or more investment bankers or other purchasers who may agree
with the Company to purchase such Notes from the holders thereof and convert
them into Common Stock of the Company and to make payment for such Notes as
aforesaid to the Trustee in trust for such holders.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, or at the option of the holder of this Note, at the Corporate Trust
Office, a new Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange thereof, subject
to the limitations provided in the Indenture, without charge except for any tax
or other governmental charge imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent, any
conversion agent and any Note registrar may deem and treat the registered holder
hereof as the absolute owner of this Note (whether or not this Note shall be
overdue and notwithstanding any notation of ownership or other writing hereon),
for the purpose of receiving payment hereof, or on account hereof, for the
conversion hereof and for all other purposes, and neither the Company nor the
Trustee nor any other authenticating agent nor any paying agent nor any other
conversion agent nor any Note registrar shall be affected by any notice to the
contrary. All payments made to or upon the order of such registered holder
shall, to the extent of the sum or sums paid, satisfy and discharge liability
for monies payable on this Note.
No recourse for the payment of the principal of or any premium or interest
on this Note, or for any claim based hereon or otherwise in respect hereof, and
no recourse under or upon any obligation, covenant or agreement of the Company
in the Indenture or any indenture supplemental thereto or in any Note, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
Terms used in this Note and defined in the Indenture are used herein as
therein defined.
-4-
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of
this Note, shall be construed as though they were written out in full according
to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT -- ____ Custodian ________
TEN ENT - as tenants by the (Cust) (Minor)
entireties
JT TEN- as joint tenants with under Uniform Gifts to Minors Act
right to survivorship
and not as tenants in
common ____________________________
(State)
</TABLE>
Additional abbreviations may also be used
though not in the above list.
<PAGE>
CONVERSION NOTICE
To: RENAL TREATMENT CENTERS, INC.
The undersigned registered owner of this Note hereby irrevocably exercises
the option to convert this Note, or the portion hereof (which is $1,000 or an
integral multiple thereof) below designated, into shares of Common Stock of
Renal Treatment Centers, Inc. in accordance with the terms of the Indenture
referred to in this Note, and directs that the shares issuable and deliverable
upon such conversion, together with any check in payment for fractional shares
and any Notes representing any unconverted principal amount hereof, be issued
and delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
check the appropriate box below and pay all transfer taxes payable with respect
thereto. Any amount required to be paid to the undersigned on account of
interest accompanies this Note.
Dated:____________________
___________________________________
___________________________________
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule
17Ad-15 if shares of Common Stock are to
be issued, or Notes to be delivered,
other than to and in the name of the
registered holder.
___________________________________
Signature Guarantee
<PAGE>
Fill in for registration of shares of
Common Stock if to be issued, and
Notes if to be delivered, other than
to and in the name of the registered
holder:
___________________________
(Name)
___________________________
(Street Address)
___________________________
(City, State and Zip Code)
Please print name and address
Principal amount to be converted (if
less than all): $___________
_____________________________________
Social Security or Other Taxpayer
Identification Number
-2-
<PAGE>
ASSIGNMENT
For value received ______________________ hereby sell(s), assign(s) and
transfer(s) unto
___________________________________________________________________
(Please insert name, social security or other Taxpayer Identification
Number of assignee)
the within Note, and hereby irrevocably constitutes and appoints
____________________________________________________________________
attorney to transfer the said Note on the books of the Company, with full power
of substitution in the premises.
In connection with any transfer of the within Note within three years of
the date of original issuance of such Note, the undersigned confirms that such
Note is being transferred:
[ ] To Renal Treatment Centers, Inc. or a subsidiary thereof; or
[ ] Pursuant to and in compliance with Rule 144A under the Securities
Act of 1933, as amended; or
[ ] To an Institutional Accredited Investor pursuant to and in compliance
with the Securities Act of 1933, as amended; or
[ ] Pursuant to and in compliance with Regulation S under the Securities
Act of 1933, as amended; or
[ ] Pursuant to and in compliance with Rule 144 under the Securities Act
of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate").
[ ] The transferee is an Affiliate of the Company.
<PAGE>
Dated:___________________
__________________________________________
__________________________________________
Signature(s)
Signature(s) must be guaranteed by an eligible
Guarantor Institution (banks, stock brokers,
savings and loan associations and credit unions)
with membership in an approved signature guarantee
medallion program pursuant to Securities and
Exchange Commission Rule 17Ad-15 if shares of
Common Stock are to be issued, or Notes to be
delivered, other than to and in the name of the
registered holder.
__________________________________________
Signature Guarantee
-2-
<PAGE>
OPTION TO ELECT REPURCHASE
UPON A CHANGE IN CONTROL
To: RENAL TREATMENT CENTERS, INC.
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Renal Treatment Centers, Inc. (the
"Company") as to the occurrence of a Change in Control with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Note, or the portion thereof (which is $1,000 or an integral
multiple thereof) below designated, in accordance with the terms of the
Indenture referred to in this Note at the repurchase price, together with
accrued interest to, but excluding, such date, to the registered holder hereof.
Dated:_________________
___________________________________________
___________________________________________
Signature(s)
NOTICE: The above signatures of the holder(s)
hereof must correspond with the name as written
upon the face of the Note in every particular
without alteration, enlargement or any change
whatever.
Principal amount to be repurchased (if less than
all):
$__________
_______________________________________________
Social Security or Other Taxpayer
Identification Number
-3-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement" is made and entered
into as of June 12, 1996, by and among Renal Treatment Centers, Inc., a Delaware
corporation (the "Company"), and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, UBS Securities LLC, J.C. Bradford & Co. and
Wessels, Arnold & Henderson (the "Initial Purchasers") pursuant to the Purchase
Agreement, dated as of June 6, 1996 (the "Purchase Agreement"), between the
Company and the Initial Purchasers. In order to induce the Initial Purchasers
to enter into the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution of this
Agreement is a condition to the closing under the Purchase Agreement.
The Company agrees with the Initial Purchasers, (i) for their benefit as
Initial Purchasers and (ii) for the benefit of the holders from time to time of
the Notes (including the Initial Purchasers) and the holders from time to time
of the Common Stock issued upon conversion of the Notes (each of the foregoing a
"Holder" and together the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition shall
-----------
have their respective meanings set forth in the Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:
Affiliate: "Affiliate" means, with respect to any specified person,
---------
(i) any other person directly or indirectly controlling or controlled by, or
under direct or indirect common control with, such specified person or (ii) any
officer or director of such other person. For purposes of this definition, the
term "control" (including the terms "controlling," "controlled by" and "under
common control with") of a person means the possession, direct or indirect, of
the power (whether or not exercised) to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday
------------
that is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.
Common Stock: The shares of common stock, $.01 par value, of the
------------
Company and any other shares of common stock as may constitute "Common Stock"
for purposes of the Indenture, in each case, as issuable or issued upon
conversion of the Notes.
Damages Accrual Period: See Section 2(d) hereof.
----------------------
Damages Payment Date: Each of the semi-annual interest payment dates
--------------------
provided in the Indenture, whether or not Liquidated Damages are payable on such
date.
Effectiveness Period: The period commencing with the date hereof and
--------------------
ending on the earlier of the date that is three years after the latest date of
original issuance of the Notes and the date that all Registrable Securities have
ceased to be Registrable Securities.
-1-
<PAGE>
Effectiveness Target Date: See Section 2(a) hereof.
-------------------------
Event: See Section 2(d) hereof.
-----
Event Date: See Section 2(d) hereof.
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Filing Date: See Section 2(a) hereof.
-----------
Holder: See the second paragraph of this Agreement.
------
Indenture: The Indenture, dated as of June 12, 1996, between the
---------
Company and PNC Bank, N.A., as trustee, pursuant to which the Notes are being
issued, as amended or supplemented from time to time in accordance with the
terms thereof.
Initial Purchasers: See the first paragraph of this Agreement.
------------------
Initial Shelf Registration: See Section 2(a) hereof.
--------------------------
Liquidated Damages: See Section 2(d) hereof.
------------------
Losses: See Section 5 hereof.
------
Managing Underwriters: The investment banking firm or firms that
---------------------
shall manage or co-manage an Underwritten Offering.
Notes: The 5 5/8% Convertible Subordinated Notes due 2006 of the
-----
Company being issued and sold pursuant to the Purchase Agreement and the
Indenture.
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any amendment or prospectus supplement, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
Purchase Agreement: See the first paragraph of this Agreement.
------------------
Record Holder: (i) with respect to any Damages Payment Date relating
-------------
to the Notes, each Person who is a registered holder of such Notes on the record
date with respect to the interest payment date under the Indenture on which such
Damages Payment Date shall occur and (ii) with respect to any Damages Payment
Date relating to the Common Stock, each Person who is a registered holder of
such Common Stock 15 days prior to such Damages Payment Date.
Registrable Securities: Each Note and each share of Common Stock into
----------------------
which the Notes are convertible or converted upon original issuance thereof, and
at all times subsequent thereto, and any Common Stock issued with respect
thereto upon any stock dividend, split or similar event, until, in the case of
any such Note or share of Common Stock, (i) it is effectively registered under
the
-2-
<PAGE>
Securities Act and disposed of in accordance with the Registration Statement
covering it, (ii) it is saleable by the holder thereof pursuant to Rule 144(k)
or (iii) it is sold to the public pursuant to Rule 144, and, as a result of the
event or circumstance described in any of the foregoing clauses (i) through
(iii), the legends with respect to transfer restrictions required under the
Indenture (other than any such legends required solely as the consequences of
the fact that the Registrable Securities are owned by, or were previously owned
by, the Company or an Affiliate of the Company) are removed or removable in
accordance with the terms of the Indenture.
Registration Expenses: See Section 5 hereof.
---------------------
Registration Statement: Any registration statement of the Company
----------------------
which covers any of the Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 under the Securities Act, as such Rule may be
--------
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be
---------
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations promulgated by the SEC thereunder.
Shelf Registration: See Section 2(a) hereof.
------------------
Special Counsel: Willkie Farr & Gallagher, or such other successor
---------------
counsel as shall be specified by the holders of a majority of the Registrable
Securities, the fees and expenses of which will be paid by the Company pursuant
to Section 5 hereof.
Subsequent Shelf Registration: See Section 2(b) hereof.
-----------------------------
Suspension Period: See Section 2(d).
-----------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee: The Trustee under the Indenture.
-------
Underwritten Registration or Underwritten Offering: A registration in
--------------------------------------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. Shelf Registration.
------------------
(a) Shelf Registration. The Company shall prepare and file with the
------------------
SEC, as soon as practicable but in any event on or prior to the date ninety (90)
days following the latest date of original issuance of the Notes (the "Filing
Date"), a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 of the Securities Act (a "Shelf Registration")
registering the
-3-
<PAGE>
resale from time to time by Holders thereof of all of the Registrable Securities
(the "Initial Shelf Registration"). The Initial Shelf Registration shall be on
Form S-3 or another appropriate form permitting registration of such Registrable
Securities for resale by such Holders in the manner or manners designated by
them (including, without limitation, one or more Underwritten Offerings). The
Company shall use its best efforts to cause the Initial Shelf Registration to be
declared effective under the Securities Act as soon as practicable but in any
event on or prior to the date one hundred and twenty (120) days following the
Filing Date (the "Effectiveness Target Date"), and shall use its best efforts to
keep the Initial Shelf Registration continuously effective under the Securities
Act, subject to the provisions of Section 2(c), until the earlier of the
expiration of the Effectiveness Period or the date a Subsequent Shelf
Registration (as defined below) covering all of the Registrable Securities has
been declared effective under the Securities Act. Subject to the right of the
Company to have the Initial Shelf Registration not be effective, or not to be
updated, amended or supplemented, for periods of time set forth in Section 2(c),
the Company further agrees to use its best efforts to prevent the happening of
any event that would cause the Initial Shelf Registration to contain a material
misstatement or omission or to be not effective and usable for resale of the
Registrable Securities during the Effective Period.
(b) If the Initial Shelf Registration or any Subsequent Shelf
Registration ceases to be effective for any reason as a result of the issuance
of a stop order by the SEC at any time during the Effectiveness Period, the
Company shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within thirty (30)
days of such cessation of effectiveness amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration covering all of
the Registrable Securities (a "Subsequent Shelf Registration"). If a Subsequent
Shelf Registration is filed, the Company shall use its best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after such filing and to keep such Registration Statement continuously effective
until the end of the Effectiveness Period.
(c) In the event (A) of the happening of any event of the kind
described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi) hereof
or (B) that, in the good faith judgment of the Company, it is advisable to
suspend the use of the Prospectus for a discrete period of time due to pending
material corporate developments or similar material events that have not yet
been publicly disclosed and as to which the Company believes public disclosure
will be prejudicial to the Company, the Company shall deliver a certificate in
writing, signed by an authorized executive officer of the Company, to the
Special Counsel, the Initial Purchasers and the Managing Underwriters, if any,
to the effect of the foregoing and thereafter the use of the Prospectus shall be
suspended, and the Company, subject to the terms of this Section 2(c), shall
thereafter not be required to maintain the effectiveness or update the Shelf
Registration. The Company will use its best efforts to ensure that the use of
the Prospectus may be resumed as soon as practicable, in the case of suspension
under Section 2(c)(A), and, in the case of a pending development or event
referred to in Section 2(c)(B) hereof, as soon as, in the good faith judgment of
the Company, public disclosure of such material corporate development or similar
material event would not have a material adverse effect on the Company.
Notwithstanding the foregoing, the Company shall not under any circumstances be
entitled to exercise its right under this Section 2(c) to suspend the use of the
Prospectus (whether as a result of events referred to in Section 2(c)(A) hereof
or as a result of the pending development or event referred to in Section
2(c)(B) hereof) more than one (1) time in any three (3) month period, and the
periods in which the use of the Prospectus is suspended shall not exceed fifteen
(15) days in any three-month period (a "Suspension Period").
-4-
<PAGE>
(d) The parties hereto agree that the Holders of Registrable
Securities will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if (i) the Initial Shelf Registration
has not been filed on or prior to the Filing Date, (ii) the Initial Shelf
Registration has not been declared effective by the Effectiveness Target Date,
(iii) prior to the end of the Effectiveness Period, the SEC shall have issued a
stop order suspending the effectiveness of the Shelf Registration or proceedings
have been initiated with respect to the Shelf Registration under Section 8(d) or
8(e) of the Securities Act, (iv) the aggregate number of days in any one
Suspension Period exceeds the period permitted pursuant to Section 2(c) hereof
or (v) the number of Suspension Periods exceed the number permitted pursuant to
Section 2(c) hereof (each of the events of a type described in any of the
foregoing clauses (i) through (v) are individually referred to herein as an
"Event," and the Filing Date in the case of clause (i), the Effectiveness Target
Date in the case of clause (ii), the date on which the effectiveness of the
Shelf Registration has been suspended or proceedings with respect to the Shelf
Registration under Section 8(d) or 8(e) of the Securities Act have been
commenced in the case of clause (iii), the date on which the duration of a
Suspension Period exceeds the period permitted by Section 2(c) hereof in the
case of clause (iv), and the date of the commencement of a Suspension Period
that causes the limit on the number of Suspension Periods under Section 2(c)
hereof to be exceeded in the case of clause (v), being referred to herein as an
"Event Date"). Events shall be deemed to continue until the date of the
termination of such Event, which shall be the following dates with respect to
the respective types of Events: the date the Initial Registration Statement is
filed in the case of an Event of the type described in clause (i), the date the
Initial Shelf Registration is declared effective in the case of clause (ii), the
date that all stop orders suspending effectiveness of the Shelf Registration
have been removed and the proceedings initiated with respect to the Shelf
Registration under Section 8(d) or 8(e) of the Securities Act have terminated,
as the case may be, in the case of Events of the types described in clause
(iii), termination of the Suspension Period which caused the aggregate number of
days in any one Suspension Period to exceed the number permitted by Section 2(c)
to be exceeded in the case of Events of the types described in clause (iv), and
termination of the Suspension Periods the commencement of which caused the
number of Suspension Periods permitted by Section 2(d) to be exceeded in the
case of Events of the type described in clause (v).
Accordingly, upon the occurrence of any Event and until such time as there
are no Events which have occurred and are continuing (a "Damages Accrual
Period"), commencing on the Event Date on which such Damages Accrual Period
began, the Company agrees to pay, as liquidated damages, and not as a penalty,
an additional amount (the "Liquidated Damages"): (i) to each holder of Notes
that are Registrable Securities, accruing at a rate equal to one-half of one
percent per annum (50 basis points) on the aggregate principal amount of Notes
that are Registrable Securities held by such Holder and (ii) to each holder of
shares of Common Stock that are Registrable Securities, accruing at a rate equal
to one-half of one percent per annum (50 basis points) calculated on an amount
equal to the product of (x) the then-applicable Conversion Price (as defined in
the Indenture), times (y) the number of shares of Common Stock that are
Registrable Securities held by such holder. Notwithstanding the foregoing, no
Liquidated Damages shall accrue as to any Registrable Securities from and after
the earlier of (x) the date such securities are no longer Registrable
Securities, and (y) the expiration of the Effectiveness Period. The rate of
accrual of the Liquidated Damages with respect to any period shall not exceed
the rate provided for in this paragraph notwithstanding the occurrence of
multiple concurrent Events.
The Company shall pay the Liquidated Damages due on any Notes or Common
Stock by depositing with the Trustee under the Indenture, in trust, for the
benefit of the holders of Notes or Common Stock, as the case may be, entitled
thereto, at least one Business Day prior to the applicable
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<PAGE>
Damages Payment Date, sums sufficient to pay the Liquidated Damages accrued or
accruing since the last preceding Damages Payment Date through such Damages
Payment Date. The Liquidated Damages shall be paid by the Company to the Record
Holders on each Damages Payment Date by wire transfer of immediately available
funds to the account specified by them or by mailing checks to their registered
addresses as they appear in the Note register (as defined in the Indenture), in
the case of the Notes, and in the register of the Company for the Common Stock,
in the case of the Common Stock, if no such accounts have been specified on or
before the Damage Payment Date; provided, however, that any Liquidated Damages
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accrued with respect to any Note or portion thereof called for redemption on a
redemption date, or repurchased in connection with a Change in Control (as
defined in the Indenture) on a repurchase date, or converted into Common Stock
on a conversion date prior to the Damages Payment Date, shall, in any such
event, be paid instead to the holder who submitted such Note or portion thereof
for redemption, repurchase or conversion on the applicable redemption date,
repurchase date or conversions date, as the case may be, on such date (or
promptly following the conversion date, in the case of conversion of a Note). If
a holder of a Note submits a Note for conversion during the period between a
record date for the payment of Liquidated Damages and the related Damages
Payment Date, Liquidated Damages for the period from the conversion date through
the next succeeding Damages Payment Date shall accrue and be payable to the
holder of Common Stock received on conversion on the next succeeding Damages
Payment Date, notwithstanding that such holder was not a Record Holder with
respect to such Damages Payment Date. The Trustee shall be entitled, on behalf
of the holders of Notes and Common Stock to seek any available remedy for the
enforcement of this Agreement, including for the payment of such Liquidated
Damages. Nothing shall preclude a holder of Registrable Securities from pursuing
or obtaining specific performance or other equitable relief with respect to this
Agreement.
All of the Company's obligations set forth in this Section 2(d) which are
outstanding with respect to any Registrable Securities at the time such security
ceases to be a Registrable Security shall survive until such time as all such
obligations with respect to such security have been satisfied in full
(notwithstanding termination of the Agreement pursuant to Section 7(o)).
The parties hereto agree that the Liquidated Damages provided for in this
Section 2(d) constitute a reasonable estimate of the damages that may be
incurred by holders of Registrable Securities (other than the Initial
Purchasers) by reason of the failure of the Shelf Registration to be filed or
declared effective or unavailable (absolutely or as a practical matter) for
effecting resales of Registrable Securities, as the case may be, in accordance
with the provisions hereof.
3. Registration Procedures. In connection with the Company's registra-
-----------------------
tion obligations under Section 2 hereof, the Company shall effect such
registrations to permit the sale of the Registrable Securities in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
the Company shall as expeditiously as possible:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the Holders thereof in
accordance with the intended method or methods of distribution thereof and shall
include all required financial statements, and use its best efforts to cause
each such Registration Statement to become effective and remain effective as
provided herein; provided, that before filing any such Registration Statement or
--------
Prospectus or any amendments or supplements thereto the Company shall furnish
within a reasonable time period to each selling Holder (if requested by such
Selling Holder), the Initial Purchasers, the Special Counsel and the Managing
Underwriters of such offering, if any, copies of all such documents proposed to
be filed, which documents will be subject to
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<PAGE>
the review of each selling Holder (if requested by such Selling Holder), the
Initial Purchasers, the Special Counsel and such Managing Underwriters, and the
Company shall not file any such Registration Statement or amendment thereto or
any Prospectus or any supplement thereto to which the Holders of a majority of
the Registrable Securities covered by such Registration Statement, the Initial
Purchasers or the Special Counsel shall reasonably object in writing within five
Business Days after the receipt thereof. In addition, the Company shall use its
best efforts to reflect in each such document referenced in this paragraph so
filed with the SEC such comments as the Initial Purchasers, Special Counsel and
the Managing Underwriters, if any, may propose.
(b) Subject to Section 2(c), prepare and file with the SEC such
amendments and post-effective amendments to each Registration Statement as may
be necessary to keep such Registration Statement continuously effective for the
applicable period specified in Section 2; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the sellers thereof set forth in such Registration Statement
as so amended or such Prospectus as so supplemented. The Company shall ensure
that (i) any Shelf Registration and any amendment thereto and any Prospectus
forming a part thereof and any amendment or supplement thereto complies in all
material respects with the Act and the rules and regulations thereunder, (ii)
any Shelf Registration 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 Shelf
Registration, and any amendment or supplement to such Prospectus, does not
include an untrue statement or 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) Notify the Holders, the Initial Purchasers, the Special Counsel
and the Managing Underwriters, if any, promptly, and (if requested by any such
person) confirm such notice in writing, (i) when a Prospectus, any Prospectus
supplement, a Registration Statement or a post-effective amendment to a
Registration Statement has been filed with the SEC, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the SEC or any other federal or state
governmental authority for amendments or supplements to a Registration Statement
or related Prospectus or for additional information, (iii) of the issuance by
the SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation or
threatening of any proceedings for that purpose, (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose, (v) of the existence of any fact or happening of any event which makes
any statement of a material fact in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue or which would require the making of any changes in the
Registration Statement or Prospectus in order that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, and (vi) of the Company's determination that a post-
effective amendment to a Registration Statement would be appropriate.
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<PAGE>
(d) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the earliest possible
moment.
(e) If requested by the Initial Purchasers or the Managing
Underwriters, if any, or the Holders of a majority of the Registrable Securities
being sold, (i) promptly incorporate in a Prospectus supplement or post-
effective amendment to a Registration Statement such information as the Initial
Purchaser, the Special Counsel, the Managing Underwriters, if any, or such
Holders agree should be included therein, and (ii) make all required filings of
such Prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(f) Furnish to each selling Holder (if requested by such selling
Holder), the Special Counsel, the Initial Purchasers, and each Managing
Underwriter, if any, without charge, at least one conformed copy of the
Registration Statement or Statements and any amendment thereto, including
financial statements but excluding schedules, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) Deliver to each selling Holder, the Special Counsel, the Initial
Purchasers and each Managing Underwriter, if any, in connection with any
offering of Registrable Securities, without charge, as many copies of the
Prospectus or Prospectuses relating to such Registrable Securities (including
each preliminary prospectus) and any amendment or supplement thereto as such
persons may reasonably request; and the Company hereby consents to the use of
such Prospectus or each amendment or supplement thereto by each of the selling
Holders of Registrable Securities and the Underwriters, if any, in connection
with any offering and sale of the Registrable Securities covered by such
Prospectus or any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to
register or qualify or cooperate with the selling Holders, the Managing
Underwriters, if any, and the Special Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any selling Holder or Managing Underwriter reasonably requests in writing; keep
each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept effective
and do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by the
applicable Registration Statement; provided, that the Company will not be
--------
required to (i) qualify generally to do business in any jurisdiction where it is
not then so qualified or (ii) take any action that would subject it to general
service of process in suits or to taxation in any such jurisdiction where it is
not then so subject.
(i) Cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies in addition to the SEC or authorities within the United
States as may be necessary to enable the selling Holder or Holders thereof or
the Managing Underwriters, if any, to consummate the disposition of such
Registrable Securities.
(j) During the Effectiveness Period (subject to the provisions of
Section 2(c)), immediately upon the existence of any fact or the occurrence of
any event as a result of which a
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<PAGE>
Registration Statement shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, or a Prospectus shall contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, promptly
prepare and file a post-effective amendment to each Registration Statement or a
supplement to the related Prospectus or any document incorporated therein by
reference or file any other required document (such as a Current Report on Form
8-K) that would be incorporated by reference into the Registration Statement so
that the Registration Statement shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and so that the
Prospectus will not contain any untrue statement of a material fact or omit to
state any material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder,
and, in the case of a post-effective amendment to a Registration Statement, use
its best efforts to cause it to become effective as soon as practicable.
(k) Enter into such agreements (including, in the event of an
Underwritten Offering, an underwriting agreement in form, scope and substance as
is customary in Underwritten Offerings) and take all such other actions in
connection therewith (including, in the event of an Underwritten Offering, those
reasonably requested by the Managing Underwriters, if any, or the Holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into, and if the
registration is an underwritten registration, (i) make such representations and
warranties to the Holders of such Registrable Securities and the underwriters
with respect to the business of the Company and its subsidiaries, the
Registration Statement, Prospectus and documents incorporated by reference or
deemed incorporated by reference, if any, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings and confirm the same if and when requested; (ii) use its reasonable
efforts to obtain opinions of counsel to the Company and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the Managing Underwriters, if any, Special Counsel and the
Holders of a majority of the Registrable Securities being sold) addressed to
each of the underwriters covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by such Special Counsel and Managing Underwriters; (iii) use its
reasonable efforts to obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other certified public accountants of any subsidiary of the Company or any
business acquired or to be acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to each of the Managing Underwriters, if any,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with Underwritten
Offerings; and (iv) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority of the Registrable Securities being sold,
the Special Counsel and the Managing Underwriters, if any, to evidence the
continued validity of the representations and warranties of the Company and its
subsidiaries made pursuant to clause (i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company. The above shall be done at each closing
under such underwriting or similar agreement as and to the extent required
thereunder.
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<PAGE>
(l) Make available for inspection by a representative of the Holders
of Registrable Securities being sold, any Managing Underwriter participating in
any disposition of Registrable Securities, if any, and any attorney or
accountant retained by such selling Holders or underwriter, financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the executive officers, directors and employees of the
Company and its subsidiaries to supply all information reasonably requested by
any such representative, Managing Underwriter, attorney or accountant in
connection with such disposition; provided, however, that any information that
-------- -------
is reasonably and in good faith designated by the Company in writing as
confidential at the time of delivery of such information shall be kept
confidential by such persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such information is
required by law (including any disclosure requirements pursuant to Federal
securities laws in connection with the filing of any Registration Statement or
the use of any prospectus referred to in this Agreement), (iii) such information
becomes generally available to the public other than as a result of disclosure
or failure to safeguard by any such person or (iv) such information becomes
available to any such person from a source other than the Company and such
source is not bound by a confidentiality agreement.
(m) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements (which need
not be audited) satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the Securities
Act) no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company commencing after the
effective date of a Registration Statement, which statements shall cover said
12-month periods.
(n) Cooperate with the selling Holders of Registrable Securities,
the Initial Purchasers, the Special Counsel and the Managing Underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends; and enable such Registrable Securities to be in such denominations and
registered in such names as the Holders may request.
(o) Not later than the effectiveness date of any Registration
Statement hereunder, provide a CUSIP number for the Registrable Securities
registered under such Registration Statement, and provide the Trustee under the
Indenture and the transfer agent for the Common Stock with printed certificates
for the Registrable Securities which are in a form eligible for deposit with The
Depository Trust Company.
(p) Cause all shares of Common Stock covered by the Registration
Statement to be listed on each securities exchange or quotation system on which
the Company's Common Stock is then listed no later than the date the
Registration Statement is declared effective and, in connection therewith, to
the extent applicable, to make such filings under the Exchange Act (e.g., the
filing of a Registration Statement on Form 8-A) and to have such filings
declared effective thereunder.
(q) Cooperate and assist in any filing required to be made with the
National Association of Securities Dealers, Inc.
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<PAGE>
(r) Cause the Indenture to be qualified under the TIA, and, in
connection therewith, cooperate with the Trustee and the Holders, the Initial
Purchasers, the Special Counsel and the Managing Underwriters, if any, to effect
such changes to the Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute all documents as may be required to
effect such changes and all other forms and documents required to be filed with
the SEC to enable such Indenture to be so qualified in a timely manner.
The Company may require each Holder of securities to be sold pursuant
to any Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of such securities as the Company may
from time to time reasonably require for inclusion in such Registration
Statement. Any Holder who fails to provide such information shall not be
entitled to use the Prospectus.
4. Registration Expenses. All fees and expenses incident to the
---------------------
Company's obligations under this Agreement shall be borne by the Company whether
or not any of the Registration Statements become effective. Such fees and
expenses shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (x) with respect to filings
required to be made with the National Association of Securities Dealers, Inc.
and (y) of compliance with federal securities or Blue Sky laws (including,
without limitation, fees and disbursements of the Special Counsel in connection
with Blue Sky qualifications of the Registrable Securities laws of such
jurisdictions as the Managing Underwriters, if any, or Holders of a majority of
the Registrable Securities being sold may designate)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities in a form eligible for deposit with The Depository Trust
Company and of printing Prospectuses if the printing of Prospectuses is
requested by the Special Counsel, the Initial Purchasers, the Managing
Underwriters or the holders of a majority of the Registrable Securities included
in any Registration Statement), (iii) messenger, telephone and delivery
expenses, (iv) reasonable fees and disbursements of counsel for the Company and
the Special Counsel in connection with the Shelf Registration (provided that the
Company shall not be liable for the fees and expenses of more than one separate
firm for all parties (other than the Company) participating in any transaction
hereunder), (v) fees and disbursements of all independent certified public
accountants referred to in Section 3(k)(iii) hereof (including the expenses of
any special audit and "cold comfort" letters required by or incident to such
performance) and (vi) Securities Act liability insurance obtained by the Company
in its sole discretion. In addition, the Company shall pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange on which similar
securities issued by the Company are then listed and the fees and expenses of
any person, including special experts, retained by the Company. Notwithstanding
the provisions of this Section 5, each seller of Registrable Securities shall
pay all selling expenses and all registration expenses to the extent that the
Company is prohibited by applicable Blue Sky laws from paying for or on behalf
of such seller of Registrable Securities.
5. Indemnification.
---------------
(a) Indemnification by the Company. The Company shall indemnify and
------------------------------
hold harmless each Holder, the directors, officers, employees and agents of each
such Holder and each person, if any, who controls any such Holder (within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act) from and against all losses, liabilities, damages and expenses
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<PAGE>
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim)
(collectively, "Losses"), arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
Losses arise out of or are based upon the information relating to any Holder
furnished to the Company in writing by any Holder expressly for use therein;
provided, that the Company shall not be liable to any holder of Registrable
- --------
Securities (or any person controlling such Holder) to the extent that any such
Losses arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any preliminary prospectus if
(i) such Holder failed to send or deliver a copy of the Prospectus with or prior
to the delivery of written confirmation of the sale by such Holder to the person
asserting the claims from which such Losses arise and (ii) the Prospectus would
have corrected such untrue statement or alleged untrue statement or such
omission or alleged omission. The Company shall also indemnify each
underwriter, their officers and directors, and each person who controls such
person (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) to the same extent and with the same limitations as provided
above with respect to the indemnification of the holders of Registrable
Securities.
(b) Indemnification by Holder of Registrable Securities. Each
---------------------------------------------------
Holder agrees severally and not jointly to indemnify and hold harmless the
Company, its directors, its officers who sign a Registration Statement, and each
person, if any, who controls the Company (within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act), from and against
all losses arising out of or based upon any untrue statement of a material fact
contained in any Registration Statement, Prospectus or preliminary prospectus or
arising out of or based upon any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, to
the extent, but only to the extent, that such untrue statement or omission is
contained in any information relating to such Holder so furnished in writing by
such Holder to the Company expressly for use in such Registration Statement or
Prospectus. In no event shall the liability of any selling holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the proceeds
received by such holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. In case any proceeding
--------------------------------------
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the "indemnifying
party") in writing, but failure so to notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof. The indemnifying party, upon
request of the indemnified party, shall retain counsel satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them, or (iii) the indemnifying party shall not have
employed counsel satisfactory to the
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<PAGE>
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all indemnified parties
under Section 5(a) or 5(b) hereof who are parties to such proceeding or
proceedings, and that all such fees and expenses shall be reimbursed as they are
incurred. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph,
such indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, 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.
(d) Contribution. If the indemnification provided for in this
------------
Section 5 is unavailable to an indemnified party under Section 5(a) or 5(b)
hereof in respect of any Losses or is insufficient to hold such indemnified
party harmless, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses, (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties on the one hand and the indemnified party or parties on the other
hand 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 indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions that
resulted in such Losses, as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the total net
proceeds from the initial placement of the Notes pursuant to the Purchase
Agreement. Benefits received by the Initial Purchasers shall be deemed to be
equal to the total purchase discounts and commissions received by them pursuant
to the Purchase Agreement and benefits received by any other Holders shall be
deemed to be equal to the value of receiving Notes registered under the
Securities Act. Benefits received by any underwriter shall be deemed to be equal
to the total underwriting discounts and commissions, as set forth on the cover
page of the Prospectus forming a part of the Registration Statement which
resulted in such Losses. The relative fault of the Holders on the one hand and
the Company on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Holders or by the Company and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Holders' respective obligations to contribute
pursuant to this paragraph are several in proportion to the respective number of
Registrable Securities they have sold pursuant to a Registration Statement, and
not joint.
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<PAGE>
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
--------
allocation or by any other method or allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the Losses
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding this Section 5(d), an
indemnifying party that is a selling Holder of Registrable Securities shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities sold by such indemnifying party and
distributed to the public were offered to the public exceeds the amount of any
damages which such indemnifying party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
The indemnity, contribution and expense reimbursement obligations of the
Company hereunder shall be in addition to any liability the Company may
otherwise have hereunder, under the Purchase Agreement or otherwise. The
provisions of this Section 5 shall survive so long as Registrable Securities
remain outstanding, notwithstanding any transfer of the Registrable Securities
by any holder or any termination of this Agreement.
The indemnity and contribution provisions contained in this Section 5 shall
remain operative and in full force and effect regardless of (i) any termination
of this Agreement, (ii) any investigation made by or on behalf of any Holder or
any person controlling any Holder, or the Company, its officers or directors or
any person controlling the Company and (iii) the sale of any Registrable
Securities by any Holder.
6. Information Requirements.
------------------------
(a) The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act, and if at any time the Company is
not required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144 and Rule 144A under the
Securities Act. The Company further covenants that it will cooperate with any
holder of Registrable Securities and take such further reasonable action as any
holder of Registrable Securities may reasonably request (including, without
limitation, making such reasonable representations as any such holder may
reasonably request), all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144 and Rule 144A
under the Securities Act. Upon the request of any holder of Registrable
Securities, the Company shall deliver to such holder a written statement as to
whether it has complied with such filing requirements. Notwithstanding the
foregoing, nothing in this Section 6 shall be deemed to require the Company to
register any of its securities under any section of the Exchange Act.
(b) The Company shall file the reports required to be filed by it
under the Exchange Act and shall comply with all other requirements set forth in
the instructions to Form S-3 in order to allow the Company to be eligible to
file registration statements on Form S-3.
-14-
<PAGE>
7. Miscellaneous.
-------------
(a) Remedies. In the event of a breach by the Company of its
--------
obligations under this Agreement, each holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) No Conflicting Agreements. Except as provided in the Offering
-------------------------
Memorandum, the Company has not, as of the date hereof and shall not, on or
after the date of this Agreement, enter into any agreement with respect to its
securities which conflicts with the rights granted to the holders of Registrable
Securities in this Agreement. The Company represents and warrants that the
rights granted to the holders of Registrable Securities hereunder do not in any
way conflict with the rights granted to the holders of the Company's securities
under any other agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, 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 of the then outstanding Registrable Securities (for purposes of
such calculation, with holders of Common Stock deemed to be the holders of the
aggregate principal amount of Notes that have been converted into such Common
Stock). Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other holders of Registrable Securities may be given by
holders of at least a majority of the Registrable Securities being sold by such
holders; provided, that the provisions of this sentence may not be amended,
--------
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(d) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing and shall be deemed given (i) when
made, if made by hand delivery, (ii) upon confirmation, if made by telecopier or
(iii) one business day after being deposited with a reputable next-day courier,
postage prepaid, to the parties as follows:
(x) if to a holder of Registrable Securities, at the most
current address given by such holder to the Company in accordance with
the provisions of Section 7(e);
(y) if to the Company, to:
Renal Treatment Centers, Inc.
Building 2, Suite 300
1180 West Swedesford Road
Berwyn, PA 19312
Attention: Chief Financial Officer
Telecopy No.: (610) 644-4796
with a copy to:
-15-
<PAGE>
Duane, Morris & Heckscher
One Liberty Place
Philadelphia, PA 19103-7396
Attention: Kathleen M. Shay, Esq.
Telecopy No.: (415)493-6811
and
(z) if to the Special Counsel to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: William J. Grant, Jr., Esq.
Telecopy No.: (212)821-8000
or to such other address as such person may have furnished to the other persons
identified in this Section 7(d) in writing in accordance herewith.
Copies of all notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in the Indenture.
(e) Owner of Registrable Securities. The Company will maintain, or
-------------------------------
will cause its registrar and transfer agent to maintain, a register with respect
to the Registrable Securities in which all transfers of Registrable Securities
of which the Company has received notice will be recorded. The Company may deem
and treat the person in whose name Registrable Securities are registered in such
register of the Company as the owner thereof for all purposes, including,
without limitation, the giving of notices under this Agreement.
(f) Approval of Holders. Whenever the consent or approval of
-------------------
holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or its affiliates (as such
term is defined in Rule 405 under the Securities Act) (other than the Initial
Purchasers or subsequent holders of Registrable Securities if such subsequent
holders are deemed to be such affiliates solely by reason of their holdings of
such Registrable Securities) shall not be counted in determining whether such
consent or approval was given by the holders of such required percentage. For
purposes of calculating the consent or approval of Holders of a majority of the
then outstanding aggregate principal amount of Registrable Securities,
Registrable Securities which have been converted into shares of Common Stock
shall be deemed to bear the principal amount at which such securities were
converted.
(g) Successors and Assigns. Any person who purchases any
----------------------
Registrable Securities from an Initial Purchaser shall be deemed, for purposes
of this Agreement, to be an assignee of such Initial Purchaser. The Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties and shall inure to the benefit of and be binding upon each
holder of any Registrable Securities.
-16-
<PAGE>
(h) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be original and all of which taken together
shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
(k) Severability. If any term, provision, covenant or restriction
------------
of this Agreement is held 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 thereby, and the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such which may be hereafter declared
invalid, illegal, void or unenforceable.
(l) Entire Agreement. This Agreement is intended by the parties
----------------
as a final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. Except as provided in the
Purchase Agreement and the Indenture, there are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the securities sold pursuant to the Purchase Agreement and the Indenture. This
Agreement supersedes all prior agreements and understandings among the parties
with respect to such subject matter.
(m) Attorneys' Fees. In any action or proceeding brought to enforce
---------------
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the court, shall
be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
(n) Further Assurances. Each of the parties hereto shall use all
------------------
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things reasonably necessary, proper or advisable under
applicable law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and the other
documents contemplated hereby and consummate and make effective the transactions
contemplated hereby.
(o) Termination. This Agreement and the obligations of the parties
-----------
hereunder shall terminate upon the end of the Effectiveness Period, except for
any liabilities or obligations under Sections 2 (d), 4 or 5 hereof, each of
which shall remain in effect in accordance with their terms.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
RENAL TREATMENT CENTERS, INC.
By: /s/ Robert L. Mayer, Jr.
-------------------------------
Name: Robert L. Mayer
-----------------------------
Title: President and Chief Executive Officer
----------------------------
Accepted as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
UBS SECURITIES LLC
J.C. BRADFORD & CO.
WESSELS, ARNOLD & HENDERSON
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Marilyn J. Pugliese
---------------------------------
Authorized Signatory
<PAGE>
AMENDMENT NO. 1 TO THE
RENAL TREATMENT CENTERS, INC.
EQUITY INCENTIVE PLAN FOR OUTSIDE DIRECTORS
-------------------------------------------
Pursuant to the provisions of paragraph 5(b) of the Renal Treatment
Centers, Inc. Equity Incentive Plan for Outside Directors (the "Plan"), Renal
Treatment Centers, Inc. (the "Company") hereby amends the Plan as of the
Effective Date as follows:
1. Effective Date. The Plan is amended effective as of May 2, 1996
--------------
(the "Effective Date").
2. Subject to Shareholder Approval. This amendment is subject to
-------------------------------
approval by the holders of a majority of the shares of common stock of the
Company present or represented and voting at a meeting duly called and held.
Grants may be made hereunder prior to stockholder approval, provided that any
such grants shall be subject to such stockholder approval. This amendment shall
not be construed to affect in any way the rights or privileges of any optionee
under the Plan unless and until shareholder approval is granted.
3. Specific Amendments.
-------------------
(a) Subparagraph (ii) of Section 4(a) is hereby amended to read
in full as follows:
"(ii) Granting of Options. Each person appointed, elected or
-------------------
re-elected an Outside Director on or after May 2, 1996 but before
December 31, 1999 shall, on the business day following the date of
appointment or election to the Board, be granted an Option for the
purchase of that number of shares as shall be determined by
multiplying by 3,000 the number of years of such Outside Director's
then current term as a Director. In the event that the term for which
an Outside Director is elected or appointed includes a portion of a
year, the number of shares for which such Option shall be granted
shall be reduced accordingly."
(b) Subparagraph (iv)(A) of Section 4(b) is hereby amended to read
in full as follows:
"(A) No Option may be exercised in whole or in part during the
first year after such Option has been granted. Thereafter, in the case
of any Option granted on or after November 15, 1993 but before May 2,
1996, and except as otherwise provided in Section 4(b)(vii), the
Option shall become exercisable in cumulative annual installments on
each anniversary of the date of grant in an amount equal to the lesser
of 1,000 shares or the number of shares under the Option then
remaining unexercisable, until all of the shares under the Option have
become exercisable. In the case of any Option granted on or after May
2, 1996 but before December 31, 1999, and except as otherwise provided
in Section 4(b)(vii), the
<PAGE>
Option shall become exercisable in cumulative annual installments on
each anniversary of the date of grant in an amount equal to the lesser
of 3,000 shares or the number of shares under the Option then
remaining unexercisable, until all of the shares under the Option have
become exercisable."
4. Execution. To record the adoption of this amendment by the Company's
---------
Board of Directors, this amendment has been executed in the manner set forth
below.
RENAL TREATMENT CENTERS, INC.
By: /s/ Robert L. Mayer, Jr.
-------------------------
Name: Robert L. Mayer, Jr.
Title: President
Dated: May 2, 1996
-2-
<PAGE>
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------------
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is made as of the 2nd
day of May, 1996, by and between RENAL TREATMENT CENTERS, INC., a Delaware
corporation with offices at 1180 West Swedesford Road, Suite 300, Building 2,
Berwyn, PA 19312 ("Employer") and ROBERT L. MAYER, JR. ("Employee").
W I T N E S S E T H:
WHEREAS, Employer and Employee are parties to a certain Employment Agreement,
dated as of March 2, 1995 (the "Agreement"); and
WHEREAS, the parties wish to make certain changes to the Agreement, all as more
fully set forth herein.
NOW THEREFORE, in consideration of the mutual promises and covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Amendments.
----------
a. Section 2.3(b) is hereby amended to read in full as follows:
"(b) For calendar year 1996, an Incentive Bonus (the "1996 Incentive
Bonus") will be paid if the applicable Financial Target for 1996 (as set forth
below) shall be attained or exceeded. The amount of the 1996 Incentive Bonus
shall be calculated on a straight-line, sliding-scale basis ranging from 40% of
Salary if the Minimum Financial Target for 1996 is achieved but not exceeded to
55% of Salary if the Maximum Financial Target is achieved. The Minimum
Financial Target for 1996 shall be earnings per share of $0.81 and the Maximum
Financial Target for 1996 shall be earnings per share of $0.85. In calculating
whether Employer has attained the Financial Target for 1996 the amount of the
1996 Incentive Bonus shall be included and items of extraordinary gain and loss
shall be excluded. Nothing in this Agreement shall prevent the Compensation
Committee from awarding an Incentive Bonus for 1996 if the Minimum Financial
Target is not met or from awarding an Incentive Bonus in excess of 55% of Salary
for 1996. Such bonus, if any, as determined in accordance with the provisions
of this Section 2.3(b) shall be paid no later than fifteen (15) days following
the Compensation Committee's review and approval that such Financial Target(s)
have been attained."
b. A new Section 2.3(c) is added to the Agreement, to read in full as
follows:
<PAGE>
"(c) Incentive Bonuses in calendar years after 1996 need not be determined
in a similar manner as the 1995 Incentive Bonus or the 1996 Incentive Bonus."
c. Section 2.5 of the Agreement is hereby amended to read in full as
follows:
"In addition to all other compensation to be paid to Employee by Employer
hereunder upon the occurrence of a Change of Control (as defined in Section 3.4
below), Employer shall cause all options ("Options") granted to Employee under
Employer's stock option plans to become fully vested and exercisable immediately
upon the Change of Control. In addition, Employee shall have the right
exercisable by written notice to Employer upon the occurrence of a Change of
Control to elect to receive, in lieu of shares of common stock of Employer (the
"Company Shares") issuable upon the exercise of Options (which Options shall be
canceled upon the making of the payment referred to below), an amount in cash
equal to the aggregate spread between the exercise prices of the Options held by
Employee, whether or not then fully vested or exercisable, and the higher of
(a) the closing price per Company Share as reported on the New York Stock
Exchange on the date of the Change of Control (or the last trading date prior
thereto); or (b) the highest price per Company Share actually paid in
connection with the Change of Control of Employer (the higher price being
referred to as the "Termination Price"), but excluding from such calculation
all Options the exercise price of which is in excess of the Termination Price."
d. New Sections 2.6 through and 2.10 are hereby added to the Agreement
to read as follows:
"2.6 Acceleration of Retirement Benefits. In the event Employer
-----------------------------------
terminates this Agreement for any reason other than for Material Cause (as
defined in Section 3.3 below), or if Employee's employment terminates by reason
of death or disability as described in Section 3.2 hereof, then in addition to
amounts otherwise payable to Employee, Employer shall pay Employee, within
thirty (30) days of the effective date of termination, an amount equal to the
portion of Employer's contributions for the benefit of Employee under Employer's
Savings Plan, or any other qualified retirement plan of Employer then in effect,
that has not vested as of the date of Employee's termination, if any, plus an
additional amount sufficient to satisfy Employee's federal or state income tax
liability with respect to the foregoing payment and any additional amount
payable pursuant to this Section 2.6, it being Employer's intention that
Employee's net after tax position be identical to that which would have been
obtained had Employee not been subject to any federal or state income tax
liabilities with respect to payments made under this Section 2.6.
2.7 Acceleration of Exercisability of Stock Options. In the event
-----------------------------------------------
Employee is terminated for any reason other than for Material Cause, or if
Employee's employment terminates by reason of death or disability as described
in Section 3.2 hereof, then all unexercised options granted to Employee under
Employer's stock option plans which would otherwise have vested within twelve
(12) months from the date of Employee's termination or which would otherwise
have vested during the full Term of this Agreement, whichever is
- 2 -
<PAGE>
greater, shall be deemed fully vested and exercisable immediately upon
Employee's termination. In determining which options shall become immediately
exercisable hereunder, the then unexercisable options under each grant of
options to Employee shall become exercisable.
2.8 If Employer shall terminate the employment of Employee prior to the
end of the Post Change of Control Employment Period (as defined below) for any
reason other than for Material Cause, or total disability or incapacity for a
period of at least six consecutive months after written notice by Employer to
Employee, Employee shall be entitled to receive such payments and benefits as
are specifically provided by this Agreement for a period equal to the balance of
the Post Change of Control Employment Period as if such termination had not
occurred. For purposes hereof "Post Change of Control Employment Period" shall
mean the period following a Change of Control during which Employee shall be
employed pursuant to this Agreement.
2.9 If Employee is entitled to continue to receive salary pursuant to
Section 2.8 of this Agreement after the termination of his employment, he shall
also be entitled to receive employee fringe and welfare benefits (including, but
not limited to, medical insurance, disability insurance and other insurance
programs) at least comparable to those to which he was entitled immediately
prior to the date on which such termination occurs. If the terms of any of
Employer's welfare benefit plans do not permit continued participation by
Employee, Employer shall arrange to provide to Employee a benefit substantially
similar to, and no less favorable than, the benefit he was entitled to receive
under such plan at the end of the period of coverage.
2.10 Notwithstanding any other provision of this Agreement, in the event
Employee is terminated for Material Cause or this Agreement terminates as a
result of Employee's death, Employee shall not be entitled to any further
compensation, bonuses or benefits under this Agreement."
e. Section 3.3 of the Agreement is hereby amended to read in full as
follows:
"3.3 Board Discretion. Employer may terminate this Agreement at any time,
----------------
whether or not for cause, if such termination is approved by the affirmative
vote of a majority of the members of the Board of Directors of Employer other
than Employee. In the event of any termination, other than upon death or
disability pursuant to Section 3.2 above, termination following a Change of
Control or termination for Material Cause, Employer shall continue to pay
Employee the Salary according to the terms of Section 2.1 for a period of one
(1) year. For purposes of this Agreement, the term "Material Cause" shall mean:
(a) conviction of a felony involving moral turpitude relating to the business of
Employer and which does, in fact, adversely and directly affect the business of
Employer; (b) the adjudication by a court of competent jurisdiction that
Employee has committed any act of fraud or dishonesty resulting or intended to
result directly or indirectly in personal enrichment at the expense of Employer;
(c) repeated failure or refusal by Employee to follow policies or directives
reasonably
- 3 -
<PAGE>
established by the Board of Directors of Employer that goes uncorrected for a
period of thirty (30) consecutive days after written notice has been provided to
Employee; (d) persistent willful failure by Employee to fulfill his duties
hereunder that goes uncorrected for a period of thirty (30) consecutive days
after written notice has been provided to Employee; or (e) intentional breach by
Employee of Sections 4.1(a), 4.1(b) or Section 4.2 of this Agreement."
f. The first sentence of Section 3.4 of the Agreement is hereby amended
to read in full as follows:
"In the event of any termination, other than upon death or disability
pursuant to Section 3.2 above or termination for Material Cause, that occurs
after a Change of Control (as defined below), Employer shall continue to pay
Employee the Salary according to the terms of Section 2.1 for a period of two
(2) years from the date of the Change of Control."
g. The first paragraph of Section 5 of the Agreement is hereby amended
to read in full as follows:
"In the event that any payment or benefit received or to be received by
Employee in connection with a Change of Control (whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement by Employer,
any successor to Employer or any corporation ("Affiliate") affiliated with
Employer or which becomes so affiliated pursuant to the transactions resulting
in a Change of Control, both within the meaning of Section 1504 of the Internal
Revenue Code of 1986, as amended (the "Code"), (collectively all such payments
are hereinafter referred to as the "Total Payments")) is deemed to be an "Excess
Parachute Payment" (in whole or in part) to Employee as a result of Section 280G
and/or 4999 of the Code, no change shall be made to the Total Payments to be
made in connection with the Change of Control, except that, in addition to all
other amounts to be paid to Employee by Employer hereunder, Employer, within
thirty (30) days of the date on which the Change of Control occurs, shall pay to
Employee, in addition to any other payment, coverage or benefit due and owing
hereunder, an amount determined by multiplying the rate of excise tax then
imposed by Code Section 4999 by the amount of the "Excess Parachute Payment"
received by Employee (determined without regard to any payments made to Employee
pursuant to this Section) and dividing the product so obtained by the amount
obtained by subtracting the aggregate, local, state and Federal income tax rates
applicable to the receipt by Employee of the "Excess Parachute Payment" (taking
into account the deductibility for Federal income tax purposes of the payment of
state and local income taxes thereon) from the amount obtained by subtracting
from 1.00 the rate of excise tax then imposed by Section 4999 of the Code. It
is Employer's intention that Employee's net after-tax position be identical to
that which would have obtained had Sections 280G and 4999 not been part of the
Code."
h. A new Section 12 is hereby added to the Agreement to read in its
entirety as follows:
- 4 -
<PAGE>
"12. Expense Reimbursement. In the event that any person asserts the
---------------------
invalidity of all or any part of this Agreement and Employee incurs legal fees
or out-of-pocket expenses in connection with defending the validity of all or a
portion of this Agreement, Employer shall reimburse Employee for all legal fees
and out-of-pocket expenses Employee so incurs."
2. Ratification and Confirmation. The other terms and conditions of the
-----------------------------
Agreement, as amended by this Amendment, are hereby ratified and confirmed and
shall continue in full force and effect.
3. Miscellaneous. This Amendment shall be effective as of May 2, 1996. This
-------------
Amendment may be executed in two or more counterparts, and by different parties
on different counterparts, each of which shall be deemed an original and in
making proof of this Amendment it shall be necessary only to produce sufficient
counterparts. This Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and shall be governed by the
laws of the Commonwealth of Pennsylvania, conflict of laws provisions
notwithstanding.
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed,
this Amendment as of the day and year first above written.
RENAL TREATMENT CENTERS, INC.
By:/s/ Frederick C. Jansen
--------------------------------------
Frederick C. Jansen,
Executive Vice President, Secretary
Treasurer and Chief Financial Officer
Witness:
/s/ Frederick C. Jansen /s/ Robert L. Mayer, Jr.
- ----------------------------- ----------------------------------------
Robert L. Mayer, Jr.
- 5 -
<PAGE>
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------------
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is made as of the 2nd
day of May, 1996, by and between RENAL TREATMENT CENTERS, INC., a Delaware
corporation with offices at 1180 West Swedesford Road, Suite 300, Building 2,
Berwyn, PA 19312 ("Employer") and FREDERICK C. JANSEN ("Employee").
W I T N E S S E T H:
WHEREAS, Employer and Employee are parties to a certain Employment Agreement,
dated as of March 2, 1995 (the "Agreement"); and
WHEREAS, the parties wish to make certain changes to the Agreement, all as more
fully set forth herein.
NOW THEREFORE, in consideration of the mutual promises and covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Amendments.
----------
a. Section 2.3(b) is hereby amended to read in full as follows:
"(b) For calendar year 1996, an Incentive Bonus (the "1996 Incentive
Bonus") will be paid if the applicable Financial Target for 1996 (as set forth
below) shall be attained or exceeded. The amount of the 1996 Incentive Bonus
shall be calculated on a straight-line, sliding-scale basis ranging from 40% of
Salary if the Minimum Financial Target for 1996 is achieved but not exceeded to
55% of Salary if the Maximum Financial Target is achieved. The Minimum
Financial Target for 1996 shall be earnings per share of $0.81 and the Maximum
Financial Target for 1996 shall be earnings per share of $0.85. In calculating
whether Employer has attained the Financial Target for 1996 the amount of the
1996 Incentive Bonus shall be included and items of extraordinary gain and loss
shall be excluded. Nothing in this Agreement shall prevent the Compensation
Committee from awarding an Incentive Bonus for 1996 if the Minimum Financial
Target is not met or from awarding an Incentive Bonus in excess of 55% of Salary
for 1996 Such bonus, if any, as determined in accordance with the provisions of
this Section 2.3(b) shall be paid no later than fifteen (15) days following the
Compensation Committee's review and approval that such Financial Target(s) have
been attained.."
b. A new Section 2.3(c) is added to the Agreement, to read in full as
follows:
"(c) Incentive Bonuses in calendar years after 1996 need not be determined
in a similar manner as the 1995 Incentive Bonus or the 1996 Incentive Bonus."
<PAGE>
c. Section 2.5 of the Agreement is hereby amended to read in full as
follows:
"In addition to all other compensation to be paid to Employee by Employer
hereunder upon the occurrence of a Change of Control (as defined in Section 3.4
below), Employer shall cause all options ("Options") granted to Employee under
Employer's stock option plans to become fully vested and exercisable immediately
upon the Change of Control. In addition, Employee shall have the right
exercisable by written notice to Employer upon the occurrence of a Change of
Control to elect to receive, in lieu of shares of common stock of Employer (the
"Company Shares") issuable upon the exercise of Options (which Options shall be
canceled upon the making of the payment referred to below), an amount in cash
equal to the aggregate spread between the exercise prices of the Options held by
Employee, whether or not then fully vested or exercisable, and the higher of (a)
the closing price per Company Share as reported on the New York Stock Exchange
on the date of the Change of Control (or the last trading date prior thereto);
or (b) the highest price per Company Share actually paid in connection with the
Change of Control of Employer (the higher price being referred to as the
"Termination Price"), but excluding from such calculation all Options the
exercise price of which is in excess of the Termination Price."
d. New Sections 2.6, 2.7, 2.8 and 2.9 are hereby added to the Agreement to
read as follows:
"2.6 Acceleration of Retirement Benefits. In the event Employer
-----------------------------------
terminates this Agreement for any reason other than for Material Cause (as
defined in Section 3.3 below), or if Employee's employment terminates by reason
of death or disability as described in Section 3.2 hereof, then in addition to
amounts otherwise payable to Employee, Employer shall pay Employee, within
thirty (30) days of the effective date of termination, an amount equal to the
portion of Employer's contributions for the benefit of Employee under Employer's
Savings Plan, or any other qualified retirement plan of Employer then in effect,
that has not vested as of the date of Employee's termination, if any, plus an
additional amount sufficient to satisfy Employee's federal or state income tax
liability with respect to the foregoing payment and any additional amount
payable pursuant to this Section 2.6, it being Employer's intention that
Employee's net after tax position be identical to that which would have been
obtained had Employee not been subject to any federal or state income tax
liabilities with respect to payments made under this Section 2.6.
2.7 Acceleration of Exercisability of Stock Options. In the event
-----------------------------------------------
Employee is terminated for any reason other than for Material Cause, or if
Employee's employment terminates by reason of death or disability as described
in Section 3.2 hereof, then all unexercised options granted to Employee under
Employer's stock option plans which would otherwise have vested within twelve
(12) months from the date of Employee's termination or which would otherwise
have vested during the full Term of this Agreement, whichever is greater, shall
be deemed fully vested and exercisable immediately upon Employee's termination.
In determining which options shall become immediately exercisable hereunder, the
then unexercisable options under each grant of options to Employee shall become
exercisable.
<PAGE>
2.8 If Employer shall terminate the employment of Employee prior to the
end of the Post Change of Control Employment Period (as defined below) for any
reason other than for Material Cause, or total disability or incapacity for a
period of at least six consecutive months after written notice by Employer to
Employee, Employee shall be entitled to receive such payments and benefits as
are specifically provided by this Agreement for a period equal to the balance of
the Post Change of Control Employment Period as if such termination had not
occurred. For purposes hereof "Post Change of Control Employment Period" shall
mean the period following a Change of Control during which Employee shall be
employed pursuant to this Agreement.
2.9 If Employee is entitled to continue to receive salary pursuant to
Section 2.8 of this Agreement after the termination of his employment, he shall
also be entitled to receive employee fringe and welfare benefits (including, but
not limited to, medical insurance, disability insurance and other insurance
programs) at least comparable to those to which he was entitled immediately
prior to the date on which such termination occurs. If the terms of any of
Employer's welfare benefit plans do not permit continued participation by
Employee, Employer shall arrange to provide to Employee a benefit substantially
similar to, and no less favorable than, the benefit he was entitled to receive
under such plan at the end of the period of coverage.
2.10 Notwithstanding any other provision of this Agreement, in the event
Employee is terminated for Material Cause or this Agreement terminates as a
result of Employee's death, Employee shall not be entitled to any further
compensation, bonuses or benefits under this Agreement."
e. Section 3.3 of the Agreement is hereby amended to read in full as
follows:
"3.3 Board Discretion. Employer may terminate this Agreement at any time,
----------------
whether or not for cause, if such termination is approved by the affirmative
vote of a majority of the members of the Board of Directors of Employer other
than Employee. In the event of any termination, other than upon death or
disability pursuant to Section 3.2 above, termination following a Change of
Control or termination for Material Cause, Employer shall continue to pay
Employee the Salary according to the terms of Section 2.1 for a period of one
(1) year. For purposes of this Agreement, the term "Material Cause" shall mean:
(a) conviction of a felony involving moral turpitude relating to the business of
Employer and which does, in fact, adversely and directly affect the business of
Employer; (b) the adjudication by a court of competent jurisdiction that
Employee has committed any act of fraud or dishonesty resulting or intended to
result directly or indirectly in personal enrichment at the expense of Employer;
(c) repeated failure or refusal by Employee to follow policies or directives
reasonably established by the Board of Directors of Employer that goes
uncorrected for a period of thirty (30) consecutive days after written notice
has been provided to Employee; (d) persistent willful failure by Employee to
fulfill his duties hereunder that goes uncorrected for a period of thirty (30)
consecutive days after written notice has been provided to Employee; or (e)
intentional breach by Employee of Sections 4.1(b), 4.1(a) or Section 4.2 of this
Agreement."
<PAGE>
f. The first sentence of Section 3.4 of the Agreement is hereby amended to
read in full as follows:
"In the event of any termination, other than upon death or disability
pursuant to Section 3.2 above or termination for Material Cause, that occurs
after a Change of Control (as defined below), Employer shall continue to pay
Employee the Salary according to the terms of Section 2.1 for a period of two
(2) years from the date of the Change of Control."
g. The first paragraph of Section 5 of the Agreement is hereby amended to
read in full as follows:
"In the event that any payment or benefit received or to be received by
Employee in connection with a Change of Control (whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement by Employer,
any successor to Employer or any corporation ("Affiliate") affiliated with
Employer or which becomes so affiliated pursuant to the transactions resulting
in a Change of Control, both within the meaning of Section 1504 of the Internal
Revenue Code of 1986, as amended (the "Code"), (collectively all such payments
are hereinafter referred to as the "Total Payments")) is deemed to be an "Excess
Parachute Payment" (in whole or in part) to Employee as a result of Section 280G
and/or 4999 of the Code, no change shall be made to the Total Payments to be
made in connection with the Change of Control, except that, in addition to all
other amounts to be paid to Employee by Employer hereunder, Employer, within
thirty (30) days of the date on which the Change of Control occurs, shall pay to
Employee, in addition to any other payment, coverage or benefit due and owing
hereunder, an amount determined by multiplying the rate of excise tax then
imposed by Code Section 4999 by the amount of the "Excess Parachute Payment"
received by Employee (determined without regard to any payments made to Employee
pursuant to this Section) and dividing the product so obtained by the amount
obtained by subtracting the aggregate, local, state and Federal income tax rates
applicable to the receipt by Employee of the "Excess Parachute Payment" (taking
into account the deductibility for Federal income tax purposes of the payment of
state and local income taxes thereon) from the amount obtained by subtracting
from 1.00 the rate of excise tax then imposed by Section 4999 of the Code. It
is Employer's intention that Employee's net after-tax position be identical to
that which would have obtained had Sections 280G and 4999 not been part of the
Code."
h. A new Section 12 is hereby added to the Agreement to read in its
entirety as follows:
"12. Expense Reimbursement. In the event that any person asserts the
---------------------
invalidity of all or any part of this Agreement and Employee incurs legal fees
or out-of-pocket expenses in connection with defending the validity of all or a
portion of this Agreement, Employer shall reimburse Employee for all legal fees
and out-of-pocket expenses Employee so incurs."
2. Ratification and Confirmation. The other terms and conditions of the
-----------------------------
Agreement, as amended by this Amendment, are hereby ratified and confirmed and
shall continue in full force and effect.
<PAGE>
3. Miscellaneous. This Amendment shall be effective as of May 2, 1996. This
-------------
Amendment may be executed in two or more counterparts, and by different parties
on different counterparts, each of which shall be deemed an original and in
making proof of this Amendment it shall be necessary only to produce sufficient
counterparts. This Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and shall be governed by the
laws of the Commonwealth of Pennsylvania, conflict of laws provisions
notwithstanding.
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed,
this Amendment as of the day and year first above written.
RENAL TREATMENT CENTERS, INC.
By:/s/ Robert L. Mayer, Jr.
------------------------
Robert L. Mayer, Jr.,
President and Chief Executive Officer
Witness:
/s/ Robert L. Mayer, Jr. /s/ Frederick C. Jansen
- ------------------------ -----------------------
Frederick C. Jansen
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 2nd day of May,
1996 by and between RENAL TREATMENT CENTERS, INC. ("Company"), and BARBARA A.
BEDNAR ("Employee").
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
of which the parties hereby acknowledge, the parties hereto, intending to be
legally bound hereby, agree as follows:
Section 1. Employment and Duties. Company shall employ Employee and
--------- ---------------------
Employee accepts such employment for the Term set forth in Section 3 hereof, on
the terms and conditions set forth in this Agreement. During the Term Employee
shall serve as the Vice President and Chief Operating Officer of Dialysis
Services of Company and shall perform such duties as are normally associated
with such position, as well as such other duties as shall be assigned to
Employee from time to time during the continuance of this Agreement by the
President and/or Chief Executive Officer of Company. Employee shall devote
Employee's best efforts and skills to the business and interests of Company.
Employee shall not engage in any other business activity during the term of this
Agreement.
Section 2. Compensation. In consideration of the services to be performed
--------- ------------
by Employee hereunder, Employee shall receive:
2.1 Salary. A salary ("Salary") at the rate of One Hundred Eighty
------
Thousand Dollars ($180,000) per year effective as of January 1, 1996.
Employee's salary shall be payable in installments consistent with Company's
payroll schedule. Employee's salary shall be reviewed each year on or about the
anniversary of Employee's employment and Company may in its sole discretion
increase Employee's salary.
2.2 Benefits. Such medical, disability and other similar benefits as are
--------
provided by plans approved by the unanimous affirmative vote of the entire
membership of the Compensation Committee of the Board of Directors of Company
("Committee Approval").
2.3 Bonuses. Such bonuses as are approved by Committee Approval; provided
-------
that the potential bonus amount for 1996 is hereby established as follows: for
calendar year 1996, an Incentive Bonus (the "1996 Incentive Bonus") will be paid
if the applicable Financial Target for 1996 (as set forth below) shall be
attained or exceeded. The amount of the 1996 Incentive Bonus shall be
calculated on a straight-line, sliding-scale basis ranging from 40% of Salary if
the Minimum Financial Target for 1996 is achieved but not exceeded to 55% of
<PAGE>
Salary if the Maximum Financial Target is achieved. The Minimum Financial
Target for 1996 shall be earnings per share of $0.81 and the Maximum Financial
Target for 1996 shall be earnings per share of $0.85. In calculating whether
Employer has attained the Financial Target for 1996 the amount of the 1996
Incentive Bonus shall be included and items of extraordinary gain and loss shall
be excluded. Nothing in this Agreement shall prevent the Compensation Committee
from awarding an Incentive Bonus for 1996 if the Minimum Financial Target is not
met or from awarding an Incentive Bonus in excess of 55% of Salary for 1996.
Incentive Bonuses in calendar years after 1996 need not be determined in a
similar manner as the 1996 Incentive Bonus. Such bonus, if any, as determined
in accordance with the provisions of this Section 2.3(b) shall be paid no later
than fifteen (15) days following the Compensation Committee's review and
approval that such Financial Target(s) have been attained.
2.4 Acceleration of Retirement Benefits. In the event Company terminates
-----------------------------------
this Agreement for any reason other than under Section 3.2 hereof or if
Employee's employment terminates by reason of death or disability as described
in Section 3.3 hereof, then in addition to amounts otherwise payable to
Employee, Company shall pay Employee, within thirty (30) days of the effective
date of termination, an amount equal to the portion of Company's contributions
for the benefit of Employee under Company's Savings Plan, or any other qualified
retirement plan of Company then in effect, that has not vested as of the date of
Employee's termination, if any, plus an additional amount sufficient to satisfy
Employee's federal or state income tax liability with respect to the foregoing
payment and any additional amount payable pursuant to this Section 2.4, it being
Company's intention that Employee's net after tax position be identical to that
which would have been obtained had Employee not been subject to any federal or
state income tax liabilities with respect to payments made under this Section
2.4.
2.5 Acceleration of Exercisability of Stock Options. In the event
-----------------------------------------------
Employee is terminated for any reason other than under Section 3.2 hereof, or if
Employee's employment terminates by reason of death or disability as described
in Section 3.3 hereof, or in the event of a Constructive Discharge, as defined
below, then all unexercised options granted to Employee under Company's stock
option plans which would otherwise have vested within twelve (12) months from
the date of Employee's termination or which would otherwise have vested during
the full Term of this Agreement, whichever is greater, shall be deemed fully
vested and exercisable immediately upon Employee's termination. In determining
which options shall become immediately exercisable hereunder, the then
unexercisable options under each grant of options to Employee shall become
exercisable. The foregoing benefit shall be in addition to, and not in lieu of,
any similar benefit contained in the Executive Severance Agreement between
Company and Employee, dated as of May 1, 1995 (the "Executive Severance
Agreement"). For purposes of this Agreement, the term "Constructive Discharge"
means a termination of Employee's employment by Employee due to a failure of
Company or its successors, without the prior written consent of Employee, to
fulfill Company's obligations under this Agreement in any material respect,
including any material change by Company in
- 2 -
<PAGE>
the functions, duties, or responsibilities of Employee's position with Company
which would reduce the ranking, level, dignity, responsibility, importance or
scope of such position.
Section 3. Term.
--------- ----
3.1 Commencement. The term ("Term") of this Agreement shall commence
------------
("Commencement Date") on the date hereof and unless sooner terminated as
provided herein, shall continue thereafter until May 31, 1998; provided that the
Term shall automatically renew for additional periods of two (2) years each
unless either party shall deliver written notice to the other of its intention
not to renew the Term not later than ninety (90) days prior to the applicable
renewal date.
3.2 Termination for Material Cause. Company may terminate this Agreement
------------------------------
for material cause, provided that, before Company may terminate this Agreement
for material cause, Company must give Employee at least 30 days' advance written
notice of its intention to terminate, specifying in detail the cause for
termination and the intended termination date. For purposes hereof, the term
"for material cause" shall mean: (a) conviction of a felony involving moral
turpitude relating to the business of Company and which does, in fact, adversely
and directly affect the business of Company; (b) the adjudication by a court of
competent jurisdiction that Employee has committed any act of fraud or
dishonesty resulting or intended to result directly or indirectly in personal
enrichment at the expense of Company; (c) repeated failure or refusal by
Employee to follow policies or directives reasonably established by the
President and Chief Executive Officer of Company that goes uncorrected for a
period of thirty (30) consecutive days after written notice has been provided to
Employee; (d) persistent willful failure by Employee to fulfill her duties
hereunder that goes uncorrected for a period of thirty (30) consecutive days
after written notice has been provided to Employee; or (e) intentional breach by
Employee of Sections 4.1(1), 4.1(2) or Section 4.2 of this Agreement.
3.3 Death and Disability. This Agreement shall automatically terminate
--------------------
upon the death of Employee. Upon thirty (30) days' notice (which notice may be
given prior to the completion of the periods described herein), Company may
terminate this Agreement in the event that Employee has for the preceding six
(6) month period been subject to a physical or mental disability that prevented
Employee from adequately performing Employee's regular duties; provided that
either: (i) immediately upon the effective date of such termination, Employee
shall be eligible to receive full disability benefits under the disability
insurance, if any, provided to her by Company, or (ii) Company shall continue to
pay the Salary to Employee until the first to occur of: (A) full disability
benefits are received or (B) one year.
3.4 Rights and Obligations Upon Termination. Upon termination, this
---------------------------------------
Agreement shall be of no further force and effect and neither party shall have
any further right or obligation hereunder; provided however, no termination
shall modify or affect the rights and obligations of the parties which have
accrued prior to termination; and further provided
- 3 -
<PAGE>
however, the rights and obligations of the parties under Section 4 shall survive
termination of this Agreement.
Section 4. Information and Competition.
--------- ---------------------------
4.1(1) Information. Employee recognizes and acknowledges that: (i) in
-----------
the course of Employee's employment or continued employment by Company, it will
or may be necessary for Employee to create, use or have access to (A) technical,
business, or customer information, materials, or data relating to Company's
present or planned business which has not previously been released to the public
with Company's authorization, including, but not limited to, confidential
information, materials or proprietary data belonging to Company or relating to
Company's affairs (collectively, the "Confidential Information") and (B)
information and materials that concern Company's business that come into
Employee's possession by reason of employment with Company (collectively,
"Business Related Information"); (ii) the Confidential Information and Business
Related Information are the property of Company; (iii) the use, misappropriation
or disclosure of the Confidential Information or the Business Related
Information would constitute a breach of trust and could cause serious and
irreparable injury to Company; and (iv) it is essential to the protection of
Company's good will and to the maintenance of Company's competitive position
that the Confidential Information and Business Related Information be kept
secret and that Employee not disclose the Confidential Information or the
Business Related Information to others or use same to Employee's own advantage
or the advantage of others.
4.1(2) Non-Disclosure. In recognition of the acknowledgments contained in
--------------
Section 4.1(1) above, Employee agrees during the Term and thereafter: (i) to
hold and safeguard the Confidential Information and Business Related Information
in trust for Company, its successors and assigns; (ii) not to appropriate or
disclose or make available to anyone for use outside of Company's organization
at any time, either during employment with Company or subsequent to the
termination of employment with Company for any reason, any of the Confidential
Information or Business Related Information, whether or not developed by
Employee, except as required in the performance of Employee's duties to Company;
(iii) to keep in strictest confidence, both during Employee's employment and
subsequent to termination of employment, any Confidential Information or
Business Related Information; and (iv) not to disclose or divulge, or allow to
be disclosed or divulged by any person within Employee's control, to any person,
firm or corporation, or use directly or indirectly, for Employee's own benefit
or the benefit of others, any Confidential Information or Business Related
Information.
4.2 Competition. During the Term and thereafter Employee:
-----------
(a) for a period of one (1) year shall not solicit for employment or employ
for her own or for another's benefit any employee, former employees, officer,
director or consultant of Company; and
- 4 -
<PAGE>
(b) for a period of one (1) year shall not directly or indirectly, (on her
own behalf or as an officer, director, consultant, partner, owner, stockholder,
employee, creditor, agent, trustee or advisor of any individual, partnership or
corporation or other entity (hereinafter a "Person") or in any other capacity)
own, manage, control, operate, invest or acquire an interest in or otherwise
engage in or act for or on behalf of any Person other than Company engaged in
any activity, in those states within the United States and those countries
outside the United States in which Company or any of its subsidiaries during her
employment had conducted any business, where such activity is similar to and
competitive with the activities carried on by Company or any of its subsidiaries
during her employment by Company or is, directly or indirectly, concerned with
soliciting, serving or catering to any of the customers, patients, physicians or
hospitals served by Company or its subsidiaries during her employment by Company
for the provision of products or services of a nature offered by Company during
the Term. Employee acknowledges that the nature of Company's activities is such
that competitive activities could be conducted effectively regardless of the
geographic distance between Company's place of business and the place of any
competitive business.
4.3 Enforcement. In the event that any part of this Section 4 shall be
-----------
held unenforceable or invalid, the remaining parts thereof shall nevertheless
continue to be valid and enforceable as though the invalid portions had not been
a part hereof. In the event that the area, period of restriction, activity or
subject established in accordance with this Section 4 shall be deemed to exceed
the maximum area, period of restriction, activity or subject that a court of
competent jurisdiction deems enforceable, said area, period of restriction,
activities or subjects shall, for the purpose of this Section 4, be reduced to
the extent necessary to render them enforceable.
4.4 Equitable Relief. Employee agrees that any violation by her of any
----------------
covenant in Section 4 may cause such damage to Company as will be serious and
irreparable and the exact amount of which will be difficult to ascertain, and
for that reason, Employee agrees that Company shall be entitled, as a matter of
right, to a temporary, preliminary and/or permanent injunction and/or other
injunctive relief, ex parte or otherwise, from any court of competent
jurisdiction, restraining any further violations by Employee. Such injunctive
relief shall be in addition to and in no way in limitation of, any and all other
remedies Company shall have in law and equity for the enforcement of such
covenants and provisions.
4.5 Indemnification and Payment. In the event of Employee's violation of
---------------------------
any covenant in Section 4, Employee shall indemnify and hold harmless Company
from any loss, liability, cost or expense (including reasonable attorney's fees)
arising out of such violation and shall pay over to Company any benefit received
by Employee in connection with such violation.
4.6 Documents. Upon the termination of Employee's employment with Company
---------
for any reason, Employee shall promptly deliver to Company all materials and
documents belonging to or concerning Company or relating to its affairs and,
without limiting the
- 5 -
<PAGE>
foregoing, will promptly deliver to Company any and all other documents or
materials containing or constituting Confidential Information or Business
Related Information.
Section 5. Entire Agreement. This Agreement supersedes any and all prior
--------- ----------------
agreements between the parties and represents the entire understanding of the
parties hereto with respect to the employment of Employee and there are no other
agreements, warranties or representations except as herein provided. The
parties acknowledge that this Agreement shall not affect any prior, subsequent,
or contemporaneous agreements between the parties respecting Confidential
Information or Business Related Information. This Agreement including this
Section 5 may not be altered or amended except in writing executed by both
parties hereto. Notwithstanding the execution and delivery of this Agreement
and anything herein to the contrary, the Executive Severance Agreement shall
remain in full force and effect as of the date hereof.
Section 6. Assignment; Benefit. This Agreement is personal and may not be
--------- -------------------
assigned by Employee. This Agreement may be assigned by Company and shall inure
to the benefit of and be binding upon the successors and assigns of Company.
Section 7. Applicable Law. This Agreement shall be governed by the
--------- --------------
internal laws of the Commonwealth of Pennsylvania, without regard to conflicts
of laws provisions.
Section 8. Notice. Any notice required or permitted to be given hereunder
--------- ------
shall be sufficient if in writing and if sent by certified or registered mail to
the last address as shall appear on the records of Company in the case of
Employee or to its principal office in the case of Company.
Section 9. Waiver. The waiver by any party of a breach of any provision
--------- ------
of this Agreement by the other shall not operate or be construed as a waiver of
any other or subsequent breach of such or any provision.
Section 10. Jurisdiction. Employee hereby submits to the jurisdiction of
---------- ------------
the courts of the Commonwealth of Pennsylvania or of the United States Court for
the Eastern District of Pennsylvania in any action or dispute arising out of
this Agreement, its interpretation or implementation. With respect to the
undersigned submitting to said courts of the Commonwealth of Pennsylvania or of
said United States court, Employee agrees that personal jurisdiction over
Employee may be obtained by the mailing of a summons or complaint (postage
prepaid) to Employee at the last address of Employee as shall appear on the
records of Company.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals as of the day and year set forth above.
RENAL TREATMENT CENTERS, INC.
By: /s/ Robert L. Mayer, Jr.
------------------------------
Robert L. Mayer, Jr.,
President and Chief
Executive Officer
Witness: /s/ Thomas J. Karl /s/ Barbara A. Bednar
------------------- -----------------------------
Barbara A. Bednar
- 7 -
<PAGE>
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------------
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is made as of
the 2nd day of May, 1996, between RENAL TREATMENT CENTERS, INC., a Delaware
corporation with offices at 1180 West Swedesford Road, Suite 300, Building 2,
Berwyn, PA 19312 ("Company") and JOHN A. CHAMBERS ("Employee").
W I T N E S S E T H:
WHEREAS, Company and Employee are parties to a certain Employment
Agreement, dated as of August 30, 1993 (the "Agreement"); and
WHEREAS, the parties wish to extend the term of the Agreement and make
certain other changes to the Agreement, all as more fully set forth herein.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Amendments.
----------
a. A new Section 2.12 is added to the Agreement, to read in full as
follows:
"2.12 Acceleration of Retirement Benefits. In the event Company
-----------------------------------
terminates this Agreement for any reason other than under Section 3.2 hereof or
if Employee's employment terminates by reason of death or disability as
described in Section 3.3 hereof, then in addition to amounts otherwise payable
to Employee, Company shall pay Employee, within thirty (30) days of the
effective date of termination, an amount equal to the portion of Company's
contributions for the benefit of Employee under Company's Savings Plan, or any
other qualified retirement plan of Company then in effect, that has not vested
as of the date of Employee's termination, if any, plus an additional amount
sufficient to satisfy Employee's federal or state income tax liability with
respect to the foregoing payment and any additional amount payable pursuant to
this Section 2.12, it being the Company's intention that Employee's net after
tax position be identical to that which would have been obtained had Employee
not been subject to any federal or state income tax liabilities with respect to
payments made under this Section 2.12."
b. A new Section 2.13 is added to the Agreement, to read in full as
follows:
"2.13 Acceleration of Exercisability of Stock Options. In the event
-----------------------------------------------
Employee is terminated for any reason other than under Section 3.2 hereof, or if
Employee's employment terminates by reason of death or disability as described
in Section 3.3 hereof, or in the event of a Constructive Discharge, as defined
below, then all unexercised options granted to
<PAGE>
Employee under Company's stock option plans which would otherwise have vested
within twelve (12) months from the date of Employee's termination or which would
otherwise have vested during the full Term of this Agreement, whichever is
greater, shall be deemed fully vested and exercisable immediately upon
Employee's termination. In determining which options shall become immediately
exercisable hereunder, the then unexercisable options under each grant of
options to Employee shall become exercisable. The foregoing benefit shall be in
addition to, and not in lieu of, any similar benefit contained in the Executive
Severance Agreement between Company and Employee, dated as of May 1, 1995 (the
"Executive Severance Agreement"). For purposes of this Agreement, the term
"Constructive Discharge" means a termination of Employee's employment by
Employee due to a failure of Company or its successors, without the prior
written consent of Employee, to fulfill the Company's obligations under this
Agreement in any material respect, including any material change by the Company
in the functions, duties, or responsibilities of Employee's position with the
Company which would reduce the ranking, level, dignity, responsibility,
importance or scope of such position.
c. Section 3.1 of the Agreement is hereby amended to read in full as
follows:
"3.1 Commencement. The term ("Term") of this Agreement shall commence
------------
("Commencement Date") on a date between August 15, 1993 and August 31, 1993 as
the parties may agree, and unless sooner terminated as provided herein, shall
continue thereafter until August 31, 1998; provided that the Term shall
automatically renew for additional periods of two (2) years each unless either
party shall deliver written notice to the other of its intention not to renew
the Term not later than ninety (90) days prior to the applicable renewal date."
d. Section 3.2 of the Agreement is hereby amended to read in full as
follows:
"3.2 Termination for Material Cause. Company may terminate this Agreement
------------------------------
for material cause, provided that, before Company may terminate this Agreement
for material cause, Company must give Employee at least 30 days' advance written
notice of its intention to terminate, specifying in detail the cause for
termination and the intended termination date. For purposes hereof, the term
"for material cause" shall mean: (a) conviction of a felony involving moral
turpitude relating to the business of Company and which does, in fact, adversely
and directly affect the business of Company; (b) the adjudication by a court of
competent jurisdiction that Employee has committed any act of fraud or
dishonesty resulting or intended to result directly or indirectly in personal
enrichment at the expense of Company; (c) repeated failure or refusal by
Employee to follow policies or directives reasonably established by the
President and Chief Executive Officer of Company that goes uncorrected for a
period of thirty (30) consecutive days after written notice has been provided to
Employee; (d) persistent willful failure by Employee to fulfill his duties
hereunder that goes uncorrected for a period of thirty (30) consecutive days
after written notice has been provided to Employee; or (e) intentional breach by
Employee of Sections 4.1(1), 4.1(2) or Section 4.2 of this Agreement.
<PAGE>
2. Ratification and Confirmation. The other terms and conditions of the
-----------------------------
Agreement, as amended by this Amendment, are hereby ratified and confirmed and
shall continue in full force and effect.
3. Miscellaneous. This Amendment shall be effective as of January 1, 1996.
-------------
This Amendment may be executed in two or more counterparts, and by different
parties on different counterparts, each of which shall be deemed an original and
in making proof of this Amendment it shall be necessary only to produce
sufficient counterparts. This Amendment and the rights and obligations of the
parties hereunder shall be construed in accordance with and shall be governed by
the laws of the Commonwealth of Pennsylvania, conflict of laws provisions
notwithstanding.
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed,
this Amendment as of the day and year first above written.
RENAL TREATMENT CENTERS, INC.
By:/s/ Robert L. Mayer, Jr.
------------------------
Robert L. Mayer, Jr.,
President and Chief Executive Officer
Witness:
/s/ Frederick C. Jansen /s/ John A. Chambers
- --------------------------- ---------------------------
John A. Chambers
<PAGE>
FIRST AMENDMENT TO EXECUTIVE SEVERANCE AGREEMENT
------------------------------------------------
This First Amendment to Executive Severance Agreement ("Amendment") is made
as of the 2nd day of May, 1996 between Renal Treatment Centers, Inc. (the
"Company"), a Delaware corporation and Barbara A. Bednar (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive are parties to a certain Executive
Severance Agreement dated May 1, 1995 (the "Agreement"); and
WHEREAS, the parties wish to make certain changes to the Agreement, all as more
fully set forth herein.
NOW THEREFORE, in consideration of the mutual promises and covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Amendments.
----------
a. Section 1(b) is hereby amended to read in full as follows:
"(b) If the Executive is employed by the Company on the date on which a
Change of Control of the Company occurs, then, except as otherwise provided in
Sections 4 and 5(a), the Company agrees to employ the Executive, and the
Executive agrees to serve the Company, in a management capacity for a period of
twelve (12) months, commencing on the date on which the Change of Control
occurs."
b. Section 3(c) is hereby amended to read in full as follows:
"(c) In addition to all other compensation to be paid to the Executive by
the Company hereunder upon the occurrence of a Change of Control, the Company
shall cause all options ("Options") granted to the Executive under the Company's
stock option plans to become fully vested and exercisable immediately upon the
Change of Control. In addition, the Executive shall have the right exercisable
by written notice to the Company upon the occurrence of a Change of Control to
elect to receive, in lieu of shares of common stock of the Company (the "Company
Shares") issuable upon the exercise of Options (which Options shall be canceled
upon the making of the payment referred to below), an amount in cash equal to
the aggregate spread between the exercise prices of the Options held by the
Executive, whether or not then fully vested or exercisable, and the higher of
(a) the closing price per Company Share as reported on the New York Stock
Exchange on the date of the Change of Control (or the last trading date prior
thereto); or (b) the highest price per Company Share actually paid in
<PAGE>
connection with the Change of Control of the Company (the higher price being
referred to as the "Termination Price"), but excluding from such calculation all
Options the exercise price of which is in excess of the Termination Price."
c. Subsections (a), (b), (c) and (d) of Section 5 are hereby amended to
read in full as follows:
"(a) If, during the Post Change of Control Employment Period, the
Executive shall terminate his employment other than for Good Reason (as defined
in Section 7 of this Agreement) or Constructive Discharge (as defined in the
Employment Agreement), or shall violate the provisions of Section 2(c) hereof,
the Company's remaining obligations under this Agreement shall terminate.
(b) The Company shall have the right to terminate the Post Change of
Control Employment Period of the Executive under this Agreement for Material
Cause (as defined below), and for no other reason. Upon such termination, the
Company's remaining obligations under this Agreement shall terminate. Moreover,
any conduct of the Executive in connection with a Change of Control (including
his opposition to or support of a Change of Control) shall not under any
circumstances be deemed to constitute Material Cause for purposes of this
Agreement.
(c) If the Executive shall terminate his employment for Good Reason or by
reason of Constructive Discharge prior to the end of the Post Change of Control
Employment Period, the Executive shall receive the same payments that would have
been provided to the Executive under Sections 5(e) and 5(f) hereof.
(d) If the Company shall terminate the employment of the Executive prior
to the end of the Post Change of Control Employment Period for any reason other
than Material Cause as provided in Section 5(b) of this Agreement or total
disability or incapacity for a period of at least six consecutive months as
provided in Section 4(b) of this Agreement, or if the Executive shall terminate
his employment for Good Reason or by reason of Constructive Discharge prior to
the end of the Post Change of Control Employment Period, the Executive shall be
entitled to receive such payments and benefits as are specifically provided by
this Agreement for a period equal to the balance of the Post Change of Control
Employment Period as if such termination had not occurred."
d. A new Section 7(d) is added to the Agreement to read in full as
follows:
"(d) For purposes of this Agreement, the term "Material Cause" shall mean
any of the following:
(i) conviction of a felony involving moral turpitude relating to the
business of the Company and which does, in fact, adversely and directly affect
the business of the Company;
<PAGE>
(ii) the adjudication by a court of competent jurisdiction that the
Executive has committed any act of fraud or dishonesty resulting or intended to
result directly or indirectly in personal enrichment at the expense of the
Company;
(iii) repeated failure or refusal by the Executive to follow
policies or directives reasonably established by the Company that goes
uncorrected for a period of thirty (30) consecutive days after written notice
has been provided to the Executive; and
(iv) persistent willful failure by the Executive to fulfill his
duties that goes uncorrected for a period of thirty (30) consecutive days after
written notice has been provided to the Executive."
e. The first paragraph of Section 8 is amended to read as follows:
"In the event that any payment or benefit received or to be received by the
Executive in connection with a Change of Control (whether payable pursuant to
the terms of this Agreement or any other plan, arrangement or agreement by the
Company, any successor to the Company or any corporation ("Affiliate")
affiliated with the Company or which becomes so affiliated pursuant to the
transactions resulting in a Change of Control, both within the meaning of
Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code"),
(collectively all such payments are hereinafter referred to as the "Total
Payments")) is deemed to be an "Excess Parachute Payment" (in whole or in part)
to the Executive as a result of Section 280G and/or 4999 of the Code, no change
shall be made to the Total Payments to be made in connection with the Change of
Control, except that, in addition to all other amounts to be paid to the
Executive by the Company hereunder, the Company, within thirty (30) days of the
date on which the Change of Control occurs, shall pay to the Executive, in
addition to any other payment, coverage or benefit due and owing hereunder, an
amount determined by multiplying the rate of excise tax then imposed by Code
Section 4999 by the amount of the "Excess Parachute Payment" received by the
Executive (determined without regard to any payments made to the Executive
pursuant to this Section) and dividing the product so obtained by the amount
obtained by subtracting the aggregate, local, state and Federal income tax rates
applicable to the receipt by the Executive of the "Excess Parachute Payment"
(taking into account the deductibility for Federal income tax purposes of the
payment of state and local income taxes thereon) from the amount obtained by
subtracting from 1.00 the rate of excise tax then imposed by Section 4999 of the
Code. It is the Company's intention that the Executive's net after-tax position
be identical to that which would have obtained had Sections 280G and 4999 not
been part of the Code."
2. Ratification and Confirmation. The other terms and conditions of the
-----------------------------
Agreement, as amended by this Amendment, are hereby ratified and confirmed and
shall continue in full force and effect.
3. Miscellaneous. This Amendment shall be effective as of May 2, 1996. This
-------------
Amendment may be executed in two or more counterparts, and by different parties
on
3
<PAGE>
different counterparts, each of which shall be deemed an original and in making
proof of this Amendment it shall be necessary only to produce sufficient
counterparts. This Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and shall be governed by the
laws of the Commonwealth of Pennsylvania, conflict of laws provisions
notwithstanding.
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed,
this Amendment as of the day and year first above written.
RENAL TREATMENT CENTERS, INC.
By: /s/ Robert L. Mayer, Jr.
-------------------------
Robert L. Mayer, Jr.,
President and Chief Executive Officer
Witness:
/s/ Thomas J. Karl /s/ Barbara A. Bednar
- ------------------------ ----------------------------
Barbara A. Bednar
4
<PAGE>
FIRST AMENDMENT TO EXECUTIVE SEVERANCE AGREEMENT
------------------------------------------------
This First Amendment to Executive Severance Agreement is made as of the
2nd day of May, 1996 between Renal Treatment Centers, Inc. (the "Company"), a
Delaware corporation and Ronald H. Rodgers, Jr. (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive are parties to a certain Executive
Severance Agreement dated May 1, 1995 (the "Agreement"); and
WHEREAS, the parties wish to make certain changes to the Agreement, all as more
fully set forth herein.
NOW THEREFORE, in consideration of the mutual promises and covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Amendments.
----------
a. Section 1(b) is hereby amended to read in full as follows:
"(b) If the Executive is employed by the Company on the date on which a
Change of Control of the Company occurs, then, except as otherwise provided in
Sections 4 and 5(a), the Company agrees to employ the Executive, and the
Executive agrees to serve the Company, in a management capacity for a period of
twelve (12) months, commencing on the date on which the Change of Control
occurs."
b. Section 3(c) is hereby amended to read in full as follows:
"(c) In addition to all other compensation to be paid to the Executive by
the Company hereunder upon the occurrence of a Change of Control, the Company
shall cause all options ("Options") granted to the Executive under the Company's
stock option plans to become fully vested and exercisable immediately upon the
Change of Control. In addition, the Executive shall have the right exercisable
by written notice to the Company upon the occurrence of a Change of Control to
elect to receive, in lieu of shares of common stock of the Company (the "Company
Shares") issuable upon the exercise of Options (which Options shall be canceled
upon the making of the payment referred to below), an amount in cash equal to
the aggregate spread between the exercise prices of the Options held by the
Executive, whether or not then fully vested or exercisable, and the higher of
(a) the closing price per Company Share as reported on the New York Stock
Exchange on the date of the Change of Control (or the last trading date prior
thereto); or (b) the highest price per Company Share actually paid in
<PAGE>
connection with the Change of Control of the Company (the higher price being
referred to as the "Termination Price"), but excluding from such calculation all
Options the exercise price of which is in excess of the Termination Price."
c. Subsections (a), (b), (c) and (d) of Section 5 are hereby amended
to read in full as follows:
"(a) If, during the Post Change of Control Employment Period, the
Executive shall terminate his employment other than for Good Reason (as defined
in Section 7 of this Agreement) or Constructive Discharge (as defined in the
Employment Agreement), or shall violate the provisions of Section 2(c) hereof,
the Company's remaining obligations under this Agreement shall terminate.
(b) The Company shall have the right to terminate the Post Change of
Control Employment Period of the Executive under this Agreement for Material
Cause (as defined below), and for no other reason. Upon such termination, the
Company's remaining obligations under this Agreement shall terminate. Moreover,
any conduct of the Executive in connection with a Change of Control (including
his opposition to or support of a Change of Control) shall not under any
circumstances be deemed to constitute Material Cause for purposes of this
Agreement.
(c) If the Executive shall terminate his employment for Good Reason or by
reason of Constructive Discharge prior to the end of the Post Change of Control
Employment Period, the Executive shall receive the same payments that would have
been provided to the Executive under Sections 5(e) and 5(f) hereof.
(d) If the Company shall terminate the employment of the Executive prior
to the end of the Post Change of Control Employment Period for any reason other
than Material Cause as provided in Section 5(b) of this Agreement or total
disability or incapacity for a period of at least six consecutive months as
provided in Section 4(b) of this Agreement, or if the Executive shall terminate
his employment for Good Reason or by reason of Constructive Discharge prior to
the end of the Post Change of Control Employment Period, the Executive shall be
entitled to receive such payments and benefits as are specifically provided by
this Agreement for a period equal to the balance of the Post Change of Control
Employment Period as if such termination had not occurred."
d. A new Section 7(d) is added to the Agreement to read in full as
follows:
"(d) For purposes of this Agreement, the term "Material Cause" shall mean
any of the following:
(i) conviction of a felony involving moral turpitude relating to
the business of the Company and which does, in fact, adversely and directly
affect the business of the Company;
2
<PAGE>
(ii) the adjudication by a court of competent jurisdiction that
the Executive has committed any act of fraud or dishonesty resulting or inten-
ded to result directly or indirectly in personal enrichment at the expense of
the Company;
(iii) repeated failure or refusal by the Executive to follow
policies or directives reasonably established by the Company that goes uncor-
rected for a period of thirty (30) consecutive days after written notice has
been provided to the Executive; and
(iv) persistent willful failure by the Executive to fulfill his
duties that goes uncorrected for a period of thirty (30) consecutive days after
written notice has been provided to the Executive."
e. The first paragraph of Section 8 is amended to read as follows:
"In the event that any payment or benefit received or to be received by the
Executive in connection with a Change of Control (whether payable pursuant to
the terms of this Agreement or any other plan, arrangement or agreement by the
Company, any successor to the Company or any corporation ("Affiliate")
affiliated with the Company or which becomes so affiliated pursuant to the
transactions resulting in a Change of Control, both within the meaning of
Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code"),
(collectively all such payments are hereinafter referred to as the "Total
Payments")) is deemed to be an "Excess Parachute Payment" (in whole or in part)
to the Executive as a result of Section 280G and/or 4999 of the Code, no change
shall be made to the Total Payments to be made in connection with the Change of
Control, except that, in addition to all other amounts to be paid to the
Executive by the Company hereunder, the Company, within thirty (30) days of the
date on which the Change of Control occurs, shall pay to the Executive, in
addition to any other payment, coverage or benefit due and owing hereunder, an
amount determined by multiplying the rate of excise tax then imposed by Code
Section 4999 by the amount of the "Excess Parachute Payment" received by the
Executive (determined without regard to any payments made to the Executive
pursuant to this Section) and dividing the product so obtained by the amount
obtained by subtracting the aggregate, local, state and Federal income tax rates
applicable to the receipt by the Executive of the "Excess Parachute Payment"
(taking into account the deductibility for Federal income tax purposes of the
payment of state and local income taxes thereon) from the amount obtained by
subtracting from 1.00 the rate of excise tax then imposed by Section 4999 of the
Code. It is the Company's intention that the Executive's net after-tax position
be identical to that which would have obtained had Sections 280G and 4999 not
been part of the Code."
2. Ratification and Confirmation. The other terms and conditions of the
-----------------------------
Agreement, as amended by this Amendment, are hereby ratified and confirmed and
shall continue in full force and effect.
3. Miscellaneous. This Amendment shall be effective as of May 2, 1996. This
-------------
Amendment may be executed in two or more counterparts, and by different parties
on
3
<PAGE>
different counterparts, each of which shall be deemed an original and in making
proof of this Amendment it shall be necessary only to produce sufficient
counterparts. This Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and shall be governed by the
laws of the Commonwealth of Pennsylvania, conflict of laws provisions
notwithstanding.
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed,
this Amendment as of the day and year first above written.
RENAL TREATMENT CENTERS, INC.
By:/s/ Robert L. Mayer, Jr.
------------------------
Robert L. Mayer, Jr.,
President and Chief Executive Officer
Witness:
/s/ Frederick C. Jansen /s/ Ronald H. Rodgers, Jr.
- ----------------------- --------------------------
Ronald H. Rodgers, Jr.
4
<PAGE>
FIRST AMENDMENT TO EXECUTIVE SEVERANCE AGREEMENT
------------------------------------------------
This First Amendment to Executive Severance Agreement ("Amendment") is made
as of the 2nd day of May, 1996 between Renal Treatment Centers, Inc. (the
"Company"), a Delaware corporation and John A. Chambers (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive are parties to a certain Executive
Severance Agreement dated May 1, 1995 (the "Agreement"); and
WHEREAS, the parties wish to make certain changes to the Agreement, all as more
fully set forth herein.
NOW THEREFORE, in consideration of the mutual promises and covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Amendments.
----------
a. Section 1(b) is hereby amended to read in full as follows:
"(b) If the Executive is employed by the Company on the date on which a
Change of Control of the Company occurs, then, except as otherwise provided in
Sections 4 and 5(a), the Company agrees to employ the Executive, and the
Executive agrees to serve the Company, in a management capacity for a period of
twelve (12) months, commencing on the date on which the Change of Control
occurs."
b. Section 3(c) is hereby amended to read in full as follows:
"(c) In addition to all other compensation to be paid to the Executive by
the Company hereunder upon the occurrence of a Change of Control, the Company
shall cause all options ("Options") granted to the Executive under the Company's
stock option plans to become fully vested and exercisable immediately upon the
Change of Control. In addition, the Executive shall have the right exercisable
by written notice to the Company upon the occurrence of a Change of Control to
elect to receive, in lieu of shares of common stock of the Company (the "Company
Shares") issuable upon the exercise of Options (which Options shall be canceled
upon the making of the payment referred to below), an amount in cash equal to
the aggregate spread between the exercise prices of the Options held by the
Executive, whether or not then fully vested or exercisable, and the higher of
(a) the closing price per Company Share as reported on the New York Stock
Exchange on the date of the Change of Control (or the last trading date prior
thereto); or (b) the highest price per Company Share actually paid in
<PAGE>
connection with the Change of Control of the Company (the higher price being
referred to as the "Termination Price"), but excluding from such calculation all
Options the exercise price of which is in excess of the Termination Price."
c. Subsections (a), (b), (c) and (d) of Section 5 are hereby amended to
read in full as follows:
"(a) If, during the Post Change of Control Employment Period, the
Executive shall terminate his employment other than for Good Reason (as defined
in Section 7 of this Agreement) or Constructive Discharge (as defined in the
Employment Agreement), or shall violate the provisions of Section 2(c) hereof,
the Company's remaining obligations under this Agreement shall terminate.
(b) The Company shall have the right to terminate the Post Change of
Control Employment Period of the Executive under this Agreement for Material
Cause (as defined below), and for no other reason. Upon such termination, the
Company's remaining obligations under this Agreement shall terminate. Moreover,
any conduct of the Executive in connection with a Change of Control (including
his opposition to or support of a Change of Control) shall not under any
circumstances be deemed to constitute Material Cause for purposes of this
Agreement.
(c) If the Executive shall terminate his employment for Good Reason or by
reason of Constructive Discharge prior to the end of the Post Change of Control
Employment Period, the Executive shall receive the same payments that would have
been provided to the Executive under Sections 5(e) and 5(f) hereof.
(d) If the Company shall terminate the employment of the Executive prior
to the end of the Post Change of Control Employment Period for any reason other
than Material Cause as provided in Section 5(b) of this Agreement or total
disability or incapacity for a period of at least six consecutive months as
provided in Section 4(b) of this Agreement, or if the Executive shall terminate
his employment for Good Reason or by reason of Constructive Discharge prior to
the end of the Post Change of Control Employment Period, the Executive shall be
entitled to receive such payments and benefits as are specifically provided by
this Agreement for a period equal to the balance of the Post Change of Control
Employment Period as if such termination had not occurred."
d. A new Section 7(d) is added to the Agreement to read in full as
follows:
"(d) For purposes of this Agreement, the term "Material Cause" shall mean
any of the following:
(i) conviction of a felony involving moral turpitude relating to the
business of the Company and which does, in fact, adversely and directly affect
the business of the Company;
2
<PAGE>
(ii) the adjudication by a court of competent jurisdiction that the
Executive has committed any act of fraud or dishonesty resulting or intended to
result directly or indirectly in personal enrichment at the expense of the
Company;
(iii) repeated failure or refusal by the Executive to follow policies or
directives reasonably established by the Company that goes uncorrected for a
period of thirty (30) consecutive days after written notice has been provided to
the Executive; and
(iv) persistent willful failure by the Executive to fulfill his duties
that goes uncorrected for a period of thirty (30) consecutive days after written
notice has been provided to the Executive."
e. The first paragraph of Section 8 is amended to read as follows:
"In the event that any payment or benefit received or to be received by the
Executive in connection with a Change of Control (whether payable pursuant to
the terms of this Agreement or any other plan, arrangement or agreement by the
Company, any successor to the Company or any corporation ("Affiliate")
affiliated with the Company or which becomes so affiliated pursuant to the
transactions resulting in a Change of Control, both within the meaning of
Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code"),
(collectively all such payments are hereinafter referred to as the "Total
Payments")) is deemed to be an "Excess Parachute Payment" (in whole or in part)
to the Executive as a result of Section 280G and/or 4999 of the Code, no change
shall be made to the Total Payments to be made in connection with the Change of
Control, except that, in addition to all other amounts to be paid to the
Executive by the Company hereunder, the Company, within thirty (30) days of the
date on which the Change of Control occurs, shall pay to the Executive, in
addition to any other payment, coverage or benefit due and owing hereunder, an
amount determined by multiplying the rate of excise tax then imposed by Code
Section 4999 by the amount of the "Excess Parachute Payment" received by the
Executive (determined without regard to any payments made to the Executive
pursuant to this Section) and dividing the product so obtained by the amount
obtained by subtracting the aggregate, local, state and Federal income tax rates
applicable to the receipt by the Executive of the "Excess Parachute Payment"
(taking into account the deductibility for Federal income tax purposes of the
payment of state and local income taxes thereon) from the amount obtained by
subtracting from 1.00 the rate of excise tax then imposed by Section 4999 of the
Code. It is the Company's intention that the Executive's net after-tax position
be identical to that which would have obtained had Sections 280G and 4999 not
been part of the Code."
2. Ratification and Confirmation. The other terms and conditions of the
-----------------------------
Agreement, as amended by this Amendment, are hereby ratified and confirmed and
shall continue in full force and effect.
3. Miscellaneous. This Amendment shall be effective as of May 2, 1996. This
-------------
Amendment may be executed in two or more counterparts, and by different parties
on
3
<PAGE>
different counterparts, each of which shall be deemed an original and in making
proof of this Amendment it shall be necessary only to produce sufficient
counterparts. This Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and shall be governed by the
laws of the Commonwealth of Pennsylvania, conflict of laws provisions
notwithstanding.
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed,
this Amendment as of the day and year first above written.
RENAL TREATMENT CENTERS, INC.
By:/s/ Robert L. Mayer, Jr.
------------------------
Robert L. Mayer, Jr.,
President and Chief Executive Officer
Witness:
/s/ Frederick C. Jansen /s/ John A. Chambers
----------------------- --------------------
John A. Chambers
4
<PAGE>
FOURTH AMENDMENT TO LEASE
-------------------------
THIS FOURTH AMENDMENT TO LEASE is made this 30th day of May, 1996, between
TERRAMICS/SOUTHPOINT ASSOCIATES II LIMITED PARTNERSHIP (the "Landlord") and
RENAL TREATMENT CENTERS, INC. (the "Tenant").
BACKGROUND
----------
A. Landlord and Tenant entered into a lease dated November 8, 1991, as
amended by a First Amendment to Lease dated January 18, 1993, a Second Amendment
to Lease dated September 30, 1993 and a Third Amendment to Lease dated March 2,
1995 (the "Existing Lease"), covering office space consisting of approximately
21,025 rentable square feet (the "Existing Space") on the third floor of the
building (the "Building") known as Southpoint TWO located at 1180 West
Swedesford Road in the Southpoint Office Complex, Berwyn, Pennsylvania.
B. Landlord and Tenant desire to amend the Existing Lease, under the terms
and conditions set forth below, to expand the premises covered under the
Existing Lease to include approximately 20,511 rentable square feet of
additional space (the "Additional Space") on the second floor of the Building.
The Additional Space consists of 16,153 rentable square feet (the "First
Additional Space") which shall be leased to Tenant on June 8, 1996 and 4,358
rentable square feet (the "Second Additional Space") which shall be leased to
Tenant on October 1, 1996. The First Additional Space and the Second Additional
Space are depicted on Exhibit "A" attached to this Amendment.
C. The CIT Group/Equipment Financing, Inc. ("CIT") currently leases the
Additional Space from Landlord. Landlord and CIT intend to terminate CIT's
lease for the Additional Space pursuant to a Lease Termination Agreement (the
"CIT Agreement").
NOW, THEREFORE, the parties hereto, for good and valuable consideration and
intending to be legally bound, agree as follows:
1. Premises. Landlord hereby leases to Tenant, and Tenant leases from
--------
Landlord, the Additional Space, under the same terms and conditions as are set
forth in the Existing Lease except as
<PAGE>
amended by the provisions set forth in this Amendment. All capitalized terms
not otherwise defined herein shall have the same meanings ascribed to them in
the Existing Lease. The Existing Lease as hereby amended shall be referred to
herein as the "Lease".
2. AS-IS Condition. Landlord shall deliver and Tenant shall accept the
---------------
Additional Space in its existing "As Is" condition. Any work requested by
Tenant shall be performed only if Landlord and Tenant first reach written
agreement on any charges to Tenant therefor.
3. Term. The term of the Lease with respect to the First Additional Space
----
shall commence on June 8, 1996 and the term of the Lease with respect to the
Second Additional Space shall commence on October 1, 1996. Notwithstanding the
foregoing, if, for any reason, Landlord is unable to deliver possession of the
Additional Space on the dates described above, Landlord shall not be liable for
any damage caused thereby, nor shall the Lease be void or voidable, but, rather,
the term of the Lease with respect to the applicable Additional Space shall
commence upon the date that possession of the applicable Additional Space is
made available to Tenant. Unless sooner terminated in accordance with the terms
of the Lease, the term of the Lease with respect to the Additional Space shall
be coterminous with the term of the Lease with respect to the Existing Space.
4. Minimum Annual Rent. Tenant shall pay a minimum annual rent for the
Additional Space (until September 30, 1996, for the First Additional Space only)
as follows:
(a) for and during the period commencing June 8, 1996 through September
30, 1996, the minimum annual rent for the First Additional Space shall be Ten
Dollars ($10.00) per rentable square foot or One Hundred Sixty One Thousand Five
Hundred Thirty Dollars ($161,530.00) per annum, payable in equal monthly
installments of Thirteen Thousand Four Hundred Sixty and 83/100 Dollars
($13,460.83);
<PAGE>
(b) for and during the period commencing October 1, 1996 through
February 28, 1998, the minimum annual rent shall be Ten Dollars ($10.00)
per rentable square foot or Two Hundred Five Thousand One Hundred Ten
Dollars ($205,110.00), payable in equal monthly installments of Seventeen
Thousand Ninety-Two and 50/100 Dollars ($17,092.50); and
(c) for and during the period commencing March 1, 1998 through
December 31, 1998, the minimum annual rent shall be Twenty-One and 25/100
Dollars ($21.25) per rentable square foot or Four Hundred Thirty Five
Thousand Eight Hundred Fifty-Eight and 75/100 Dollars ($435,858.75) payable
in equal monthly installments of Thirty Six Thousand Three Hundred Twenty-
One and 56/100 Dollars ($36,321.56).
(d) for and during the balance of the term of the Lease, the minimum
annual rent shall be Twenty-One Dollars ($21.00) per rentable square foot
or Four Hundred Thirty Thousand Seven Hundred Thirty-One dollars
($430,731.00), payable in equal monthly installments of Thirty-Five
Thousand Eight Hundred Ninety-Four and 25/100 Dollars ($35,894.25).
Such minimum annual rent shall be paid by Tenant in the same manner as set forth
in the Existing Lease.
5. Proportionate Share. As of June 8, 1996, Tenant's Proportionate Share
-------------------
shall be increased to Sixty-One and 55/100 percent (61.55%). As of October 1,
1996, Tenant's Proportionate Share shall be increased to Sixty-Eight and 77/100
percent (68.77%).
6. Definition of Premises. As of June 8, 1996 with respect to the First
----------------------
Additional Space and as of October 1, 1996 with respect to the Second Additional
Space, the term "Premises" as used in the Lease shall be deemed to include the
Additional Space.
7. Broker. Tenant represents and warrants that it has not dealt with any
------
broker or agent in the negotiation for this
-3-
<PAGE>
Amendment, and agrees to indemnify and hold Landlord harmless from any and all
costs or liability for compensation claimed by any such broker or agent employed
by Tenant or claiming to have been engaged by Tenant in connection with this
Amendment.
8. Partial Termination Option. Tenant shall have the right to terminate
--------------------------
this Lease with respect to approximately 5,000 rentable square feet of the
Additional Space (the "Termination Space"), effective March 1, 1998 (the "Early
Termination Date"), but not at any other time, under the following terms and
conditions:
(a) Tenant shall give Landlord written notice of its election to
exercise this option on or before June 1, 1997;
(b) Tenant shall pay all installments of minimum annual rent and
additional rent with respect to the Termination Space accruing up to the
Early Termination Date;
(c) Tenant shall pay all costs associated with segregating the
Termination Space from the remainder of the Premises and all other costs in
order for the second floor of the Building to be used as a multi-tenant
floor.
(d) The exact location of the Termination Space shall be reasonably
determined by Landlord after consultation with Tenant.
(e) Tenant shall not, at the time it exercises its partial termination
option, be in default under this Lease beyond any applicable period of
grace.
If Tenant exercises its option to terminate the Lease with respect to the
Termination Space in accordance with the provisions hereof, the Lease with
respect to the Termination Space shall be terminated on the Early Termination
Date without further liability of Tenant hereunder, except for such liability
that has accrued on or prior to the Early Termination Date and such liability
that survives termination of the Lease. After notice has been given to Landlord
of Tenant's election to terminate this Lease with respect to the Termination
Space, the Termination Space may be shown by Landlord from time to time, at
-4-
<PAGE>
any time during business hours or any other reasonable time upon reasonable
prior notice, to prospective tenants.
9. Concessions. Except as provided for herein, Tenant shall not be
-----------
entitled to any improvement allowances or any other leasing concessions in
connection with this Amendment.
10. Contingency. This Amendment is contingent upon CIT and Landlord fully
-----------
executing the CIT Agreement. In the event that Landlord and CIT do not fully
execute the CIT Agreement, the Existing Lease shall remain in full force and
effect without modification by reason of this Amendment.
11. Binding Agreement. Except as expressly modified by this Amendment,
-----------------
the terms and conditions of the Lease shall remain in full force and effect,
without change. This Amendment shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized representatives.
TENANT:
RENAL TREATMENT CENTERS, INC., a
Delaware corporation
Date Signed: 5/30/96 By: /s/ [SIGNATURE APPEARS HERE]
------------------- -------------------------------------
Attest: /s/ [SIGNATURE APPEARS HERE]
---------------------------------
(corporate seal)
LANDLORD:
TERRAMICS/SOUTHPOINT ASSOCIATES II
LIMITED PARTNERSHIP, a Pennsylvania
limited partnership
Date Signed: 5/30/96 By: /s/ [SIGNATURE APPEARS HERE]
------------------- -------------------------------------
(Authorized Representative)
- ------------
-5-
<PAGE>
SCJTHPOINT DEMISED AREA PLAN
- --------------------------------------------------------------------------------
Building Two SECOND FLOOR
[PHOTO OF ADDITIONAL SPACE APPEARS HERE]
EXHIBIT "A"
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 2nd day of May,
1996 by and between RENAL TREATMENT CENTERS, INC. ("Company"), and RONALD H.
RODGERS, JR. ("Employee").
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
of which the parties hereby acknowledge, the parties hereto, intending to be
legally bound hereby, agree as follows:
Section 1. Employment and Duties. Company shall employ Employee and
--------- ---------------------
Employee accepts such employment for the Term set forth in Section 3 hereof, on
the terms and conditions set forth in this Agreement. During the Term Employee
shall serve as Vice President - Finance of Company and shall perform such duties
as are normally associated with such position, as well as such other duties as
shall be assigned to Employee from time to time during the continuance of this
Agreement by the President and Chief Executive Officer and/or the Executive Vice
President and Chief Financial Officer of Company. Employee shall devote
Employee's best efforts and skills to the business and interests of Company.
Employee shall not engage in any other business activity during the term of this
Agreement.
Section 2. Compensation. In consideration of the services to be performed
--------- ------------
by Employee hereunder, Employee shall receive:
2.1 Salary. A salary ("Salary") at the rate of One Hundred Seventy
------
Thousand Dollars ($170,000) per year effective as of January 1, 1996.
Employee's salary shall be payable in installments consistent with Company's
payroll schedule. Employee's salary shall be reviewed each year on or about the
anniversary of Employee's employment and Company may in its sole discretion
increase Employee's salary.
2.2 Benefits. Such medical, disability and other similar benefits as are
--------
provided by plans approved by the unanimous affirmative vote of the entire
membership of the Compensation Committee ("Compensation Committee") of the Board
of Directors of Company ("Committee Approval").
2.3 Bonuses. Such bonuses as are approved by Committee Approval; provided
-------
that the potential bonus amount for 1996 is hereby established as follows: for
calendar year 1996, an Incentive Bonus (the "1996 Incentive Bonus") will be paid
if the applicable Financial Target for 1996 (as set forth below) shall be
attained or exceeded. The amount of the 1996 Incentive Bonus shall be
calculated on a straight-line, sliding-scale basis ranging from 40% of
-1-
<PAGE>
Salary if the Minimum Financial Target for 1996 is achieved but not exceeded to
55% of Salary if the Maximum Financial Target is achieved. The Minimum
Financial Target for 1996 shall be earnings per share of $0.81 and the Maximum
Financial Target for 1996 shall be earnings per share of $0.85. In calculating
whether Employer has attained the Financial Target for 1996 the amount of the
1996 Incentive Bonus shall be included and items of extraordinary gain and loss
shall be excluded. Nothing in this Agreement shall prevent the Compensation
Committee from awarding an Incentive Bonus for 1996 if the Minimum Financial
Target is not met or from awarding an Incentive Bonus in excess of 55% of Salary
for 1996. Incentive Bonuses in calendar years after 1996 need not be determined
in a similar manner as the 1996 Incentive Bonus. Such bonus, if any, as
determined in accordance with the provisions of this Section 2.3 shall be paid
no later than fifteen (15) days following the Compensation Committee's review
and approval that such Financial Targets have been attained.
2.4 Acceleration of Retirement Benefits. In the event Company terminates
-----------------------------------
this Agreement for any reason other than under Section 3.2 hereof or if
Employee's employment terminates by reason of death or disability as described
in Section 3.3 hereof, then in addition to amounts otherwise payable to
Employee, Company shall pay Employee, within thirty (30) days of the effective
date of termination, an amount equal to the portion of Company's contributions
for the benefit of Employee under Company's Savings Plan, or any other qualified
retirement plan of Company then in effect, that has not vested as of the date of
Employee's termination, if any, plus an additional amount sufficient to satisfy
Employee's federal or state income tax liability with respect to the foregoing
payment and any additional amount payable pursuant to this Section 2.4, it being
Company's intention that Employee's net after tax position be identical to that
which would have been obtained had Employee not been subject to any federal or
state income tax liabilities with respect to payments made under this
Section 2.4.
2.5 Acceleration of Exercisability of Stock Options. In the event
-----------------------------------------------
Employee is terminated for any reason other than under Section 3.2 hereof, or if
Employee's employment terminates by reason of death or disability as described
in Section 3.3 hereof, or in the event of a Constructive Discharge, as defined
below, then all unexercised options granted to Employee under Company's stock
option plans which would otherwise have vested within twelve (12) months from
the date of Employee's termination or which would otherwise have vested during
the full Term of this Agreement, whichever is greater, shall be deemed fully
vested and exercisable immediately upon Employee's termination. In determining
which options shall become immediately exercisable hereunder, the then
unexercisable options under each grant of options to Employee shall become
exercisable. The foregoing benefit shall be in addition to, and not in lieu of,
any similar benefit contained in the Executive Severance Agreement between
Company and Employee, dated as of May 1, 1995 (the "Executive Severance
Agreement"). For purposes of this Agreement, the term "Constructive Discharge"
means a termination of Employee's employment by Employee due to a failure of
Company or its successors, without the prior written consent of Employee, to
fulfill Company's obligations under this Agreement in any material respect,
including any material change by Company in
-2-
<PAGE>
the functions, duties, or responsibilities of Employee's position with Company
which would reduce the ranking, level, dignity, responsibility, importance or
scope of such position.
Section 3. Term.
--------- ----
3.1 Commencement. The term ("Term") of this Agreement shall commence
------------
("Commencement Date") on the date hereof and unless sooner terminated as
provided herein, shall continue thereafter until March 31, 1998; provided that
the Term shall automatically renew for additional periods of two (2) years each
unless either party shall deliver written notice to the other of its intention
not to renew the Term not later than ninety (90) days prior to the applicable
renewal date.
3.2 Termination for Material Cause. Company may terminate this Agreement
------------------------------
for material cause, provided that, before Company may terminate this Agreement
for material cause, Company must give Employee at least 30 days' advance written
notice of its intention to terminate, specifying in detail the cause for
termination and the intended termination date. For purposes hereof, the term
"for material cause" shall mean: (a) conviction of a felony involving moral
turpitude relating to the business of Company and which does, in fact, adversely
and directly affect the business of Company; (b) the adjudication by a court of
competent jurisdiction that Employee has committed any act of fraud or
dishonesty resulting or intended to result directly or indirectly in personal
enrichment at the expense of Company; (c) repeated failure or refusal by
Employee to follow policies or directives reasonably established by the
President and Chief Executive Officer of Company that goes uncorrected for a
period of thirty (30) consecutive days after written notice has been provided to
Employee; (d) persistent willful failure by Employee to fulfill his duties
hereunder that goes uncorrected for a period of thirty (30) consecutive days
after written notice has been provided to Employee; or (e) intentional breach by
Employee of Sections 4.1(1), 4.1(2), or Section 4.2 of this Agreement.
3.3 Death and Disability. This Agreement shall automatically terminate
--------------------
upon the death of Employee. Upon thirty (30) days' notice (which notice may be
given prior to the completion of the periods described herein), Company may
terminate this Agreement in the event that Employee has for the preceding six
(6) month period been subject to a physical or mental disability that prevented
Employee from adequately performing Employee's regular duties; provided that
either: (i) immediately upon the effective date of such termination, Employee
shall be eligible to receive full disability benefits under the disability
insurance, if any, provided to him by Company, or (ii) Company shall continue to
pay the Salary to Employee until the first to occur of: (A) full disability
benefits are received or (B) one year.
3.4 Rights and Obligations Upon Termination. Upon termination, this
---------------------------------------
Agreement shall be of no further force and effect and neither party shall have
any further right or obligation hereunder; provided however, no termination
shall modify or affect the rights and obligations of the parties which have
accrued prior to termination; and further provided
-3-
<PAGE>
however, the rights and obligations of the parties under Section 4 shall survive
termination of this Agreement.
Section 4. Information and Competition.
--------- ---------------------------
4.1(1) Information. Employee recognizes and acknowledges that: (i) in
-----------
the course of Employee's employment or continued employment by Company, it will
or may be necessary for Employee to create, use or have access to (A) technical,
business, or customer information, materials, or data relating to Company's
present or planned business which has not previously been released to the public
with Company's authorization, including, but not limited to, confidential
information, materials or proprietary data belonging to Company or relating to
Company's affairs (collectively, the "Confidential Information") and (B)
information and materials that concern Company's business that come into
Employee's possession by reason of employment with Company (collectively,
"Business Related Information"); (ii) the Confidential Information and Business
Related Information are the property of Company; (iii) the use, misappropriation
or disclosure of the Confidential Information or the Business Related
Information would constitute a breach of trust and could cause serious and
irreparable injury to Company; and (iv) it is essential to the protection of
Company's good will and to the maintenance of Company's competitive position
that the Confidential Information and Business Related Information be kept
secret and that Employee not disclose the Confidential Information or the
Business Related Information to others or use same to Employee's own advantage
or the advantage of others.
4.1(2) Non-Disclosure. In recognition of the acknowledgments contained in
--------------
Section 4.1(1) above, Employee agrees during the Term and thereafter: (i) to
hold and safeguard the Confidential Information and Business Related Information
in trust for Company, its successors and assigns; (ii) not to appropriate or
disclose or make available to anyone for use outside of Company's organization
at any time, either during employment with Company or subsequent to the
termination of employment with Company for any reason, any of the Confidential
Information or Business Related Information, whether or not developed by
Employee, except as required in the performance of Employee's duties to Company;
(iii) to keep in strictest confidence, both during Employee's employment and
subsequent to termination of employment, any Confidential Information or
Business Related Information; and (iv) not to disclose or divulge, or allow to
be disclosed or divulged by any person within Employee's control, to any person,
firm or corporation, or use directly or indirectly, for Employee's own benefit
or the benefit of others, any Confidential Information or Business Related
Information.
4.2 Competition. During the Term and thereafter Employee:
-----------
(a) for a period of one (1) year shall not solicit for employment or
employ for his own or for another's benefit any employee, former employees,
officer, director or consultant of Company; and
-4-
<PAGE>
(b) for a period of one (1) year shall not directly or indirectly, (on
his own behalf or as an officer, director, consultant, partner, owner,
stockholder, employee, creditor, agent, trustee or advisor of any individual,
partnership or corporation or other entity (hereinafter a "Person") or in any
other capacity) own, manage, control, operate, invest or acquire an interest in
or otherwise engage in or act for or on behalf of any Person other than Company
engaged in any activity, in those states within the United States and those
countries outside the United States in which Company or any of its subsidiaries
during his employment had conducted any business, where such activity is similar
to and competitive with the activities carried on by Company or any of its
subsidiaries during his employment by Company or is, directly or indirectly,
concerned with soliciting, serving or catering to any of the customers,
patients, physicians or hospitals served by Company or its subsidiaries during
his employment by Company for the provision of products or services of a nature
offered by Company during the Term. Employee acknowledges that the nature of
Company's activities is such that competitive activities could be conducted
effectively regardless of the geographic distance between Company's place of
business and the place of any competitive business.
4.3 Enforcement. In the event that any part of this Section 4 shall be
-----------
held unenforceable or invalid, the remaining parts thereof shall nevertheless
continue to be valid and enforceable as though the invalid portions had not been
a part hereof. In the event that the area, period of restriction, activity or
subject established in accordance with this Section 4 shall be deemed to exceed
the maximum area, period of restriction, activity or subject that a court of
competent jurisdiction deems enforceable, said area, period of restriction,
activities or subjects shall, for the purpose of this Section 4, be reduced to
the extent necessary to render them enforceable.
4.4 Equitable Relief. Employee agrees that any violation by him of any
----------------
covenant in Section 4 may cause such damage to Company as will be serious and
irreparable and the exact amount of which will be difficult to ascertain, and
for that reason, Employee agrees that Company shall be entitled, as a matter of
right, to a temporary, preliminary and/or permanent injunction and/or other
injunctive relief, ex parte or otherwise, from any court of competent
jurisdiction, restraining any further violations by Employee. Such injunctive
relief shall be in addition to and in no way in limitation of, any and all other
remedies Company shall have in law and equity for the enforcement of such
covenants and provisions.
4.5 Indemnification and Payment. In the event of Employee's violation of
---------------------------
any covenant in Section 4, Employee shall indemnify and hold harmless Company
from any loss, liability, cost or expense (including reasonable attorney's fees)
arising out of such violation and shall pay over to Company any benefit received
by Employee in connection with such violation.
4.6 Documents. Upon the termination of Employee's employment with Company
---------
for any reason, Employee shall promptly deliver to Company all materials and
documents belonging to or concerning Company or relating to its affairs and,
without limiting the
-5-
<PAGE>
foregoing, will promptly deliver to Company any and all other documents or
materials containing or constituting Confidential Information or Business
Related Information.
Section 5. Entire Agreement. This Agreement supersedes any and all prior
--------- ----------------
agreements between the parties and represents the entire understanding of the
parties hereto with respect to the employment of Employee and there are no other
agreements, warranties or representations except as herein provided. The
parties acknowledge that this Agreement shall not affect any prior, subsequent,
or contemporaneous agreements between the parties respecting Confidential
Information or Business Related Information. This Agreement including this
Section 5 may not be altered or amended except in writing executed by both
parties hereto. Notwithstanding the execution and delivery of this Agreement
and anything herein to the contrary, the Executive Severance Agreement shall
remain in full force and effect as of the date hereof.
Section 6. Assignment; Benefit. This Agreement is personal and may not be
--------- -------------------
assigned by Employee. This Agreement may be assigned by Company and shall inure
to the benefit of and be binding upon the successors and assigns of Company.
Section 7. Applicable Law. This Agreement shall be governed by the
--------- --------------
internal laws of the Commonwealth of Pennsylvania, without regard to conflicts
of laws provisions.
Section 8. Notice. Any notice required or permitted to be given hereunder
--------- ------
shall be sufficient if in writing and if sent by certified or registered mail to
the last address as shall appear on the records of Company in the case of
Employee or to its principal office in the case of Company.
Section 9. Waiver. The waiver by any party of a breach of any provision
--------- ------
of this Agreement by the other shall not operate or be construed as a waiver of
any other or subsequent breach of such or any provision.
Section 10. Jurisdiction. Employee hereby submits to the jurisdiction of
---------- ------------
the courts of the Commonwealth of Pennsylvania or of the United States Court for
the Eastern District of Pennsylvania in any action or dispute arising out of
this Agreement, its interpretation or implementation. With respect to the
undersigned submitting to said courts of the Commonwealth of Pennsylvania or of
said United States court, Employee agrees that personal jurisdiction over
Employee may be obtained by the mailing of a summons or complaint (postage
prepaid) to Employee at the last address of Employee as shall appear on the
records of Company.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals as of the day and year set forth above.
RENAL TREATMENT CENTERS, INC.
By: /s/ Robert L. Mayer, Jr.
------------------------
Robert L. Mayer, Jr.,
President and Chief
Executive Officer
Witness: /s/ Frederick C. Jansen /s/ Ronald H. Rodgers,
----------------------- -----------------------
Ronald H. Rodgers, Jr.
-7-
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 11th day of March,
1996, by and between RENAL TREATMENT CENTERS, INC. ("Employer"), and Thomas J.
Karl ("Employee").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
of which the parties hereby acknowledge, the parties hereto, intending to be
legally bound hereby, agree as follows:
Section 1. Employment and Duties. Employer shall employ the Employee and the
- --------- ---------------------
Employee accepts such employment for the Term set forth in Section 3 hereof, on
the terms and conditions set forth in this Agreement. During the Term the
Employee shall serve as Vice President, Secretary and General Counsel of
Employer and shall perform such duties as are normally associated with such
position, as well as such other duties as shall reasonably be assigned to him
from time to time during the continuance of this Agreement by the President of
Employer commensurate with Employee's position as a senior corporate executive.
Employee shall devote Employee's best efforts and skills to the business and
interests of Employer.
Section 2. Compensation. In consideration of the services to be performed by
- --------- ------------
Employee hereunder, Employee shall receive:
2.1 A salary ("Salary") at the rate of at least One Hundred Eighty
Thousand Dollars ($180,000) per year. Employee's salary shall be payable in
installments consistent with Employer's payroll schedule. Employee's salary
shall be reviewed each year on or about January 1st of each calendar year,
commencing January 1, 1997 but his salary may not be reduced from the then
current level.
2.2 Employee shall receive such medical, disability, life insurance
(containing provisions allowing the beneficiaries of Employee to use the
proceeds to, among other things, exercise stock options of Employee) and other
similar benefits as are provided by plans made available to other executive
officers, provided that at no time during the Term of this Agreement shall any
such benefits be terminated or reduced in any manner. All benefits shall begin
immediately upon Employee's commencement of employment with Employer and the
Employer hereby waives any and all waiting periods.
2.3 In the discretion of the Compensation Committee, Employee shall be
paid an annual incentive bonus (an "Incentive Bonus") with respect to each
calendar year of Employer ending during the term of this Agreement. Each
Incentive Bonus shall be paid as promptly as practicable after the end of the
year for
<PAGE>
which it was earned but in no event more than 15 day after the completion of the
audit of Employer's financial statements for such year, and shall be of no less
percentage of Employee's salary than is applicable to any other officer of the
Employer other than the President and current Executive Vice President and Chief
Financial Officer. For purposes of the Incentive Bonus payable in 1997 for
Employee's contributions in calendar year 1996, such bonus shall be calculated
as if Employee had been employed by Employer for the entire 1996 calendar year
and received his full annual salary.
2.4 Employer shall pay Employee a sign on bonus equal to $36,000
payable within five days from the date that employment commences hereunder.
2.5 Employer shall provide group life insurance, group accident
insurance, group disability income insurance and group health insurance to
Employee in the amount and on the terms such insurance is made available to any
other executive officer of the Employer.
2.6 Employer shall reimburse Employee for all business related
telephone expenses, mobile or otherwise.
2.7 Employer deems it necessary to the duties of Employee that he
belong to standard and customary bar and legal associations and organizations.
Employer shall pay all dues for membership to such associations and
organizations and similar obligations required to be paid to remain a member in
good standing of the bar association and such associations, and for attendance
at legal continuing education courses and seminars.
2.8 Upon submission of adequate documentation, Employer shall pay to
or reimburse Employee all reasonable out-of-pocket expenses for entertainment,
travel, meals, hotel accommodations and the like incurred by him in the interest
of its business.
2.9 In the event Employer terminates this Agreement for any reason
other than under Sections 3.2, or if Employee's employment terminates by reason
of death or disability as described in Section 3.3. hereof or in the event of a
Constructive Discharge (as defined in Section 2.10 below) of Employee, then in
addition to amounts otherwise payable to Employee, Employer shall pay Employee,
within thirty (30) days of the effective date of termination, an amount equal to
the portion of Employer's contributions for the benefit of Employee under
Employer's Savings Plan, or any other qualified retirement plan of Employer then
in effect, that has not vested as of the date of Employee's termination, if any,
plus an additional amount sufficient to satisfy Employee's federal or state
income tax liability with respect to the foregoing payment and any additional
amount
-2-
<PAGE>
payable pursuant to this Section 2.9, it being the Employer's intention that
Employee's net after tax position be identical to that which would have been
obtained had the Employee had not been subject to any federal or state income
tax liabilities with respect to payments made under this Section 2.9. In
addition, Employee shall be entitled to participate in the Employer's Savings
Plan or any other qualified retirement plan of Employer immediately upon
consummation of Employee's employment hereunder and Employer hereby waives any
and all waiting periods.
2.10 In the event Employee is terminated for any reason other than under
Sections 3.2, or if Employee's employment terminates by reason of death or
disability as described in Section 3.3 hereof or in the event of a Constructive
Discharge of Employee, then all unexercisable options granted to Employee under
Employer's stock option plans which would otherwise have vested within twelve
(12) months from the date of Employee's termination or which would otherwise
have vested during the full Term of this Agreement, whichever is greater, shall
be deemed fully vested and exercisable immediately upon Employee's termination.
In determining which options shall become immediately exercisable hereunder, the
then unexercisable options under each grant of options to Employee shall become
exercisable. The foregoing benefit shall be in addition to, and not in lieu of,
any similar benefit contained in the Executive Severance Agreement between the
Employee and Employer, dated as of March 11, 1996 ( the "Executive Severance
Agreement"). For purposes of this Agreement, the term "Constructive Discharge"
means a termination of the Employee's employment by the Employee due to a
failure of the Employer or its successors without the prior written consent of
the Employee to fulfill the obligations under this Agreement in any material
respect, including any material change by the Employer in the functions, duties
or responsibilities of the Employee's position with the Employer which would
reduce the ranking or level, dignity, responsibility, importance or scope of
such position.
2.11 Employee shall have direct participation in stock option awards
commencing December 31, 1996 or at the same time as such 1996 awards are granted
to, and in amounts no less than, the higher amounts granted to the Vice
President and Chief Operating Officer or the Vice President - Finance of the
Employer, or such other title as such individuals may hold in the future.
2.12 Employer agrees to permit Employee to spend one week on site at a
dialysis facility to occur within the first two months from the date Employee
commences employment hereunder.
2.13 Employer agrees to grant to the benefit of Employee an
extraordinary one time bonus on May 31, 1998 consisting of additional stock
options of the Employer's common stock having an exercise price equal to eighty
percent of the
- 3 -
<PAGE>
closing price of the Employer's common stock on the trading day of such stock
immediately preceding May 31, 1998. The total number of shares of stock options
to be granted, if any, shall equal the following: twenty percent (20%) of the
cumulative savings inside non litigation legal expenses derived since the date
Employees employment commences hereunder determined by taking the sum of (i) non
litigation legal expenses incurred by the Employer for the twelve month period
prior to the Employees commencement date hereunder (the "Base") minus non
litigation legal expenses incurred during the first anniversary of Employee's
commencement date of employment and (ii) the Base minus non litigation legal
expenses incurred during the second anniversary of Employee's commencement date
of employment. Subsections 2.13(i) and 2.13(ii) shall be calculated on a pro
rata basis as a percentage of revenues compared with the Base.
2.14 Employer agrees to grant on the date hereof for the benefit of
Employee stock options to purchase 180,000 shares of the Employer's common stock
at an exercise price being the closing price of the Employer's common stock
March 11, 1996 with a grant date being March 11, 1996. Such options shall vest
beginning September 1, 1996; 33% will vest on September 1, 1996, 33% will vest
on December 31, 1997 and 33% will vest on December 31, 1998.
2.15 Such additional bonuses as shall be determined by the Compensation
Committee on an annual basis.
Section 3. Term.
- --------- ----
3.1 Commencement. The term ("Term") of this Agreement shall commence
------------
("Commencement Date") on the date between May 1, 1996 and May 31, 1996, as
specified by Employee and shall continue thereafter until April 30, 1999, and
shall continue thereafter on a year to year basis unless any party provides the
other party with at least ninety days prior written notice of termination.
3.2 Termination for Material Cause. Employer may terminate this
------------------------------
Agreement for Material Cause, provided that, before Employer may terminate this
Agreement for Material Cause, Employer must give Employee at least 30 days'
advance written notice of its intention to terminate, specifying in detail the
cause for termination and the intended termination date. For purposes hereof,
the term for "Material Cause" shall mean: (a) conviction of a felony involving
moral turpitude relating to the business of Employer which does, in fact,
adversely and directly affect the business of Employer; (b) the adjudication by
a court of competent jurisdiction that Employee has committed any act of fraud
or dishonesty resulting or intended to result directly or indirectly in personal
enrichment at the expense of Employer; (c) repeated failure or refusal by
Employee to follow policies or
- 4 -
<PAGE>
directives reasonably established by the President and Chief Executive Officer
of Employer that goes uncorrected for a period of thirty (30) consecutive days
after written notice has been provided to Employee; (d) persistent willful
failure by Employee to fulfill his duties hereunder that goes uncorrected for a
period of thirty (30) consecutive days after written notice has been provided to
Employee; or (e) intentional breach by Employee of Section 4.1(b) or Section
4.2 of this Agreement.
Notwithstanding anything set forth in Sections 3.2(c) or Section 3.2(d) shall
not constitute "Material Cause" if such termination arose as a result of or
constituted a Constructive Discharge.
3.3 Death and Disability. This Agreement shall automatically terminate
--------------------
upon death of Employee. Employer may terminate this Agreement upon written
notice in the event that Employee has for the preceding six month period been
subject to a physical or mental disability that, even with reasonable
accommodation, prevents Employee from adequately performing his regular duties,
provided that either: (a) Employee is immediately eligible to receive full
disability benefits under the disability insurance provided to him by Employer,
or (b) Employer continues to pay Employee's Salary until full disability
benefits are received up to a maximum period of one year.
3.4 Rights and Obligations upon Termination. Upon termination, this
---------------------------------------
Agreement shall be of no further force and effect and neither party shall be of
no further force and effect and neither party shall have any further right or
obligation hereunder except those specified in this Agreement; provided,
however, no termination shall modify or affect the rights and obligations of the
parties which have accrued prior to termination; and further provided, however,
the rights and obligations of the parties under Section 4 shall survive
termination of this Agreement. Notwithstanding anything herein to the contrary,
in the event of any termination other than upon death or disability pursuant to
Section 3.3 above, termination following a Change of Control ( as defined in the
Executive Severance Agreement) or termination for material uses, Employer of
Section 2.1 for a period of one (1) year or the period consisting of the
remaining under this Agreement, whichever is greater.
Section 4. Information and Competition.
- --------- ---------------------------
4.1 (a) Information. Employee recognizes and acknowledges that:
-----------
(i) in the course of Employee's employment or continued employment by Employer,
it will or may be necessary for Employee to create, use or have access to (A)
technical, business, or customer information, materials, or data relating to
Employer's present or planned business which has not previously
- 5 -
<PAGE>
been released to the public either as a result of (1) Employer's authorization,
or (2) other dissemination that does not constitute a breach of this Agreement
including, but not limited to, confidential information, materials or
proprietary data belonging to Employer or relating to Employer's affairs
(collectively, the "Confidential Information") and (B) information and materials
that concern Employer's business that come into Employee's possession by reason
of employment with Employer (collectively, "Business Related Information"); (ii)
the Confidential Information and Business Related Information are the property
of Employer; (iii) the use, misappropriation or disclosure of the Confidential
Information or the Business Related Information would constitute a breach of
trust and could cause serious and irreparable injury to Employer; and (iv) it is
essential to the protection of Employer's good will and to the maintenance of
Employer's competitive position that the Confidential Information and Business
Related Information be kept secret and that Employee not disclose the
Confidential Information or the Business Related Information to others or use
same to Employee's own advantage or the advantage of others.
(b) Non-Disclosure. In recognition of the acknowledgement
--------------
contained in Section 4.1(a) above, Employee agrees during the Term and
thereafter: (i) not to appropriate or disclose or make available to anyone for
use outside of Employer's organization at any time, either during employment
with Employer or subsequent to the termination of employment with Employer for
any reason, any of the Confidential Information or Business Related Information,
whether or not developed by Employee, except as required in the performance of
Employee's duties to Employer; (ii) to keep in strictest confidence, both during
Employee's employment and subsequent to termination of employment, any as
Confidential Information or Business Related Information; and (iii) not to
disclose or divulge, or allow to be disclosed or divulged by any person within
Employee's control, to any person, firm or corporation, or use directly or
indirectly, for Employee's own benefit or the benefit of others, Confidential
Information or Business Related Information.
4.2 Competition. Employee agrees that while an Employee of the
-----------
Employer and for a period of one year after termination of employment Employee:
(a) will not solicit for employment or employ for his own or
for another's benefit any employee, former employee, officer, director or
consultant (including, without limitation, physician directors) of Employer; and
(b) shall not directly on his own behalf or as an officer,
director, consultant, partner, owner, stockholder, employee, creditor, agent,
trustee, or advisor of any individual, partnership or corporation or other
entity or in any other capacity own, manage, control, operate, invest or acquire
an
- 6 -
<PAGE>
interest in or otherwise engage in or act for or on behalf of any person other
than Employer engaged in any activity, in the counties of states within the
United States and those countries outside the United States in which Employer
or
any of its subsidiaries during his employment has conducted any material
business or in which Employer's customers were located where such activity is
similar to and competitive with the activities carried on by Employer or any of
its subsidiaries during his employment by Employer or is, directly or
indirectly, concerned with soliciting, serving or catering to any of the
customers of Employer or its subsidiaries during his employment by Employer for
the provision of products or services of a nature offered by Employer during the
Term, except the ownership of five percent or less of the issued and outstanding
stock of a public company. Notwithstanding the foregoing, Employee may be
employed by an entity that engages in businesses (the "Other Business") other
than prohibited business if Employer limits his activities to the Other
Business. Employee acknowledges that the nature of Employer's activities is such
that competitive activities could be conducted effectively regardless of the
geographic distance between Employer's place of business and the place of any
competitive business.
4.3 Enforcement. In the event that any part of this Section 4 shall
-----------
be held unenforceable or invalid, the remaining parts thereof shall nevertheless
continue to be valid and enforceable as though the invalid portions had not been
a part hereof. In the event that the area, period of restriction, activity or
subject established in accordance with this Section 4 shall be deemed to exceed
the maximum area, period of restriction, activity or subject which a court of
competent jurisdiction deems enforceable, said area, period of restriction,
activities or subjects shall, for the purposes of this Section 4, be reduced to
the extent necessary to render them enforceable.
4.4 Equitable Relief. Employee agrees that any violation on his part
----------------
of any covenant in Section 4 hereof may cause such damage to Employer as will
be serious and irreparable and the exact amount of which will be difficult to
ascertain, and for that reason, he agrees that Employer shall be entitled, as a
matter of right, to a temporary, preliminary and/or permanent injunction and/or
other injunctive relief, ex parte or otherwise, from any court of competent
jurisdiction, restraining any further violations of Employee. Such injunctive
relief shall be in addition to and in no way in limitation of, any and all other
remedies Employer shall have in law and equity for the enforcement of such
covenants and provisions.
4.5 Indemnification and Payment. In the event of Employee's
---------------------------
violation of any covenant in Section 4, Employee shall indemnify and hold
harmless Employer from any loss, liability, cost or expense (including
reasonable attorney's fees) arising
-7-
<PAGE>
out of such violation and shall pay over to Employer any tangible benefit
received by Employee in connection with such violation.
4.6 Documents. Upon the termination of Employee's employment with
---------
Employer for any reason, Employee shall promptly deliver to Employer all
materials and documents belonging to or concerning Employer or relating to its
affairs and, without limiting the foregoing, will promptly deliver to Employer
any and all other documents or materials containing or constituting Confidential
Information or Business Related Information.
Section 5. Entire Agreement. This Agreement supersedes any and all prior
- --------- ----------------
agreements between the parties and represents the entire understanding of the
parties hereto with respect to the employment of Employee and there are no other
agreements, warranties or representations except as may be herein provided and
set forth in the Stock Option Agreement between the Employer and the Employee,
dated as of March 11, 1996 and the Executive Severance Agreement. The parties
acknowledge that this Agreement shall not affect any prior, subsequent, or
contemporaneous agreements between the parties respecting Employer's
confidential information. This Agreement including this Section 5 may not be
altered or amended except in writing executed by both parties hereto.
Section 6. Assignment; Benefit. This Agreement is personal and may not be
- --------- -------------------
assigned except that it shall inure to the benefit of and be binding upon the
successors of Employer and personal representatives of Employee.
Section 7. Applicable Law. This Agreement shall be governed by the laws of the
- --------- --------------
Commonwealth of Pennsylvania.
Section 8. Notice. Any notice required or permitted to be given hereunder
- --------- ------
shall be sufficient if in writing and if sent by certified or registered mail to
the last address as shall appear on the records of Employer in the case of
Employee or to Employer's principal office in the case of Employer.
Section 9. Waiver. The waiver by any party of a breach of any provision of
- --------- ------
this Agreement by the other shall not operate or be construed as a waiver of any
other or subsequent breach of such or any provision.
Section 10. Jurisdiction. Employee hereby submits to the jurisdiction of the
- ---------- ------------
courts of the Commonwealth of Pennsylvania or of the United States Court for the
Eastern District of Pennsylvania in any section or dispute arising out of this
Agreement, its interpretation or implementation. With respect to the
undersigned submitting to said courts of the Commonwealth of Pennsylvania or of
said United States court, Employer agrees that
-8-
<PAGE>
personal jurisdiction over Employee may be obtained by the mailing of a summons
or complaint (postage prepaid) to Employee at the last address of Employee as
shall appear on the records of Employer.
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
as of the day and year set forth above.
EMPLOYER:
RENAL TREATMENT CENTERS, INC.
By: /s/ Robert T. Mayer, Jr.
-----------------------------
Title: CEO
---------------------
EMPLOYEE:
/s/ Thomas J. Karl
-----------------------------
Thomas J. Karl
Witness:
/s/ Frederick C. Jansen
- -------------------------
- 10 -
<PAGE>
EXECUTIVE SEVERANCE AGREEMENT
-----------------------------
THIS AGREEMENT is made as of the 11th day of March, 1996 between Renal
Treatment Centers, Inc. (the "Company"), a Delaware corporation, and Thomas J.
Karl (the "Executive").
RECITALS:
--------
The Company considers the employment and maintenance of continuity in its
key management personnel to be essential to protecting and enhancing the best
interests of the Company and its shareholders. In this connection the Company
recognizes that the possibility of a change of control may exist and that such
possibility, and the uncertainty and questions that it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders. Accordingly, the
Company's Board of Directors (the "Board") has determined that appropriate steps
should be taken to reinforce and encourage employment of the Executive and the
Executive's continued attention and dedication to his assigned duties without
distraction in the face of the potentially disturbing circumstances arising from
the possibility of a change of control of the Company.
In order to induce the Executive to accept employment and to thereafter
remain in the employ of the Company notwithstanding the occurrence of a Change
of Control of the Company (as defined in Section 7 of this Agreement), the
Company is willing to employ the Executive in accordance with the terms of that
certain Employment Agreement dated as of March 11, 1996 between the Company and
the Executive (the "Employment Agreement") and thereafter in accordance with
such terms as may be agreed upon by the Executive and the Company and, if a
Change of Control shall occur during such employment period, the Company is
willing to continue to employ the Executive for a period equal to the remaining
term under the Employment Agreement or 12 months immediately following the date
of Change of Control, whichever is greater, on the terms and conditions set
forth in this Agreement.
In consideration of the undertakings of the Company in this Agreement, and
intending to be legally bound hereby, the Executive is willing to continue to
serve the Company in a management capacity in accordance with the terms of the
Employment Agreement and, if a Change of Control shall occur during such
employment period, the Executive is willing to serve the Company for a period
equal to the remaining term under the Employment Agreement or 12 months
immediately following the date of Change of Control, whichever is greater, on
the terms and conditions set forth in this Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the premises and covenants set forth
herein, and intending to be legally bound hereby, it is agreed as follows:
1. Employment.
----------
(a) The Company hereby affirms, confirms and reaffirms its agreement to
employ the Executive and the Executive hereby affirms, confirms and reaffirms
his agreement to be employed by the Company in accordance with the terms of the
Employment Agreement, the term of which shall be subject to extension as
provided in Section 1(b) hereof.
(b) If the Executive is employed by the Company on the date on which a
Change of Control of the Company occurs, then, except as otherwise provided in
Sections 4 and 5(a), the Company agrees to employ the Executive, and the
Executive agrees to serve the Company, in a management capacity for a period of
(i) the remaining term under the Employment Agreement or (ii) twelve (12)
months, whichever is greater, commencing on the date on which the Change of
Control occurs.
(c) The period following a Change of Control during which the Executive
shall be employed pursuant to this Agreement is hereinafter referred to as the
"Post Change of Control Employment Period."
2. Duties.
------
(a) During the Post Change of Control Employment Period, the
Executive's duties on behalf of the Company shall be in the same area of
operations and the same corporate capacity and of the same general nature as
those performed by him prior to the Post Change of Control Employment Period.
(b) During the Post Change of Control Employment Period, the Executive
shall devote such amount of his time, energy and skills to the endeavors of the
Company and the promotion of its interests as prior to the Post Change of
Control Employment Period.
(c) The Executive agrees that during the Post Change of Control
Employment Period he shall be subject to the non-competition provisions of the
Employment Agreement or any non-competition agreement between the Executive and
the Company entered into prior to the Post Change of Control Employment Period.
3. Compensation.
------------
(a) As consideration for the undertakings of the Executive in this
Agreement, and as compensation for the Executive's services during the Post
Change of Control Employment Period, the Company shall pay the Executive a
salary at least equal to the base salary
-2-
<PAGE>
that the Executive is being paid by the Company on the date on which the Change
of Control occurs.
(b) During the Post Change of Control Employment Period, the Executive
shall be entitled to employee benefits (including, but not limited to,
retirement benefits, medical insurance, disability insurance, other insurance
programs and vacations) no less favorable than those to which he is entitled on
the date on which the Change of Control occurs.
(c) In addition to all other compensation to be paid to the Executive
by the Company hereunder, upon the occurrence of a Change of Control, the
Company shall cause the options as to 30,000 shares (60,000 subsequent to the
post split to be effective close of business March 14, 1996) of the Company's
common stock (upon a Change of Control prior to September 1, 1996) and all
options (upon a Change of Control on or after September 1, 1996) ("Options")
granted to the Executive under the Company's stock option plans to automatically
become fully vested and exercisable immediately upon a Change of Control. In
addition, the Executive shall have the right exercisable by written notice to
the Company to elect to receive, in lieu of shares of common stock of the
Company (the "Company Shares") issuable upon the exercise of Options (which
Options shall be cancelled upon the making of the payment referred to below), an
amount in cash equal to the aggregate spread between the exercise prices of all
Options held by the Executive, whether or not then fully vested or exercisable,
and the higher of (A) the closing price of Company Shares as reported on the
principal securities exchange on which the Company's common stock is traded or
if the principal trading market for the Company's common stock is the Nasdaq
National Market then such market on the date of Change of Control (or the last
trading date prior thereto), or (B) the highest price per Company Share actually
paid in connection with the Change of Control of the Company (the higher price
being referred to as the "Termination Price"), but excluding from such
calculation all Options the exercise price of which is in excess of the
Termination Price. Nothing contained herein shall affect the Employee's right
to have all options held by him to become immediately exercisable pursuant to
the terms of the Employment Agreement and/or the Stock Option Agreement, dated
as of March 11,1996 between Company and Executive.
4. Death or Disability.
-------------------
(a) If the Executive shall die during the Post Change of Control
Employment Period, the Company's remaining obligations under this Agreement
shall terminate.
(b) If, during the Post Change of Control Employment Period, the
Executive shall, in the reasonable opinion of the Board, become totally disabled
or incapacitated for a period of at least six consecutive months, the Company
shall so notify the Executive in writing and, upon the expiration of such six-
month
-3-
<PAGE>
period or such later time as shall be specified in the Company's notice, the
Post Change of Control Employment Period shall terminate.
5. Termination.
-----------
(a) If, during the Post Change of Control Employment Period, the
Executive shall terminate his employment other than for Good Reason (as defined
in Section 7 of this Agreement) or other than for Constructive Discharge (as
defined in the Employment Agreement) or shall violate the provisions of Section
2(c) hereof, the Company's remaining obligations under this Agreement shall
terminate.
(b) The Company shall have the right to terminate the Post Change of
Control Employment Period of the Executive under this Agreement for Material
Cause (as defined in the Employment Agreement), and for no other reason. Upon
such termination, the Company's remaining obligations under this Agreement shall
terminate. For purposes of this Section 5(b), the Executive shall not be deemed
to have been terminated for Material Cause unless,in addition to the
requirements set forth in the definition of Material Cause in the Employment
Agreement, the Executive lacked good faith and a reasonable belief that his
conduct was in the best interest of the Company. Moreover, any conduct of the
Executive in connection with a Change of Control (including his opposition to or
support of a Change of Control) shall not under any circumstances be deemed to
constitute Material Cause for purposes of this Agreement.
(c) If the Executive shall terminate his employment for Good Reason or
by reason of Constructive Discharge prior to the end of the Post Change of
Control Employment Period, the Executive shall receive the same payments that
would have been provided to the Executive under Sections 5(e) and 5(f) hereof.
(d) If the Company shall terminate the employment of the Executive
prior to the end of the Post Change of Control Employment Period for any reason
other than Material Cause as provided in Section 5(b) of this Agreement or total
disability or incapacity for a period of at least six consecutive months as
provided in Section 4(b) of this Agreement, or if the Executive shall terminate
his employment for Good Reason or by reason of Constructive Discharge prior to
the end of the Post Change of Control Employment Period, the Executive shall be
entitled to receive such payments and benefits as are specifically provided by
this Agreement for a period equal to the balance of the Post Change of Control
Employment Period as if such termination had not occurred.
(e) Except as provided in Sections 4(a), 4(b) and 5(b) hereof, if the
Executive's employment is terminated by the Company prior to the end of the Post
Change of Control Employment Period, the Executive shall receive his base salary
in effect immediately
-4-
<PAGE>
prior to the date on which the Change of Control occurs until the expiration of
the Post Change of Control Employment Period as if such termination had not
occurred.
(f) If the Executive is entitled to continue to receive salary pursuant
to Section 5(d) of this Agreement after the termination of his employment, he
shall also be entitled to receive employee fringe and welfare benefits
(including, but not limited to, medical insurance, disability insurance and
other insurance programs) at least comparable to those to which he was entitled
immediately prior to the date on which such termination occurs. If the terms of
any of the Company's welfare benefit plans do not permit continued participation
by the Executive, the Company shall arrange to provide to the Executive a
benefit substantially similar to, and no less favorable than, the benefit he was
entitled to receive under such plan at the end of the period of coverage.
(g) In addition to all other amounts payable to the Executive under
this Section 5, upon the termination of his employment, the Executive shall be
entitled to receive all benefits (as if he were employed until the end of the
Change of Control Post Employment Period) payable to the Executive under the
Company's tax-qualified retirement plan and any other plan or agreement relating
to retirement benefits.
(h) Any purported termination of the Executive's employment by the
Company or by the Executive shall be communicated by a Notice of Termination to
the other party hereto in accordance with Section 12 hereof. A "Notice of
Termination" shall mean a written notice that indicates the specific termination
provision in this Agreement relied upon and sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment.
(i) Notwithstanding anything to the contrary set forth herein, upon the
termination of this Agreement, the Employee shall be entitled to receive any
payments or benefits under any benefit or retirement plans or other arrangements
that would, by their terms, apply.
6. Expense Reimbursement. In the event that any person asserts the
---------------------
invalidity of all or any part of this Agreement and the Executive incurs legal
fees or out-of-pocket expenses in connection with defending the validity of all
or a portion of this Agreement, the Company shall reimburse the Executive for
all legal fees and out-of-pocket expenses the Executive so incurs.
7. Definitions.
-----------
(a) For purposes of this Agreement, "Change of Control" shall be deemed
to have occurred if, during the term of this Agreement:
-5-
<PAGE>
(i) the beneficial ownership of at least 50% of the Company's
voting securities or all or substantially all of the assets of the Company shall
have been acquired, directly or indirectly, by a single person or a group of
affiliated persons, other than the Executive or a group in which the Executive
is a member, in any transaction or series of transactions; or
(ii) as the result of or in connection with any cash tender offer,
exchange offer, sale of assets, merger, consolidation or other business
combination of the Company with another corporation or entity or contested
election of directors, the persons who were directors of the Company immediately
prior to such occurrence shall cease to constitute a majority of the Board of
Directors of the Company or the surviving, new or combined entity and any
corporation or entity that shall control the Company or the surviving, new or
combined entity.
(b) For purposes of this Agreement, the date of Change of Control shall
mean the earlier to occur of:
(i) the first date on which a single person or group of affiliated
persons acquires the beneficial ownership of 50% or more of the Company's voting
securities or all or substantially all of the Company's assets in any
transaction or series of transactions; or
(ii) the date on which a cash tender offer, exchange offer, sale of
assets, merger, consolidation, other business combination or contested election
of directors resulting in the change in the Board of Directors contemplated by
Section 7(a)(ii) hereof is consummated.
(c) For purposes of this Agreement, the term "Good Reason" shall mean
the occurrence of any of the following events after the date of Change of
Control without the Executive's express written consent:
(i) the assignment to the Executive of any duties that are not in
the same corporate capacity or area of operations or are not of the same general
nature as the Executive's duties with the Company immediately prior to a Change
of Control or the failure by the Company to provide the Executive office
accommodations and assistance substantially equivalent to the accommodations and
assistance provided to the Executive immediately prior to the Change of Control;
(ii) a reduction in the Executive's compensation as in effect on the
date of the Change of Control or as the same may be increased thereafter; or
(iii) the Company's assigning the Executive to a facility situated
beyond the radius of 30 miles from the facility to which he was assigned
immediately prior to a Change of Control.
-6-
<PAGE>
8. Excess Parachute Payment. In the event that any payment or benefit
------------------------
received or to be received by the Executive in connection with a Change of
Control (whether payable pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any successor to the Company or
any corporation ("Affiliate") affiliated with the Company or which becomes so
affiliated pursuant to the transactions resulting in a Change of Control, both
within the meaning of Section 1504 of the Internal Revenue Code of 1986, as
amended (the "Code"), (collectively all such payments are hereinafter referred
to as the "Total Payments")) is deemed to be an "excess parachute payment" (in
whole or part) to the Executive as a result of Section 280G and/or 4999 of the
Code, no change shall be made to the Total Payments to be made in connection
with the Change of Control except that, in addition to any other payment,
coverage or benefit due and owing hereunder, the Company shall pay to Executive
on the date on which a Change of Control occurs a cash payment equal to an
amount determined by multiplying the rate of excise tax then imposed by Section
4999 by the amount of the "excess parachute payment" received by the Executive
(determined without regard to any payments made to the Executive pursuant to
this Section) and dividing the product so obtained by the amount obtained by
subtracting the aggregate local, state and Federal income tax rate applicable to
the receipt by Executive of the "excess parachute payment" (taking into account
the deductibility for Federal income tax purposes of the payment of state and
local income taxes thereon) from the amount obtained by subtracting from 1.00
the rate of excise tax then imposed by Section 4999 of the Code, it being the
Company's intention that the Executive's net after tax position be identical to
that which would have obtained had Sections 280G and 4999 not been part of the
Code.
For purposes of implementing this Section 8, the following provisions shall
apply: (i) no portion, if any, of the Total Payments, the receipt or enjoyment
of which the Executive shall have effectively waived in writing prior to the
date of payment of the Total Payments, shall be taken into account; and (ii) the
value of any non-cash benefit or any deferred cash payment included in the Total
Payments shall be determined by the Company's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code.
9. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of any successor to the Company including without limitation any
successor to all or substantially all of the business or assets of the Company,
and such successor shall also be responsible for the discharge and performance
of all obligations of the Company hereunder.
10. Successors. The Company will require any successor (whether direct or
----------
indirect, by purchase, merger, consolidation or
-7-
<PAGE>
otherwise) to all or substantially all of the business or assets of the Company
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Executive to compensation from
the Company in the same amount and on the same terms as the Executive would be
entitled hereunder if the Executive terminated his employment for Good Reason or
for Constructive Discharge.
11. Notice. Notices and all other communications provided for in this
------
Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return receipt requested,
postage prepaid, addressed to the Company at its principal office and to the
Executive at his principal residence as shown in the Company's personnel
records, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
12. Conflict with Other Agreements. In the event of any conflict between
------------------------------
the provisions of this Agreement and the Employment Agreement, the provisions of
this Agreement shall control.
13. Effective Date. This Agreement shall become effective on the date
--------------
Executive's employment with Company commences pursuant to the terms of the
Employment Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
Attest: RENAL TREATMENT CENTERS, INC.
/s/ Frederick C. Jansen By:/s/ Robert L. Mayer, Jr.
- -------------------------- -------------------------
President
Witness:
/s/ Frederick C. Jansen /s/ Thomas J. Karl
- -------------------------- ----------------------------
Thomas J. Karl
-8-
<PAGE>
Exhibit 11.1
Renal Treatment Centers, Inc. and Subsidiaries
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
for the three and six months ended June 30, 1996
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
Primary Fully Diluted Primary Fully Diluted
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 5,123,993 $ 5,123,993 $ 8,282,047 $ 8,282,047
Add back interest on earn out note, tax effected ---- 62,708 ---- 130,373
Add back interest on convertible note, tax effected 223,875 223,875 223,875 223,875
- ----------------------------------------------------------------------------------------------------------------------
Net income available to common stockholders $ 5,347,868 $ 5,410,576 $ 8,505,922 $ 8,636,295
- ----------------------------------------------------------------------------------------------------------------------
Weighted average number shares outstanding 23,671,496 23,671,496 23,612,831 23,612,831
Weighted average number of maximum shares subject
to exercise under outstanding stock options 1,789,894 1,789,894 1,591,183 1,591,183
Weighted average shares assumed issued upon
conversion of earn out note ---- 519,097 ---- 519,097
Weighted average shares assumed issued upon
conversion of convertible note 763,126 763,126 381,563 381,563
- ----------------------------------------------------------------------------------------------------------------------
26,224,516 26,743,613 25,585,577 26,104,674
Less treasury shares assumed purchased with proceeds
from assumed exercise of outstanding common stock
options 878,159 863,088 783,605 695,638
- ----------------------------------------------------------------------------------------------------------------------
Weighted average number of common and common
stock equivalents outstanding 25,346,357 25,880,525 24,801,972 25,409,036
- ----------------------------------------------------------------------------------------------------------------------
Net income per common and common stock equivalent $0.21 $0.21 $0.34 $0.34
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 11.1
Renal Treatment Centers, Inc. and Subsidiaries
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
for the three and six months ended June 30, 1995
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1995 June 30, 1995
Primary Fully Diluted Primary Fully
Diluted
<S> <C> <C> <C> <C>
Net income $ 3,668,729 $ 3,668,729 $ 5,701,899 $ 5,701,899
Add back interest on Denver earn out note, tax effected ---- 72,705 ---- 147,062
- ----------------------------------------------------------------------------------------------------------------------
Net income available to common stockholders 3,668,729 3,741,434 5,701,899 5,848,961
- ----------------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 21,191,142 21,191,142 21,145,102 21,145,102
Weighted average number of maximum shares subject
to exercise under outstanding stock options 1,299,250 1,299,250 1,234,806 1,234,806
Weighted average shares assumed issued upon
conversion of earn out note ---- 695,368 ---- 703,650
- ----------------------------------------------------------------------------------------------------------------------
Less treasury shares assumed purchased with proceeds 22,490,392 23,185,760 22,379,908 23,083,558
from assumed exercise of outstanding common stock
options 867,710 862,886 804,632 769,504
- ----------------------------------------------------------------------------------------------------------------------
Weighted average number of common and common
stock equivalents outstanding 21,622,682 22,322,874 21,575,276 22,314,054
- ----------------------------------------------------------------------------------------------------------------------
Net income per common and common stock equivalent $0.17 $0.17 $0.26 $0.26
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 81,124
<SECURITIES> 45,963,081
<RECEIVABLES> 68,411,636
<ALLOWANCES> 5,450,000
<INVENTORY> 3,673,966
<CURRENT-ASSETS> 115,307,875
<PP&E> 46,199,611
<DEPRECIATION> 15,812,617
<TOTAL-ASSETS> 269,163,506
<CURRENT-LIABILITIES> 15,731,137
<BONDS> 130,729,923
0
0
<COMMON> 237,736
<OTHER-SE> 122,464,710
<TOTAL-LIABILITY-AND-EQUITY> 269,163,506
<SALES> 0
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<EPS-PRIMARY> .34
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